Diary of my 1st Rehab Buy-and-Hold in Baltimore City

[Julie Hassett]

Hello BP!

Today I closed on my first buy and hold rowhome in Baltimore City. It's my first real estate deal ever - and seeing as how I only have the faintest idea of what happens next, I figured my journey of figuring it all out might come in very handy for anyone in my boat. That is:

• employed full-time
• the only "boots on the ground" 
• total newbie
• very determined!

Here's the quick and dirty on the deal:

• purchased from a wholesaler on the local REIA email list
• purchased for $42K all in
• located in 21213 (Belair-Edison)
• delivered vacant
• Would like the rehab to come in under or at $30K

What I've done so far (in order):

1. answered wholesaler's ad/email
2. set up a showing (it was a very quick walk thru b/c tenant was there and didn't know I was coming)
3. put in a cash offer over text message
4. wholesaler emailed me the original contract between him and seller and an assignment contract
5. chose a title company (because this wholesaler didn't insist I use his) - first verified over the phone that the title company is familiar with how wholesale deals are structured
6. dropped off my $1,500 EMD deposit at the title company
7. scheduled an inspection of the property through the wholesaler - this was delayed multiple time because tenant vacated later than planned and the electricity was shut off
8. called BG&E to get the power turned on in  my name (even though I didn't own the property yet) so that my inspector could properly check the boiler and electric system
9. purchased a lockbox and left a key on the front door for BG&E to verify that the property was vacant - they most likely required this because the previous tenant had a large unpaid balance
10. got a full inspection from a licensed inspector (who is also a contractor, flipper and appraiser), which took about three hours altogether and cost me $375
11. Met the neighbors and gave them my phone number in case anything funky happened at the property. (Told them I was the property manager, NOT the owner.)
12. wired the funds the day before closing to the title company
13. went to the title company and it took about 15 minutes to sign about 5 documents
14. became a real estate investor!

What the inspector found:

• structure is surprisingly sound - no damage or warping to joists, basement appears to have never taken on water, i-beams are steel, foundation is a-ok (phew!)
• electric panel is made by Federal Pacific - it is a fire and safety hazard and must be replaced by doing a panel swap ($1K - $2.5K) 
• electricity in the house is ungrounded - in order to pass section 8 inspections, electric must be TRIPLE grounded. This would require rewiring the property and ripping out perfectly fine walls to do it. Costs could run as high as $10K.
• HVAC - boiler is probably from the 1940s, but still fires up like it's brand new. However only 2 of the 6 radiators are heating up. Need to call a plumber and locate the blockage.

What's next:

• changing locks on front and back door (a little late on this but I didn't perceive the previous tenants to be the vandalizing types)
• getting insurance - not sure yet whether I start out right away with a landlord policy or if I do a build policy during the rehab
• Scheduling a plumber
• Get a second quote on electric work
• Have a couple GCs scheduled to come by next week for a walk through
• Deciding if the high cost of triple grounding the electric will be worth the extra cash flow I can receive from section 8 tenant vouchers

I'll be posting regularly as I progress... feel free to ask me questions or give me advice as well!

If I can do it, you can too!

- Julie