Hello BP, I am a part-time real estate investor in the Baltimore, MD area. I have wanted to do a post of my REI successes for quite some time. First, I really want to thank the BP community for being so supportive and such an inspiration. For everyone out there reading this thinking "can I do this?" the answer is yes, absolutely. I did not have thousands of dollars saved up, I didn't have a millionaire partner and I didn't have someone in the family showing me what to do. I studied â literally read hundreds of BP posts, any real estate books I could find and listened to podcasts for 2 years straight before doing anything (probably overkill). Anyway, the more I talked about my desire to flip houses the more people I met that knew someone, that knew someone in the business. After speaking with countless agents, investors and contractors in my area, I found a mentor to help me take the plunge. He was able to give me the confidence I needed to take on my first house.
The first house I did was a single family 3br 2.5 ba with a 1 car garage. It was built in the early 90’s so everything needed to be replaced cosmetically. New hardwood floors throughout main level, new kitchen, removed wall between dining room and kitchen, recessed lighting, new tile work and fixtures in bathrooms, drywall point up and paint, new hvac, new interior doors and hardware, new carpet. We also staged the house ourselves.
Here are the numbers:
Purchase price: 93k
Close cost: 10k
Rehab Cost: 43k
Sales Cost: 22k
Holding costs (Insurance/bge/hard money interest and point): 5k
Sold: 195k (4 contracts in first week)
Net Profit: 22k
Total length of rehab: 4 months
Here are the pics:
(I will post these later, have to dig them up)
After my first flip, I decided to give a rental a try. Ultimately, my goal is to own a large portfolios of rentals, for me, flips are just a means of generating additional funds to obtain that goal. Rentals also provide a means of protecting some of my flip income. To purchase the property, I used the profit made on the flip and took out a line of credit. The house is under 1000sq ft with 2 br and 1 ba. It's in an area of the city that I would consider "decent." I used the BRRR method for this one.
Here are the numbers
Close Cost: 5k
Rehab costs: 22k
Holding costs (taxes, insurance, interest on line of credit): 3000
Total length of rehab: 3 months
Rental Income: $1300 a month (renters move in March 1)
Refinance: I plan to cash out refi in March, assuming the appraisal come in at 120k, I will be able to pull out 90K, which would leave with an additional profit of 8k (some of that probably will go towards refinance closing costs)
Here are the pics
I GC’d both of these projects myself. This was the best thing I could’ve ever done because I have 0 construction experience. By GC’ing this myself and hiring my own subcontractors, I learned about construction processes, materials, pulling permits and order of work. I will say this, if you don’t have a mentor or someone you can trust to help guide you through the process, stick with a General Contractor. I am no construction expert, but, I do feel confident in my ability to accurately estimate rehab costs and “talk shop” with subcontractors. I’ve developed some systems that help me quickly assess rehab costs and manage projects from a distance. I look forward to refining my systems and processes continue my growth as an investor.
Here are the before pics on the first one:
How much out of pocket did you spend on the first place? Was it just the $5k on the Hard Money Loan? Those terms seem terrific if so!
Great job. Your story sounds similar to mine. Have done a few flips to fund rentals. Now up to 10 doors. How are you finding your deals? Our market is tight right now.
@Tim Youse Thanks! I used 30k of my own money. The HML was right on par with the norm, @14% and 4 points, which looking back at the numbers i forgot to include the 4 points in there. I was trying to work backwards from my profit.... My rehab was 41k and my closing cost was actually 8k.
@Brendon Pishny Thanks man. I would like to have 10 doors within a few years. Both of these deals were on the MLS. How about you?
Congratulations Gabe! You've come a long way!
@Gabriel Ehrlich MLS is tough right now, but I have got a few on there in the past. Most of my luck recently is auctions and referrals through networking. Also, did one seller finance deal last year that I found by calling FSBOs.
Congrats Gabriel the rehabs look great.
We have the same goals and strategy.
Keep on grinding and keep on growing!
Wow Gabriel, incredible story and great work. I am the research and learning process as of right now. I also believe Baltimore City will be the next area to be revitalized. If you know the area and what to look for, it’s definitely a great city to enter into real estate.I look forward to seeing more of your work and progress.
Awesome job on the rehabs Gabe, both of them look great!
Both houses look good, many more to go :))
Where is the rental located? Street/zipcode?....the rental world, i promise, is a completely different animal than flipping. You sell and your done the flip. The rental world , particularly in baltimore city, is a constant battle. Prepare yourself by making friends with those accustomed to it.
Nice work Gabe!
I love this story a lot. It resonates with me and what I've done. Congrats on making money and learning so much in the process! much success to you and your future endeavors.
Gorgeous flip! I think it's great that you're revitalizing Baltimore!
My only feedback for future rentals if you're doing low income/section 8, is fans-- people LOVE fans!!
Also, granite looks gorgeous, but for a rental, you need to change your mindset to "what's hardest for someone to destroy?"... we do laminate counter tops that look like granite and it looks amazing!
With the showers/tubs for a rental, just a suggestion that we've found that is cost effective but still gets the "wow" factor is putting a standard surround for the tub/shower, and outline the top with a back splash, much cheaper, and you won't have to worry about re-grouting!
Really nicely done though, I can see why it went so quickly!
@Gabriel Ehrlich , AWESOME JOB MAN! GR8 story and incredible transformation! Did you do the work yourself or did you sub it out? Thanks for sharing your story Gabriel truly inspiring!
@Gabriel Ehrlich Looks good , ....But I do have a question . You say you netted $ 22K , what about capital gains ? So you were the GC did you put a $$ number on your time ? That works out to $5500 a month . If you deduct the hours you spent , your net profit to me would be much less .
The flip looks great , but to me it seems a very thin margin for the time spent .
@Linda D.Thanks for the tips. The kitchen is so small, that not putting granite in it would have been silly; it cost me 900 for the granite +sink install. It would cost me around 600 to just use laminate... And I think stone will last a lot longer than laminate don't you think? The other piece of this is, I need this house to look beautiful so when the appraisal comes in, it's as high as possible to cash out all money and then some (hopefully). I spent the most money on kitchen and bath, the places where people care about most....at least that was my thinking
@Matthew Paul I work full time and was able to run the project just fine, most days it required very little time from me. Occasionally there would be an issue but it was something I could handle from my desk at work. finding the house and lining up the subcontractors was the most time consuming for me but that was all on the front end. After that, it was about scheduling or picking out materials which didn't take me more than a few hours. the best quote I received from a contractor was 50k, not including all materials. so I saved myself 10k easy.
Just wanted to give everyone an update on that second property (the rental)... I was able to successfully refinance the deal. It appraised at 126k!! I pulled out all my money invested into the deal plus an additional 10k which I will use to fund additional deals. I figured, since the rate was so low @ 5.75%, it makes sense to take the money and apply it to future deals.
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