City hot spot for investors

A National Real Estate Investors' Conference at BWI this week drew about 500 people, and many of them hopped on a bus to Baltimore for a tour of potentially lucrative investments.

October 07, 2005|By JAMIE SMITH HOPKINS | JAMIE SMITH HOPKINS,SUN REPORTER

Everyone's talking about real estate slowdowns, but you would not have known it on McCulloh Street yesterday.

In a neighborhood of broken windows and boarded-up properties, 80 people crowded around a dark shell of a rowhouse, eager for rehabbing tips so they could start investing - or investing more - in Baltimore.

The daylong bus tour of city projects was part of a conference that has drawn nearly 500 people here from the region and as far afield as London, many wanting to get in on what they think is a sure thing. "Baltimore's red hot," said Sherman Ragland, a Washington investor and a coordinator of the National Real Estate Investors' Conference, which runs through Sunday at the BWI Airport Marriott.

FOR THE RECORD - A photo caption that accompanied an article in yesterday's Business section about real estate investors misspelled the name of rehabber Mike Benons.
The Sun regrets the error.

"It's the hottest real estate market in the country right now for investors," he said.

It's certainly swarming with them, concerns about bubbles notwithstanding. A Sun analysis of real estate transfer data earlier this year found that two-thirds of homes selling in the city were going to "non owner-occupiers" - typically investors. That's up from one-third in 2001.

A significant share of the buyers hail from the much costlier New York and Washington areas. The average price for an existing home in Baltimore was a little more than $170,000 in August, according to the most recent numbers from Metropolitan Regional Information Systems Inc.

And because city prices have doubled in about four years, all sorts of people are trying to get their foot in the door - including a fair number who have quit their jobs to invest full time, banking on a continuing acceleration.

"The market really is crazy," said Alan Chantker, a city investor who is president of the Mid-Atlantic Real Estate Investors Association. "I don't know when or if it will end. ... There's no property in Baltimore that you can't sell to somebody."

Rob Bostick, a Baltimore investor who in six years has had a hand in about 270 deals - many of them homes he rehabbed and resold - led the conference bus tour yesterday. He estimated that more than half the participants, who paid as much as $795 for the full four days of seminars and workshops, have no real estate investing experience and many others have little.

They need to know what works well and where they can get into trouble, he said. "I sold a shell two weeks ago for $125,000 - a shell," Bostick said before the trip. "The market has definitely grown tremendously, and I think ... it's getting to the point now where the numbers are becoming more difficult to work for investors."

He said investors need to settle on deals without counting on continued fast appreciation, and they can't be hazy on expenses and schedules. A rehab project that takes longer than expected can eat profit quickly. His holding costs alone can top $1,000 a month on a house.

That's the sort of advice that Upper Marlboro resident Ken Vinston wants. He did some minor renovation work on a rental property he sold this year - "but this is definitely a lot more extensive," he said, looking around the McCulloh Street rowhouse, one of five that Ragland and partner Mike Benons are rehabbing on the street.

"I've decided to get my feet wet," said Vinston, 50.

Odenton resident Kim Hicks jumped into investing with both feet - she quit her job at the Prince George's County 911 center and bought her first property, a townhouse in Severn. She hopped on one of two tour buses yesterday because she wants to get to know the city. She saw a range of properties, from narrow two-stories to a sprawling house in Garwyn Oaks in West Baltimore with seven bedrooms. "I like the size," she said, stepping in to the latter property amid exposed walls and piles of lumber.

That's one of Bostick's projects. He said he bought it for $36,000 from an elderly woman in a nursing home who heard one of his radio ads. He figures he'll put about $40,000 into the rehab and sell it for "easily" $170,000 - which would leave him with at least $70,000 in profit after interest and other extra costs.

He ticked off some of the to-do list as tour participants clustered around him: $8,000 for a new shingle roof, $5,000 to replace the plumbing, $1,500 or so to modernize the kitchen, $2,500 for new wiring - it adds up quickly. "There is termite damage like I've never seen before," he noted.

Wayne Price of Annapolis walked through the house and was amazed that it would go for only $170,000 when rehabbed. "A little World War II bungalow, anywhere within the city of Annapolis or Eastport - you're looking at $550,000," he said.

In that sort of market, "there's no values left," he said. "But this is reasonable - this is very do-able."

Troy A. Reed, a Bowie resident who quit his job as a sales manager to invest in real estate, said he's made more than $100,000 since April just turning "wholesale" deals - finding homes and selling them to other investors, typically rehabbers. But halfway through the bus tour, Reed said he believes he is ready to try fixing up one of his fixer-uppers. He got it for $5,000, so - he figures - why not?

jamie.smith.hopkins@baltsun.com

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