Baltimore Real Estate Investing Blog

Here is Mark’s Secret

As a buy and hold investor that has been in the business for over 15 years I am often asked how I find my deals. Everyone wants to know the secret. I am sorry to disappoint you, but- THERE IS NO SECRET! (except maybe one… or two)

Where to Find Real Estate Deals in a Tough Market

Despite what many that know me may think, I don’t get the majority of my deals off the MLS. I get the majority of them from 2 sources. Are you ready? Here they are- I walk around the neighborhoods where I am buying and talk to EVERYONE. If I see a guy carrying drywall in a house, I’ll stop and talk to him and casually ask if the owner wants to sell the house. Yes, I have gotten deals like that. I’ll talk to an older lady leaving her house- I just got one like that! If I see a house that is vacant I’ll keep an eye out for a posting on the property. I just finished rehabbing one that I got like that. If I see an auction sign- I’ll make an offer and get the property before it goes to auction- and I recently did that- which leads me to my second way- Network your arse off.

How to Network

Talk to auctioneers, talk to active agents that deal with investors, talk to wholesalers, talk to short sale experts and talk to tax lien buyers! Despite what others may tell you there ARE deals out there. You might have to work a little harder to find them, but you will if you look. Oh, and if you talk to a seller and they want to much for the house ask them if they would consider holding a full or partial note. If they would then you might have a deal after all. One of the ways that I have turned several non deals into deals is by asking if they would accept principal only payments for a portion of the loan. That would help you to get some equity faster so that it would be easier to do a refi if you need to. That is a whole different subject, but I did want to mention it!

So, I am sorry to disappoint you, but I don’t really have the secret sauce to deal finding. I walk around and talk to people, observe vacants. send out yellow letters, talk to wholesalers, talk to attorneys, talk to tax lien buyers, talk to realtors, and of course- other investors. So there it is- but please don’t tell anyone!

This Guest Post was by Mark Owens.   I hope you enjoyed it.  I met Mark ten plus years ago and have learned so much from Mark.  He is the real deal.  His website is MarkOwens.com.

Happy Investing – Ned

What are They Thinking?

The Baltimore City Council has proposed a bill that will be very costly to Landlords. (Baltimore City Council BILL 17-0113) Basically the bill calls for the following.

• Essentially delay all evictions 10 days, (Currently already takes about 2 months)
• Require YOU the landlord to pay for mediation before you can file for eviction.
• These two requirements could easily add $500 to the cost of each eviction, through lost rents and the out of pocket cost for mediation.
• Require you to register all members of your entity with phone numbers and email addresses. Anyone with as little as 3% interest in a company will have their privacy exposed.

You can find more information about this bill at Anti Landlord Bill.  Here is a direct link to Baltimore’s unfair landlord bill.

Please Sign the Petition to Oppose This Anti-Landlord Bill.

Here is the link to oppose this regressive, counterproductive and anti housing bill

Oppose Baltimore’s Anti-Landlord Stance

Baltimore Investors are Evil

Sadly for some reason that is how small investors are viewed. We are the bad guy. We are simply greedy investors who are simply out to make a Profit.  Many think somehow making a profit is bad, yet they would scream how unfair it is if there was a cut in their paycheck.

There is an army of well paid legislators, lobbyists and so called “Tenant advocates” who are out to make our job harder and more expensive. I put tenant advocates in quotes and they are not really advocating for the majority of tenants. The are advocating for only a small portion of tenants – the irresponsible ones.

You need to get involved

This army of advocates will run us over if we don’t fight back. I learned of this an email from my friend Brian Wocjik. He offers services as a Rent Court Manager. He runs a meetup group called Landlord 411 which you should join. This meetup group is designed to help you the landlord, especially in areas regarding the law.

Sign the petition

Happy investing –  Ned

While headed for the tax sale office in the Baltimore City Municipal building I saw this sign flash up on the TV Monitor.  Who says the city doesn’t have a sense of humor.  To bad they don’t put it someplace residents will see it.

This is part of Baltimore’s Stomp out Rats Campaign. I get  the point, but maybe someone should tell the city Rats prefer a full trash can.

This class has been completed and will not be repeated in 2016

If you’re lazy and unreliable, it doesn’t matter what you’re good at.

Being really good at something is not near as important as accomplishing something. The real estate business is not something you can do successfully by yourself. You need others to be successful in Real estate investing. REI is team sport.  Do you really think that if you are lazy and unreliable others are going to want to work with you?

The real estate business in Baltimore City is a small business. I run into the same people over and over. Your reputation will get around. If your reputation is that of someone who is unreliable, no one will beat your door down to do business with you. No one brings deals to investors who can’t perform.

However if you have a reputation for working hard, being reliable and trustworthy, you will find others will go out of their way to work with you. I do a lot of business and have the ability to bring a lot of business to the people I work with. The attorneys, accountants, partners etc I choose to work with are all top notch. There are a ton of professionals that I simply will not work with again, as they dropped the ball when they had the chance.

By the way if you are afraid of partnering in your real estate investing, I get it. We all here stories about how partnerships can turn into horror stories. But how about all those partnerships that work out great. I have had 6 main partnerships in by business life. Two did not work out, but broke up on good terms. Four have worked out well to really great.  Oh and, Charlie Munger, who made the quote above, his partnership worked out pretty well too.  He is Vice-Chairman of Berkshire Hathaway and his partner is Warren Buffett.  Click here to read some great quotes from Warren Buffett.

“I would rather lose sleep over a house I didn’t buy than lose sleep over a house I bought.”

The Anatomy of a Wholesale Deal: A Case Study

In this guest blog post I will share with you one of my latest closings every step of the way from lead generation to closing. This particular property introduced many new challenges that I had not yet experienced in my real estate career such as: dealing with Power of Attorney and selling a property with a tenant in place. But that’s the great thing about real estate there is always more to learn and room to improve, whether that’s more efficient marketing, rapport building techniques or making offers. This is one of the components that make real estate both so rewarding and challenging.

Lead Generation:

Every lead originates from somewhere. In this case one of the criteria I use is absentee owners with high equity. I find this information from my local appraisal district. For my marketing piece of choice I prefer postcards.  Some investors like to use yellow letters; however, in my own personal split tests I have found yellow letters generate more calls, but the overall lead quality tends to be much lower than the calls I receive off post cards. But that’s a discussion for another blog post. I first began mailing this lead in December of 2012. I continue to mail every lead on my list every 3 months for a year. This results in them receiving my message 4 times annually. For this particular lead I did not receive the first call until August 2013. It took a grand total of 8 months for the seller to contact me. Many would be real estate investors give up on mailing after having a poor result on the 1 month, so keep mailing!

Sellers Situation:

I don’t want to get too specific here, but this case involves a father and his daughter. The father had been living in a nursing home and his health was failing, and they were running out of money to pay for his living arrangements due to a delay in health care approval. The father also had a rather severe case of dementia, and as such was not of “sound mind” to make any real estate related decisions. Thus the daughter had been granted power of attorney. This property needed to be sold before the 1 September to maintain the fathers living arrangements. This seller was under the gun and needed to liquidate the house fast, and had less than 2 weeks to do so.  However, the direness of the situation was not fully revealed to me until I had gained the sellers trust at the appointment.

Appointment:

When I go on appointments the last thing on my mind typically is the house.  At the forefront of my mind is building an excellent rapport with the sellers and trying to connect with them anyway I can. I genuinely care about their problems.  Of course that is not to say I don’t hop on the MLS and research what’s going on in that area, or drive the comps and all the other stuff we must do as real estate investors. No, I work on building an excellent rapport first with the seller so I can earn their trust. This allows me to get properties under contract even when my offer may not be the best.

This appointment was a little more challenging. The property had been turned into a rental unit to help cover the father’s medical bills. The property also used to be the fathers primary residence. There was a full family renting out the property now. Not only did I have to bond with the seller, but the renters as well. I knew when I would later have to show the property to my funding partners it would be a challenge if the tenants gave me trouble. The tenants seemed to like me, but also a bit resilient since the property could be sold. Let me make it clear, they did not want to move. To make it easy as possible

I took very good pictures and a walk through movie of the property while I was there on the premises.  This would make it MUCH easier to move the property later when I had it under contract.  Other investors were scheduled to take a look at the house that day as well, however the seller felt so comfortable with me she canceled the remaining appointments (see I told you that rapport building thing would come in handy).  The seller also began to reveal to me truly how dire the situation was touching on some of the details I had discussed earlier regarding her father’s living situation.

Making the Offer & Contract:

In this particular instance I wasn’t confident enough to make an offer at the property. Instead I called back later that evening and made her a fair offer based on the market value of the property and the amount of repairs it needed. Since this property was tenant occupied, and I wanted as few people looking through it, I was a bit more aggressive in my pricing.

The seller took my offer well but was hoping to receive a little more for it. I continued to educate the seller on the nature of the repairs (quite extensive) and the fair market value of the house. The seller needed a day or two to think about the offer. In the mean time I submitted a PDF offer for her records via email (a nice professional touch).  A few days later the seller decided to write it up, so we met and filled out the contract.

Showing the Property with the Tenant in place:

Immediately after signing the contract I began putting together my property overview packet.  Although I had a 10 day option, I didn’t sit around and do nothing for a few days. From the moment the contract was executed I put myself under the gun, I became the motivated seller and had the packet ready to market to potential funding partners.  Unfortunately for me, this particular property was in an area where I had ZERO established buyers.  The first night I had this one under contract was probably one of the most stressful nights I have ever experienced.  I really wanted to help the seller, I didn’t know what to do showing the property with a tenant in place and ultimately wanted to perform on the timeline they needed.

Fortunately I started getting some calls and one of them was a big investor in the area that I knew I could trust, although this was the first time I had met with him. I gave the tenant a call and scheduled another appointment to look at the property.

We both arrived at the property and I could see the tenant from the drive way, he looked very annoyed and displeased. I don’t blame him, but this process wasn’t exactly easy on me either. We got out of our cars and started to look around.  After finishing our walk through I pulled him aside and asked what he thought.  To my surprise he wanted to buy it now and whipped out his check book giving me his nonrefundable deposit.  I only had to show the property once, thankfully. Because I made sure the numbers worked and had great pictures and video, it really helped me package the deal together and market it efficiently.

Other Challenges:

One of the biggest challenges besides the tenant in this scenario was the lease agreement. The seller had been in a frantic mad dash trying to take care of a million other things up until the day of closing while I handled the property. One of the main issues that came up was the lack of a valid lease agreement. In Texas, when you sell a property, the lease conveys with the property and the new owner becomes the new land lord and the title company needed this information. However, in this case the copy of the lease the seller had originally turned in was Xeroxed in such a way that the initials at the bottom of each page were cut off.  In other words, without the initials the contract was invalid. I had to continue to remind the seller up until the day of closing to find the original and get it back to the title company ASAP.

You have it under contract, you have a buyer lined up and yet you are STILL not finished. At this point you effectively become the transaction engineer and do everything within your power to make sure this deal makes it across the finish line in, or in this case closing table.  In this case, making sure the title company gets a valid lease agreement.

The seller also had Power of Attorney in this case, and that is something I had not yet experienced in the field.  It turns out it is very simple to fill out the contracts when someone has PoA here in Texas.  That brings me to another point; you don’t have to be an absolute expert on everything to do a successful deal.  LEVERAGE the expertise of those around you and build your power team!  I simply called up my title company and asked them what to do. Turns out, very simple, the format they like to see is (Owner of the property) signed by (person with PoA) – Attorney in fact.

In Conclusion:

Always aim to create a win-win situation where the seller benefits and gets the amount of money they need and the end investor gets a great deal.  Don’t be afraid to get your hands dirty and try some new things you have not yet experienced.

Special thanks to Ned for allowing me the honor and privilege of guest post on his blog.  Thanks for reading and if you have any questions feel free to leave them in the comments below and I will do my best to address them.

This Guest Post was by Chris Feltus.   I hope you enjoyed it.  I met Chris on the Bigger Pockets forum.  His website is Feltus Family Homes.

Happy Investing – Ned

“The sense of unhappiness is so much easier to convey than that of happiness.”

Graham Greene

Isn’t the ultimate reason we invest in real estate, earn money, and strive for goals,  is to be happy?  One of the surest ways to be happy is to be thankful for what you have.  Everyone has something to be thankful for.  Let me give you an example.  If you are reading this, you can be thankful for access to the internet.  The internet is a powerful tool that essentially gives you access to the entire accumulated knowledge of mankind!  Wow that is something to be thankful for.

If you think about it you probably have a LOT of other things to be thankful for. Do you want to be happier?  Take a few minutes to think about what they are.

Happy investing – Ned

One of the good ones passed away to day.  Lonnie Scruggs was  real estate investing instructor who wrote books on mobile home investing.  He was famous for “Lonnie Deals.” This is buying an inexpensive mobile home and selling it at a big profit with owner financing.  I am somewhat anti-guru because of the tremendous hype and lack of real information many provide.  However Lonnie was down to earth and gave great information.  Even John Reed who is known for bashing just about all gurus gave Lonnie his seal of approval.  Rest in Peace Lonnie.

I was out checking properties for the 2013  Baltimore City Tax sale today.  One property going into the sale is 702 N Carrrollton.   The good news is 702 will soon be an end unit.

This is the property right next door, #700.  This must have just collapsed because the city wouldn’t leave a building in this condition long.   It is scheduled to be demolished because it is a safety hazard.  While this one is not in the tax sale this year, it shows the importance of inspecting properties in the city.  It would be easy to look at the picture in Google and bid  thinking  “I can pick up a fixer upper three unit dirt cheap.”

Hey if you need a chimney it’s still got a perfectly good one.   And all the bricks you can carry for free !

Be Safe – Ned

Below is a guest post by by Ryan Webber.  I like this post because of the point he makes about integrity at the end.  I met Ryan on Bigger Pockets.  He consented to let me use on of his posts here.  Ryan canbe contacted via his contact page o his website  http://www.AmarilloHomeBuyers.com.

Here is Ryan’s Post

“I would like to make a toast to lying, stealing, cheating and drinking.

If you’re going to lie, lie for a friend.

If you’re going to steal, steal a heart.

If your going to cheat, cheat death.

And if you’re going to drink, drink with me.”

Jason Wojciechowski

The Sales Lion

Here is a site I just discovered about website marketing.  This post was about networking and linking out to other sites.  How to network like an online Superstar.   In web marketing, links are key to getting ranked in the search engines.  Since he reminded me how important linking out is to networking, I am starting with his site.  In fact his post is motivation for what I hope becomes a regular feature of Baltimore Real Estate Investing Blog.  So if you like the links below, stop by his site and leave a comment thanking him.

Bigger Pockets

Bigger Pockets is one of the largest real estate investor websites. They recently started doing podcasts and I just listened to  Starting Out with Karen Rittenhouse – Subject To, Direct Mail, and Investing from a Woman’s Perspective.  This is about 45 minutes long but well worth it.  Karen is artiulate, energetic and funny.  This is her sucess story about getting started with no experience and growing and continuing to have tremendous sucess.  This is inspirational, motivational and includes enough specific information to help you take action

Morgan Politan’s Blog

This post I already mentioned in my post about Maryland Rent Control.  If you are interested in politics, policy and real estate investing you will enjoy  Morgan Politan’s  post on Rent control.

Steph Davis Video on Blockshopper

I never heard of Blockshopper before seeing it on Steph Davis’ Flip This Wholesaler Blog. This video describes blockshopper and how she uses it to find cash buyers for her Wholesale deals.  I am a big believer in Steph.  She has great content on her site.  Her Ebook on Flipping bank owned properties is one of the few products I endorse on my site;  solid info for a bargain price.

Steve Cook’s New Forum

I have save what is perhaps the best for last.  Steve Cook the creator of the extremely popular Flipping Homes forum   (Now run by my friend Pete Gauthier) has created his own new forum, Lifeonaire.   If you need real estate tips or advice there is no one better than Steve Cook.  I already see several names of very experienced investors on the board.  Yours truly will also be participating.  Check it out here http://lifeonaire.com/forum/

Leave a comment and let me know what you think of these links.

Happy Investing  – Ned

Update

The rent control bills Below did not pass.

Rent Control in Maryland/Rent Control In Baltimore

I occasionally get asked f there is rent control in Maryland or in Baltimore.   Currently neither Maryland nor Baltimore have rent control.   Often I talk to people who believe there is rent control in Maryland.  In some ways I am a little surprised,  as Maryland and even more so Baltimore, is very liberal.  Fortunately for both landlord and tenants there is no rent control.  Studies prove rent control reduces both quality and quantity of housing.  More importantly the benefits of rent control often do not go to the very people it is intended to help.

Rent Control is Introduced in Maryland

The Maryland House of representatives has introduced House Bill 315   proposing rent controls and Just cause evictions. This is a serious encroachment on our property rights.  The bill limits rent increases to 5% and requires there to be a “Just Cause” to remove a tenant from a property.  Simply choosing not to renew a lease is not an option.

On the surface, today a 5% increase may seem reasonable.  It would be easy to say this is not a real problem for landlords.  Yet it is a serious problem.  What happens when inflation is 10% but you can only raise rents 5%.  What happens if you rents are well below market and you finally realize you need to catch up to market rates?  What happens when you buy a property with a tenant that has low rent?  You will not be able to bring the rent up to market rates.  This will hold down property values on tenant occupied properties.  That’s just what we need now, more government interference to hold down property values.

Just Cause Evictions

One issue that comes up regularly, primarily from delegates from Montgomery county, is  “Just Cause Evictions”.  These  Morons Delegates  want a law that says there needs to be a “Just Cause” to remove a tenant from a property.  Obviously the landlord needs to follow the lease and there already needs to be a just cause to remove a tenant.  However the new law limits the reasons you can remove a tenant to 11 specific reasons.  It would appear that the landlord choosing not to renew a lease is NOT one of the reasons allowed.

Gee is it possible they left out some legitimate reasons.  Anyone who has been a landlord for a while knows it is perfectly legitimate to get rid a of a tenant that is an Asshole. But that would not be allowed.  By law you would have to renew your lease with bad tenants.  How about a breach of lease?  Can you remove a tenant if they breach the lease?  Well the new law says only if it is “substantial”.   Although Rent Control is more likely to get the attention of landlords,  “Just Cause” is probably a greater infringement of our property rights.   The problem is the term just cause is used to push through a policy that is anything but just.

Blame the Politicians

This bill is proposed and or sponsored by delegates; Hixson, Cullison, Gutierrez, Hucker, Kaiser, Luedtke, and A. Miller.  It is interesting to note that every one of these morons is from Montgomery County.  It is sad that we don’t require that you need to be able to pass an economics test to be elected.  Obviously the group above can’t.

You Can Help

There are three things you can do to help

1.  Write, email or call, The delegates above or those on the Environmental Matters Committee which is hearing the bill.
2. Come to the hearing for the bill to testify.
3. Join the Property Owners Association.  This helps fund a lobbyist to fight for real estate investors and address all the anti-landlord bills that come up regularly.

A hearing on this bill is scheduled for Thursday 2/28/13 at 1:00.  If you have never testified before the legislature it is easy.  It is important to have a good turnout, whichever side you are on.  If all you do is show up and take ten seconds to say I am against the bill, it will help.   If you get  good feeling that you have done your civic duty when you vote, you will get the feeling ten fold by testifying.

Update On rent control hearing location

House Office Building

Downtown Annapolis Map

Find your Legislators here

Find Maryland legislators by Name.

Find Your Legislators by Your Address

 Why rent control does not work

I wanted to add more to this post about how counter productive rent control is.  However in the interest of time I will simply refer you to a great and well researched blog post by Morgan Politan.   Why rent control l doesn’t work.

What do you think of rent control?  Leave a comment.  – Thanks, Ned

Realty Trac Report

Realty Trac recently came out with a list of the best cities in the nation to buy foreclosures in 2013

Realty Trac Foreclosure Market Report

They report that in 2012 57% of the markets they track over 200,000 people increased in the number of foreclosures over 2011.  Twelve of the top 20 markets in size decreased in foreclosure rates.  However one large city of note Baltimore was one of the 8 out of 20 largest markets that increased in foreclosures.  Baltimore foreclosures showed an increase of 34% over 2011.

Daren Blomquist, vice president at RealtyTrac said “Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble.”  I have to disagree. That may be true in some areas, however as I drive through Baltimore I see a lot of properties that appear vacant.  My experience tells  me that those were homeowner properties or investors who cold no longer pay the mortgage. These owners have abandoned their properties and they sit vacant while waiting for the banks to foreclose.

Best Markets to Buy Bank Owned Homes in 2013

Despite the increase in foreclosures in 2012, Baltimore was not listed as one of the best foreclosure markets for 2013.  However as I said above I think there will be plenty of opportunity in this market in 2013.  Palm Bay-Melbourne-Titusville metro area in Florida was at the top of the list.  Five other Florida markets were in the top 20.  Five New York cities made the top 20 list which means FL and NY cities represent over 1/2  of the list.   Check out the Realty Trac site to see the complete the complete list and cool looking charts.  (I won’t copy the charts here for copyright reasons)  They also have  list of the worst places to buy foreclosures in 2013.

How to Buy and Flip Foreclosures

So if the foreclosure market in Baltimore is strong,  how do you best take advantage of it? I make my living flipping tax lien foreclosures. There is plenty of information on that in the tax lien section of my site.  If you want to learn how to invest in Bank foreclosures the best person I know is  Steph Davis.  In Fact she is known as REO Steph.  (REO is  short for Real Estate Owned or bank owned)

Steph was a broke bartender who hated her job.  She struggled for some time before she figured out the real estate business and went on the crack the code of how to profit from bank owned properties.

Yes I am pitching her course and yes I will make a small commission for selling it.   You know, I am somewhat  anti Guru.   Oh yes I have spent a ton of money on those courses myself.  You know what I have found – The cheapest courses are often the best.  Courses can go for thousands even tens of thousands of dollars. But some of the very best are under $500. That’s why I recommend Stephs course.  It’s only about 50 bucks. You can get Stephs course of REO investing here.

Happy Investing,  –  Ned