15 Rehabs in 10 Months in Baltimore City!

[Joseph England]

Hello BP,

I started my real estate investment career a little over a year ago. I bought my first three properties within two months of each other. Two of these were turn key rentals and the other was a rental rehab that I did the work myself(I was an apprentice carpenter in college). I immediately saw the benefit of the increased equity and forced appreciation of the property I did rehab. That was when I realized that buying turn key properties and paying for someone else's rehab profit wasn't for me! If there was a rehab profit whether it be in cash or equity it was going to me mine! I immediately starting looking for very distressed properties and finally closed on my first one in late January 2016. Since then and in just 10 months I have rehabbed 15 properties in many different areas and economic levels within Baltimore City. I have rehabbed properties from the high end Canton area of 21224($80,000 rehab) all the way to Biddle street in 21213, where I bought a house for only $9,000. I started out with one general contractor and now I have three full time GCs and number of handymen and subcontractors. I started out only doing one rehab at a time, but I have subsequently expanded to currently working on four different rehab projects simultaneously.

I have made many mistakes and I have learned countless lessons while rehabbing properties in a very diverse area like Baltimore city in just the last 10 months. I have decided to share as many of these lessons with the BP community as I can (since I can contribute a lot of my success from what I have learned on this site). I have a general idea of how I would like to share these lessons I have learned but this will be a fluid thread that will change with comments and advice. I plan to go through each property individually, providing before and after pictures and the success and failures of each property.

I would like to start with my first flip in the Loch Raven area of 21239:

Brick row home, 1200 sqft, 3 beds/ 1.5 bath

Purchase price: $50,000.00

Estimated rehab costs: $40,000.00

Estimated ARV: $150,000.00

Actual Rehab costs: $45,109.94

Sale price: $145,000.00

Profit: $30,389.34

Pre-Rehab Photos:

Repairs Completed:

Replaced baseboard heating system with complete HVAC system and ductwork throughout the house

Complete kitchen rehab to include granite and all refurbished SS appliances

Complete 2nd floor bathroom rehab

Painted entire house

Refinished hardwood floors to a darker color

Installed all new ceiling fans

Replaced all windows and doors

Complete gut and rehab of basement(realized after purchase black mold covered 90% of the basement framing) to include recessed lighting and all new carpet

Rehab of basement half bath

Removed shingles and replaced with new siding on the shed with electricity.

Painted the other Shed.

Replaced main power line cable coming out of the house due to insufficient shielding for the cable.

Fixed gutters and railings throughout the exterior

Landscaping with black mulch and a assortment of flowers

Post-Rehab Photos:

Sale process:

Our original ARV was $150K but because a property very similar to ours just down the street which was list for sale at $160K went under contract. What we didn't know is that the property did go under contract but for a reduced price $150K. We had assumed that it was selling for its listing price of $160K. We had two open houses and many individual showings. After two weeks with no offers we reduced the price to $155K. Most of the feedback from the showings was that they loved the house but the only negative feedback was the absence of a second full bathroom. On the third week we got a offer and after some negotiating we got the house under contract for a sale price of $152k with $4k seller assistance.

The appraisal took place a few weeks later and we provided the scope of work and all the strong comps that showed this property was worth at least $155K. Despite doing all the right things the appraiser still decided to use their own comps and appraised the property at $145K. The buyer still needed seller assistance and we didn't want to lose the buyer  and start all over again. So we decided to drop the price and still provide seller assistance. The final contract sales price was $145K with 3k seller assistance.

Lessons Learned:

1) Always upgrade a half bath to a second bath when space permits. This gain in value and sales appeal far outweighs the price to do the work. We implemented this on our next sale and that property went under contract for the full and original sales price in less than two weeks.

2) Be prepared for things to not go your way even when you take all the right steps. This goes back to the appraisal and the fact the appraiser decided to use her own comps despite all the strong comps we provided her. There is always a human factor and sometimes things don't go your way despite all the preparation and due diligence. Hopefully you have enough cushion in your original estimates to make your target profit.

That's most of it. I probably forgot a few small details. If you have any questions...please ask!

In a couple days I will put up the second flip where I implemented all the lessons learned from this first flip. Then sometime next week I plan to put up one of my rehab rentals.