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
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
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.
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.
This is some great information! I totally agree with you that a second bath is a game changer. It seems like the 3/1/1 layout is functionally obsolete, and yet very common in the Baltimore area.
A lot of the 1/2 baths are in basements. Have you had any feedback that full baths in basements are undesirable or a waste of money?
This is awesome @Joseph England ! I hope you don't mind if I follow you. I can learn a lot from your experience since I am in northern Virginia. I can definitely take away a lot from what you have accomplished.
@Joseph England great post! Congratulations on all your success! Please continue sharing your experiences; great way to give back to the BP investor community!
I will be following also.
@Andy Gross That is a very good question. In Baltimore putting in a second bathroom is a great way for you to add that second bath and not take up space in the more open floor plans on the other floors. In Baltimore due to the shape of these row homes, finished basements with full baths are very welcomed.
This looks great, i'll also be following. When you list the work that was done, would you mind including the cost for each? I also invest in Baltimore, but I only have 3 properties so far. One of the things I struggle with is whether or not I'm paying too much for some things.
Great post and great job. Looking forward to the subsequent property dialogues!!
@Joseph England looks amazing! Great job, i will be following. My partner and i are also getting into renovating. Any advice on getting a good contractor?
What was the cost for the new HVAC system? I have a similar home (1200SF rowhome) with radiant heat and window A/C and was quoted $11,500(!) - and that was just for AC. After that, I got a few estimates over phone for between $4,000 - $6,000.
This is inspiring.
I am looking for buy and hold in Baltimore, but I avoid the city zip codes due to the high taxes and water bills.
Maybe I should look into partnering with someone like you.
This is going to be a great thread, thanks for sharing with us!
@Joseph England Looks great! Congratulations on scaling in such a short time! And thank you for being so generous with your time to outline this.
I am especially interested in how you found the GCs you are working with now. Referral?
That is so awesome. You are an inspiration to those of us that are still sitting on the sidelines. I will definitely be following you. Thank you for sharing.
@Stephanie Walkes Here is a quick breakdown of the prices on a home like this:
1) Remove and replace kitchen (Gut kitchen, install granite countertops with Island, SS appliances (microwave, refrigerator, stove, dishwasher and garbage disposal) remove wall to dining room.- $8,000.00
2) Remove and replace Bathroom (new tub or shower, new vanities and toilet, ceramic tile, paint, bath accessories). - $4,000.00
3) Frame and finish basement - $6,000.00 (with full second bath included will run about $10,000.)
4) Painting a property of this size including the finished basement - $2,500.00
5) Remove and replace all doors (about 10 in this property) with 6 panel hollow doors - $15,000.00
6) Install HVAC to include Furnace, condenser and ductwork - $7,500 (If the ductwork is already in place we can have a 2.5 ton furnace and condenser installed for $4,000.00(ductwork is the most consuming and labor intensive part of installing a HVAC system)
7) Install carpet on second floor(This includes all three bedrooms, hallway and stairs) and basement $2,300.00
8) Refinish hardwood floor and new color of the stain of for the living room and dining room - $ 900.00
9) Replace windows with all new energy efficient vinyl windows - $3,000.00
I think that's all of the big stuff. Let me know if you need me to explain in more detail.
Great post Joseph. Could you recommend or PM me any GCs you might recommend?
In the past, I've usually contacted the top 3 or 4 reviewed people on Angie's List. Since my projects were small, the difference of a few hundred dollars in their quote usually led me to one GC over another. I also found I preferred GCs that would give me itemized quotes so I could pick which things I'd tackle myself and what I'd leave up to them.
Right now, I'm considering buying property in the Loch Raven area and since I live in Endor Gardens (for now), I could have GCs quote me on jobs to my own property that I could then get a reasonable idea for what they'd charge for doing the work on other homes in the area.
Did you find that GCs gave any kind of discounted prices for investors vs home owners?
@James A. It can be very difficult task to find a good GC(possibly the hardest part of becoming a rehabber). One of the problems is once someone finds a good GC they hold on to them. My first GC and still my main GC came as a referral from a guy who only renovates one or two houses a year. Since I can offer him continuous work, he now solely works for me. My strategy of finding good GCs has been to find as many different GCs to bid on a project. I generally aim for about 3-5 different GCs to bid on each project. I then factor in the differences in prices(which can be drastic, I had one GC bid $50K for a project while another GC bid $30K on the same project). The GCs that take too long to submit a proposal, prices are too high and are unwilling to negotiate those prices, I don't bother having them bid on another project. I will then find 3-5 new GCs to bid on the next one. If any are close and I feel I could work with them but I gave the project to another GC, I will have them bid on the next project. I rinse and repeat this process. Even if I know I am going to use one of my regular GCs on a project I will still have 3-5 other GCs bid on the project in order to continue the search for more GCs.
The GCs that are well known and have well established systems(ie. marketing, websites) are usually going to have higher marked up prices, especially if the GC usually does projects for non-investors. The sweet spot I have found are GCs who are not as well established but still do quality work(up and coming GC if you will).
Let me know if this helped and If you have any other questions.
@Tim Youse Yes, I have found many GC's will lower their mark ups for prices for investors. I have actually found that you can take that even further. Sometimes you can get a even bigger discount if you are able to offer that GC continuous work versus sporadic work as a investor. This is always one of my selling points when negotiating prices since I can offer continuous work.
@Shoshana Shulman in a city like Baltimore where it is known for its crime/riots, high property taxes, and expensive utilities will scare away most investors. Where most investors see too much risk, I see reward. Any property can be profitable as long as can you purchase it for the right price. High property taxes and these other issues will usually drive down prices. Then if you factor in these higher expenses and risks into your numbers and if the deal still makes sense you will be good. I own properties from class A class neighborhoods all the way to D class neighborhoods and they are all in Baltimore City. My class C-D properties are my biggest cash flowing properties. The areas do have greater risk but if you are thorough in your due diligence of the numbers, tenants and the area the property is located in, you will have the opportunity to make larger profits than these "safer" markets. Every year Baltimore is listed in the top five if not the top of hottest real estate market for investors. People are scared of Baltimore City...and that's fine with me....less competition.
This is absolutely one of the biggest motivators I've read in awhile. My wife and I are looking to begin investing in Baltimore City. We've been crunching numbers on a rental property we're looking at and the numbers seem to work, but the high crime/high taxes of the neighborhood is scaring us a little (in additional to it just being our first investment).
I'll be paying close attention to your posts and progress. So keep killing it bro.
Wow! Great job!
I am new to this and I would like to follow you as well. Any idea on how to follow someone on this app?
I am new to Bigger Pockets but not new to Real Estate Investing. This is a great thread and awesome information from a guy that is in the thick of it, so Congrats. Thank you Joseph for doing all you do and sharing it with so many in need. I am actually a Hard Money Lender and Full Time investor as well and often mentor new rehabbers. I have been in the business now almost 20 years, but have stayed mostly under the radar until recently. You are right, contractors are likely the biggest obstacle to a rehabbers' success, so this is a critical piece to get right. When you outlined your prices, you had $ 15,000 for 10 doors which I am sure is an oversight. I assume you meant $1500 or there were other items in here? Your costs are pretty much on target, and there may be a few areas where you save some money, but if you trust your GC, it is always better to pay more and be able to sleep at night! I wish you continued success and will begin to share my long journey of real estate investing in the future.
Great post and thanks for sharing your success and challenges.
Great Post.. I had 11 properties in Baltimore and sold 3 of them. Most are for rental and doing pretty good. Would like to buy more in certain areas mostly 21223, 21230 and 21218 near Morgan State.
Also, Looking for multi units 2-4 in any area of the city that is stable.
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