The new-home jitters is a plague that often attacks first-time buyers. And the symptoms tend to escalate if buyers are also counting on income from a rental unit to pay the monthly mortgage.
To help stamp out the what-if-I-can't-find-a-tenant worries, the developer of Hollins Townhouses in the Hollins Market area of West Baltimore is guaranteeing that it can find qualified tenants to lease the apartment in the two-family town houses it has for sale.
"One of the determining factors [for purchasing the Hollins Townhouse] was the arrangement for a tenant," said Britt Baker. He is a mail carrier in the Owings Mills post office, who plans to move into his recently purchased Hollins Street house in August with his wife, Anita, a financial collections officer for Tissue Banks International in Baltimore.
American Property Management, an agency that is working with the developer, located a tenant for the Bakers.
The Bakers approved the first tenant they met, but only after some investigation.
"Being tenants ourselves, I knew what I could tolerate," Mrs. Baker said. To scope out their tenants' living habits, the Bakers arranged to meet them at their home.
Mrs. Baker said she was concerned about the two cats that her potential tenants owned, and she looked for any type of damage to their old apartment. But their prospective tenants passed muster, and they moved into the Bakers' new house earlier this month.
The Bakers, who are now renting a home in Columbia, are looking forward to moving into their house in August.
"I was raised in [Washington] D.C.," Mr. Baker said. "I am afraid to go back to my city, but I believe that you can't move away from the cities. I want to contribute to the resurrection of the city."
New York developer Howard Lowentheil is a principal of Hollins Market Limited Partnership and Market Mews Limited Partnership, the holding companies for Hollins Townhouses. He realized that to sell the houses, buyer fear had to be overcome. "I wanted to give them confidence," Mr. Lowentheil said.
The plan to guarantee to find a tenant is "something I devised with Martha Clarke [director of sales]," Mr. Lowentheil said. "Someone buys the home, and we get them a qualified renter."
With the recent plunge in mortgage rates, former renters have been turning into buyers. And regionally, the pool of available renters has been steadily shrinking.
Still, the Hollins Market area remains stable, says Melvin Hertzberger, president of American Property Management, because of its proximity to the new baseball stadium at Camden Yards.
"The market is softer now than it was two years ago, but we have been successful finding tenants for the buyers," Mr. Hertzberger said.
While prospective owners are not required to use the services of American Property Management, those who do must pay a fee equal to one month's rent.
As an additional incentive to purchase a two-family Hollins Townhouse, buyers who can find a tenant quickly for the lower-level apartment can also bank two or three months' rent even before the sale of the house is complete. The program allows the owner's tenants to move in before settlement, with Hollins Townhouses paying the mortgage until then.
With monthly rents in the town house apartments averaging about $500, new home buyers can collect up to $1,500 in rental income upon settlement. The funds are put into an escrow account until ownership is assumed.
Hollins Townhouses will give the owner $400 a month in rental income for up to one year after settlement if the rental agency cannot find a qualified tenant.
To date, none of the three buyers has been unable to find a suitable tenant.
The Hollins Street area houses are about 150 years old and were renovated about 10 years ago and then rented. The developer used tax credits for rehabilitation of historic properties to fund the development, and after renting the houses for at least five years, he planned to put them on the market.
In the past year as the leases expired, the houses were spruced up and put on the market.
Of the original lot of 54 single- and two-family houses, 17 two-family houses costing $78,000 to $85,000 are still available along with five single-family houses costing $95,000 to $125,000.
Two of those houses are zoned for commercial use and have storefronts.
For moderate-income, first-time homebuyers, the state's Community Development Administration is offering low-interest mortgages at 5 percent for the single-unit houses to buyers who will occupy the property. Buyers' incomes may range from $20,000 to $34,000.
CDA mortgages are also available at 8 percent for the two-family houses for households with incomes between $28,000 and $58,000. Buyers not qualifying for the low-interest CDA financing can use traditional mortgage sources.
"Coming up with $10,000 to $12,000 [for the down payment on houses with market financing] is a push," Mrs. Baker said. The availability of CDA financing, which requires little money down, is what helped make the Hollins Street house affordable for the Bakers.
For sales information, call Herbert Davis Associates at 547-7133 or 296-5770.