Tuesday, January 17, 2006

Flippers Exiting in Baltimore


Patterson Park is a gentrifying neighborhood located a few miles east of downtown Baltimore. This part of the neighborhood has just begun gentrifying. It has been a hotspot for flippers, rehabbers and speculators.
131 South Curley is available for sale for 229K.

The current owner just recently bought the property for 170K on 10/28/2005.

The posting on Craigslist states "The home still needs someone to finish the rehab. My estimates are of 20-23k to finish the job. The 2 upstairs baths have just been completed and boast jacuzzi tub and porcelin tile. This house is a large 2 bedroom 3 full bath home w/ central air, recessed lights, exposed brick, new windows, high cielings, columns, deck off guest room, and a partially finished basement. The sheet rock is new but needs to be taped and spackled, the kitchen needs new counters and cabinets and the carpet/ hardwood needs to be installed. Comps here are now pushing 400k amd w/ the spring pop 400k is achievable. This is a great opportunity at 229k to turn a nice 50-70k profit or more"

If there is so much profit potential then why is the seller selling?

According to the seller, I can buy the property at 229K and put in 23K which adds up to 251K. Then "w/ the spring pop 400k is achievable" even with commissions and holding costs a profit potential of 130K is realistic.

So why is the seller selling now?

Maybe the seller is really afraid of a different kind of spring 'pop.' A negative appreciation type of pop. Its all very popilicious.

54 comments:

  1. If I were 10 years younger, I'd be interested in buying this property - especially if I was looking at baltimore. If the comps bear these numbers out; at these interest rates I'd be all over it. Even the most bearish predictions makes this a no-brainer.

    As for why this guy is selling - they are tons of reasons people leave money on table. The point is, a steal is a steal. I would not care about his motives, thoughts, projections on the market. If my personal evaluation said buy - I would buy.

    Evaluation means: what are the comps? What is the potential rent (if I'm not going to live there)? What is my PITI? Does my contractor concur on rehab costs?

    There you go Mike. This is how you find a Deal in this market.

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  2. Deal? 230k for a place that sold for 170K 3 months ago. Come on, did every one get a 26% pay raise in the last 3 months. What justifies a 104% yearly increase. Do you know how much that 2br would rent for? not enough to cover 230K or even 150K in that "hood". Your right about the no-brainer part, the buyer would defenitly not want to use his to buy it.

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  3. anon...you are not doing any of your own financial analysis of this deal. Again, who cares what the guy paid for it or why he is selling? You are not using your brain. Just because someone paid $85 a share for google did that make it wildly overpriced at $150? According to your thought process, the answer is obvious. So now its at $460. I am not commenting on the merits of Google, just illustrating where your thought process fails.

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  4. What a deal, 250K to buy and fix up, then rent it out for $750 a month.

    MLS# BA5504766 2/2 in Paterson Park for rent: 2 BDRMS, 2 BA, LOCATED IN PATTERSON PARK. GREAT LOCATION!! TWO SPACIOUS BEDROOMS, EACH WITH A FULL BATH. ALL ROOMS ARE CARPETED. LIGHT AND AIRY WITH SKYLIGHTS IN THE MASTER BEDROOM AND BATHROOM. ALL NEW APPLIANCES INCLUDING REFRIGERATOR, STOVE, D/W, DISPOSAL. RENT INCLUDES WATER. TENANT PAYS ALL OTHER UTILITIES. MINS FROM DOWNTOWN AND THE PROPOSED JOHN HOPKINS BIOMEDICAL CTR. LB

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  5. Tell me how you can buy for $250,000 and then rent it for $750 a month and come even close to breaking even? Cut the price to $125,000 then maybe.

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  6. "you are not doing any of your own financial analysis of this deal" Waiting for your great finacial analysis of how a property that rents for $750 and sells for 250K is a great deal.

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  7. anons... Well, if that is the rent then maybe its not the "deal"...point is - you are now doing the correct analysis instead of basing your entire decision on how much the seller is making. By the way - what are the comps? I might carry a little more negative for a few years if the long-term looked.

    There has never been a time in this region, absent a small window in 1998 to 2000, where a 20% downpayment resulted in a breakeven (let alone positive) cashflow.

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  8. Having significantly negative cash flow and negative appreciation for the next few years really is a bad financial investment.

    (To be fair, I think you can get more then 750$ a month once this place is renovated )

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  9. Then why can't this guy get more that $750 for his renovated rental? Did I overlook somthing?
    $750
    MLS# BA5504766 2/2 in Paterson Park for rent: 2 BDRMS, 2 BA, LOCATED IN PATTERSON PARK. GREAT LOCATION!! TWO SPACIOUS BEDROOMS, EACH WITH A FULL BATH. ALL ROOMS ARE CARPETED. LIGHT AND AIRY WITH SKYLIGHTS IN THE MASTER BEDROOM AND BATHROOM. ALL NEW APPLIANCES INCLUDING REFRIGERATOR, STOVE, D/W, DISPOSAL. RENT INCLUDES WATER. TENANT PAYS ALL OTHER UTILITIES. MINS FROM DOWNTOWN AND THE PROPOSED JOHN HOPKINS BIOMEDICAL CTR. LB

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  10. David... If the comps are what the seller claims, I don't see any possibility of negative appreciation. Let's also consider the after tax (i.e. real negagtive cash flow) cost of carrying this property.

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  11. Because the 750$ rental is not renovated as nicely as this will be once another 23K or so is invested.


    I am very doubtful of the comps he mentions. Show me them!

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  12. David ... looking at the comps is a huge part of the analysis and, as I said in an earlier post, something I would personnally verify for myself (I don't let others evaluate a deal me - definitely not realtors.) I am in no way endorsing his comps. I don't know anything about that area.

    My entire point is to illustrate how one should evaluate a purchase and how absurd it is to even care what the seller is making. It takes a lot of time, effort, and knowledge to get a bargain. People on this site want, or expect, to bypass that process.

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  13. "It takes a lot of time, effort, and knowledge to get a bargain."

    True.

    "People on this site want, or expect, to bypass that process."

    I disagree.
    ---------------
    Also, my bigger question is why is the seller giving up all this profit potential? It sounds too good to be true.

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  14. David...how many ways can I say "who cares why he is selling"?

    I bought a property 2 years ago for 200K. The seller (a foreclosure investor - as I have been in the past) paid 170K for it the month before. He was asking 215K. The FMV was 245K. I offered 200K cash with a 30 day settlement. Do I care that he could have sold it for more but chose not to? Do I care that he made a quick 30K? You see, none of that affects MY analysis.

    By the way, I bought that TH (in reston) for a relative and transferred title once she got her old place sold. I had found and bought the old place too. Also, significantly under market.

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  15. "Do I care that he could have sold it for more but chose not to?"

    It raises a redd flag. The seller is claiming a profit potential of "50 -70K" within a few months. His claim maybe true. Investigate, research. But a large profit is RARELY abandonded. It is much more likely that his claims of 50 - 70K profit are wrong.

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  16. David...you merely restate my advice re: due diligence. Yes it is rare to find such a deal- but not impossible.

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  17. I agree with what you said in your original post, just not all of it.

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  18. "...w/ the spring pop 400k is achievable"

    Of course seller is referring to the "spring pop" of 2012.

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  19. mad_tiger...extremely enlightening post. Thanks for your insight!

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  20. its called humor, get a sense of one anonymous.

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  21. Why is anonymous criticizing anonymous? Does he have multiple personalities?

    I agree with some of what anonymous far above has said. I also note that some on here seem to prefer ranting and raving to doing any logical thinking.

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  22. I agree with Anonymous #7, but Anonymous #9 is a fool. Anonymous #3, want to go on a date? seriously folks, get a psedonym.

    -Big Fred

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  23. big fred ... I am #1,3,7,10,12,14,16,and (snarkily)19. sorry, no can do on the date. Had our 25th this last June. Very flattering however. I will try to figure out the login - blogger procedure.

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  24. p.s.- sorry to all for overposting today. Crummy outside and only laundry and bills to distract me today. #1,3,7,etc.

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  25. I decided to do a little checking. This house was on the market 6 months ago for 259k, this buyer got a steal at 170k. Obviously a distressed sale. Also in looking at the MLS on the 259k listing this current seller did much of the renovation. Maybe he ran out of money, as many of these guys do. Regardless, looking at the comps here I do see 350k comps w/in the same block or 2. I also looked at the rental that someone pulled up for 750/mo, I would hardly call that Patterson Park. That is more like the hood. The rentals in this market for comparable size seem to be running between 1300 and 1800 renovated. Just thought I'd chime in w/ a little bit of researched facts. Again like someone else said, who the heck cares what the guy paid, if you look at that, and you let that hold you back, you will never make a dime in this real estate market.

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  26. to anon who did the research...good job. As I said in the 1st post, I'd be taking a serious look if I were in the market. anon 1,3,7 etc.

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  27. "Just thought I'd chime in w/ a little bit of researched facts"

    Where is the link to these facts? I believe the previous poster who's facts you dispute provided a link.

    " The rentals in this market for comparable size seem to be running between 1300 and 1800 renovated"

    How about an MLS number for those rentals, or something. How did you arive at 1300-1800?

    "I also looked at the rental that someone pulled up for 750/mo, I would hardly call that Patterson Park."
    It is exactly Patterson park, blocks from the original posting.

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  28. "to anon who did the research...good job. As I said in the 1st post, I'd be taking a serious look if I were in the market. anon 1,3,7 etc. "

    patting your self on the back

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  29. Yes if that research is correct, I will pat myself on the back. Where is your research? What do you have to offer us other than mud-slinging and insults. Again, my point (for the 15th time) is that David's original post and some that followed have a serious fault in their analysis - to wit; WHAT THE SELLER PAID VS THE PROPER MERITS OF THE DEAL.

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  30. Another pearl of wisdom from mad_tiger. Educate me, don't just throw useless barbs.

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  31. "What do you have to offer us other than mud-slinging and insults"

    You have given us nothing but what we can only assume for your lack of a response to questions, un supported reasearch. Thanks but I can pull numbers out of the air my self an post them as "reasearch".



    "Just thought I'd chime in w/ a little bit of researched facts"

    Where is the link to these facts? I believe the previous poster who's facts you dispute provided a link.

    " The rentals in this market for comparable size seem to be running between 1300 and 1800 renovated"

    How about an MLS number for those rentals, or something. How did you arive at 1300-1800?

    "I also looked at the rental that someone pulled up for 750/mo, I would hardly call that Patterson Park."
    It is exactly Patterson park, blocks from the original posting.

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  32. I did not do the research - I provided an opinion on the proper analysis. I can't believe you read all these posts and still miss the entire point of the discussion.

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  33. Whoa guys. I think there's some serious misundertanding of the Baltimore City market here. First of all S. Curley street is in Canton, not "Patterson Park." There is no neighborhood specifically named Patterson Park, at least not according to this neighborhood map (PDF-takes a while to load). Unfortunately, many investors will throw around neighborhood names without much regard for their actual boundaries, and this makes a big difference in Baltimore where you can have 450k houses on one block and 80k houses literally 2 blocks up the street.

    The comp that you cited (BA5504766) renting for $750 is north of Patterson Park, a world apart from S. Curley Street. If you don't believe me, a quick drive through the area should dispel your doubts. I recommend going during the day unless you're familiar with the area.

    Rental comps below the park, in Canton, are significantly higher than $750. Generally a rehabbed 2/2 will be in the 1200-1800 range. That being said, renting out a 200k+ is probably not going to bring you a great cash flow, and probably isn't a good rental investment, at least not in Canton. That doesn't mean that you can't finish the rehab and make some money on it. Investors could have any number of reasons for leaving equity on the table; maybe he ran out of rehab money before he finished. Regardless, 230k for an almost finished full rehab of a 2/3 in Canton is probably a steal.

    Let's say for a minute that it's not a steal. Let's say that it's way overpriced. How does one overpriced MRIS listing confirm that the entire Baltimore market is a bubble?

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  34. And here's some rental comps from the City Paper. MRIS isn't a great place for rental comps.

    CANTON :) :) :) 1006 S. Clinton St. Spacious and Updated! 2 Br +den, 2 Ba, W/D, CAC, w/w, full amenities. $1195/mo. 410-732-5205

    CANTON 3 Br, 1 1/2 Ba, large, CAC, gas heat, d/w, W/D, hdwd flrs, & much more. $1450/mo 410-236-9274

    CANTON 819 S. Kenwood 2 Br , 2 1/2 Ba, w/den. Completely renov'd, CAC, W/D, d/w. Good Parking, lots of closet space and storage. Avail Now $1400/mo + sec & utils. Credit Check. Jenn 410-530-7752 or jstokes@destinygrp.net

    CANTON AREA 1 - 4 Br wonderful historic homes. Hdwd flrs, decks, W/D, CAC. Great architectural features. Conveniently located $650-$3,000. 410-732-3739. www.citylifehistoricproperties.com rentals@citylifehistoricproperties.com

    CANTON / BAYVIEW - 3 Br, 2 Ba, CAC, W/D, hdwd flrs, updated kitch & fin bsmnt. Easy access to 895, 95, & d/town. $1350/mo (Obo) Call 443-858-5498 Email: Pkovios@netscape.net

    CANTON SQUARE Recently rehab'd 2 Br, 1 Ba. W/D, appli's, new hdwd flrs, Roof top deck, Harbor & stadium view. $1800/mo. Rent negotiable. ($1500 sd). Sm pet ok. 410-675-9600 or 410-375-3114 Alex@Northwayproperties.com

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  35. " I can't believe you read all these posts and still miss the entire point of the discussion."

    The point of the discussion is that this townhouse is ridiculously over priced by a speculator trying to bail out. It will not rent for even half of the cost of buying.

    Now if you disagree with this great. Please post some MLS#'s or links showing rental properties that will show other wise. If we knew you personally maybe we could take you at your word, but here on the web you got to back up what you say with so kind of verifiable data if you want people to believe you.

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  36. Here is a reasoned analysis. Sorry to beat a dead horse - but if the numbers (comps, rent, rehab costs etc.) work then they work. Pretty simple stuff.

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  37. I am not going to hold your hand and give you verifiable data. That is the POINT. Do your own looking and research and YOU can find the right deal.

    Some of you are demanding that I find a terrific deal (using my time, knowledge and experience) and hand it to you on a silver platter. Sorry - my time and effort is for the benefit of me, my relatives and good friends.

    My point for the 20th time is the proper analysis. Thank God for SOLs and No Child Left Beind - better reading comprehension and logical thinking is foreseeable.

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  38. "First of all S. Culley street is in Canton"

    On your map the townhouse in not in Canton it is in "Baltimore-Linwood". It is a few blocks north. Like you said, 2 blocks can make a big difference Baltimore.

    Again "Generally a rehabbed 2/2 will be in the 1200-1800 range."
    Got any examples to support this?

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  39. If you are truly serious DO YOUR OWN RESEARCH. Don't ever rely on what you are told - unless it is coming from someone you have good reason to trust.

    Why do people keep questioning the numbers. That is not the point. Whether the numbers are fact or fiction is something the BUYER has to determine for himself. Why keep demanding proof? At least I can look at this as an educational hypothetical. The only redeeming aspect of this discussion is that we are finally off "the seller's profit and motive" as a consideration.

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  40. "On your map the townhouse in not in Canton it is in "Baltimore-Linwood". It is a few blocks north. Like you said, 2 blocks can make a big difference Baltimore."

    My mistake. You're right, it's not in Canton, but it is below Baltimore Street which is generally the divide between the good and the bad neighborhoods.

    Still, I don't understand your fixation with rental comps. I cited plenty of examples of comps in the Canton area, but I'm not certain about the area around 100 S. Curley Street. It's possible that rents are much lower there. Let's say you're right and that 230k house would only rent for $750. So what? Is that proof of a bubble? One house?

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  41. You see I did the research for my self and what I came up with was not the same as what you, or who ever posted it, came up with. So a normal person would ask why, where did you find that info. Maybe my data is wrong, maybe the others data is wrong, maybe my calculations are wrong. With out asking how you came up with your data I can't see if I am doing something wrong. Don't assume that just because someone questions how you arrived at a conclusion that they think it is wrong.

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  42. "So what? Is that proof of a bubble? One house?"

    No, it is not. I can provide many instances where monthly ownership costs are twice the monthly rental costs all over the DC Metro area, indication that we are in a bubble. I can't find one that is even close to making the numbers work. Can you provide one such place currently on the MLS that is not. It would be greatly appreciated if you could, thanks.

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  43. Would love to help you out but you need to spend your own time and energy. As I said, I am not going to hand you a deal - only help you understand how to recognize one.

    I gave a couple of examples of places I bought in 2005, only to be called a liar, fraud, shill, and, possibly most disparaging, a realtor. Not my point to prove that their are deals out there.

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  44. MLS#: BA5505752

    Already rented out for $1000. Section 8 might pay you more. I agree that some places in the DC metro area are overvalued. But when it comes to Baltimore city, you have a lot to learn. If you can't find deals in the city then you don't know what you're doing. And your ignorance is costing you a lot of money.

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  45. If we where not in a bubble than all you would have to do is to pull up any one of the houses listed for rent on the MLS and find a similar house for sale and compare the numbers. It would not take much "time and energy." to do so.

    But you see I have done this for many areas in dc, and can't find one which is why I think we have a bubble.

    "I gave a couple of examples of places I bought in 2005" Yes you spent lots of time posting information that no one could possibly verify. Time would have been better spent giving one example we could verify.

    "Not my point to prove that their are deals out there"

    How about some proff that we are not in a bubble?

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  46. Hey Bob,

    "And your ignorance is costing you a lot of money"

    So I guess everybody who doesn't know how to "find deals in the city" of baltimore is losing a lot of money. Please, how narrow minded could you be. If they are so easy to find, point one out.

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  47. MLS#: BA5505752

    Why don't you do take a look at that great 80K property. Don't go at night for sure, and be carefull during the day. Better take a cop with you.

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  48. Bob ....it's like talking to a wall isn't it? These guys will never concede anything and won't be happy until you find them a great deal and gift it to them.

    By the way, anonymous, the discussion is abouthow to evaluate a bargain - does not matter about the market in general. It is about getting the numbers to work on a specific property.

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  49. Why don't all the all the one's with the blinders on just have David e-mail you when it is safe to come out and open your eyes. He can tell you when the Bubble is over and you can safely buy a house. Of course he will even guarantee that you won't lose money no matter how little you know about real estate.

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  50. No sharp-witted comebacks? No flippant (no pun intended) retort? I guess you guys just decided to pick up your ball and go home.

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  51. And here's some rental comps from the City Paper. MRIS isn't a great place for rental comps.

    CANTON :) :) :) 1006 S. Clinton St. Spacious and Updated! 2 Br +den, 2 Ba, W/D, CAC, w/w, full amenities. $1195/mo. 410-732-5205

    CANTON 3 Br, 1 1/2 Ba, large, CAC, gas heat, d/w, W/D, hdwd flrs, & much more. $1450/mo 410-236-9274

    CANTON 819 S. Kenwood 2 Br , 2 1/2 Ba, w/den. Completely renov'd, CAC, W/D, d/w. Good Parking, lots of closet space and storage. Avail Now $1400/mo + sec & utils. Credit Check. Jenn 410-530-7752 or jstokes@destinygrp.net

    CANTON AREA 1 - 4 Br wonderful historic homes. Hdwd flrs, decks, W/D, CAC. Great architectural features. Conveniently located $650-$3,000. 410-732-3739. www.citylifehistoricproperties.com rentals@citylifehistoricproperties.com

    CANTON / BAYVIEW - 3 Br, 2 Ba, CAC, W/D, hdwd flrs, updated kitch & fin bsmnt. Easy access to 895, 95, & d/town. $1350/mo (Obo) Call 443-858-5498 Email: Pkovios@netscape.net

    CANTON SQUARE Recently rehab'd 2 Br, 1 Ba. W/D, appli's, new hdwd flrs, Roof top deck, Harbor & stadium view. $1800/mo. Rent negotiable. ($1500 sd). Sm pet ok. 410-675-9600 or 410-375-3114 Alex@Northwayproperties.com

    ReplyDelete
  52. If you are truly serious DO YOUR OWN RESEARCH. Don't ever rely on what you are told - unless it is coming from someone you have good reason to trust.

    Why do people keep questioning the numbers. That is not the point. Whether the numbers are fact or fiction is something the BUYER has to determine for himself. Why keep demanding proof? At least I can look at this as an educational hypothetical. The only redeeming aspect of this discussion is that we are finally off "the seller's profit and motive" as a consideration.

    ReplyDelete
  53. Here is a reasoned analysis. Sorry to beat a dead horse - but if the numbers (comps, rent, rehab costs etc.) work then they work. Pretty simple stuff.

    ReplyDelete