First Baltimore Row House

17 Replies

Hello fellow real estae people,

I have just purchased my first row house in 21223 ( 1,100 sqf) for $7k. It has 2 beds/1bath and unfinished basement. It is walkable to the stadium and new casino .9 miles. We all know the area is pretty rough with alot of drug users. i found out Baltimore is a block by block city so things can change in a blink of an eye

i knew i would rehab the whole thing once bought and decided to finish basement to make it a 3bed/2bath and change the 45 degree stairs to align with one wall straight up.

i set a budget of $60k ( some people say im crazy lol ) and plan on using a remodel loan for it. Once done it should be worth at least $120k but im hoping for $140k

my first price quotes for the demo were $13k, $11k, $9800, and $4200 ( a contractor i used prior)

the demo is done now ( took 3 days down to joints)

My quotes for remodel were $110k, $80k ( i would still have to provided appliances, granite, cabinets, all bathroom supplies), $35k labor only( i buy all materials)

I'm going to go with the $35k labor and contractor said materials should be more than $20k so total including demo should be 60k, but gonna have a 10k fluff space.

purchase plus closing fees: $9800

Renovations plus demo: estimated $60k

-plumbing

-electrical

-hvac

-drywall and stods

-roof repair

so im looking around 70k plus inspection fees 

( plan on refi after 6 months to cashout)

wondering how much i could rent for in the area?????

Use Rent-o-meter.  Do you live in B-more?  Who is your contrator?  35k for just the labor sound fishy.  Does that $35k include Electrical, HVAC and plumbing?  Are you GC'ing the project?  

Ozzy - man if i can get that much i would be happy as hell, yeah labor sounds good and that includes anything that may come up in the project because i was listing out stuff and came over $45k in labor.

Lamont- i like rent o meter thanks for the site, they say average was like $1175

im only worried becuase there is no street parking in front of the house cuz is a one way and no back parking.

i think ima post on facebook because alot of friends live in baltimore area and dc so who knows may spark some ones ideas


Your running your first job by yourself? with a labor only crew?  and no experience in full gut rehabs? no mechanical experience in Baltimore City as far as permits?  Not a good start to your investing career.

are your contractors licensed and insured with general liability and work comp and MHIC ? Being your own general can teach you a lot about contracting but make sure your main trades of plumbing, electric and HVAC are licensed to work in Baltimore City and are not trying to use a proxy to get permits. Most small companies do not have licensed mechanical trades on the payroll as its expensive and they will charge you more for being full service in house. 
Good luck in that type of area getting $1300 for a 2 BR. If you have 1100 sqft, i would try really hard to squeak out a 3rd BR even if its small. I have a really nice 2 BR with a finished basement in Pigtown on a ****** block and am getting $1150 from section 8. Market tenants in rough areas will probably only go $800-1000 max, no matter how nice it is inside due to the poor neighborhood.

Take my advice and buy in better areas for the long term. There will be little to no chance of real appreciation, unless you have 20+years to wait, and your tenant pool is poor

Your bottleneck will be controlling the construction, getting a tenant who will pay you what you are looking for and refinancing. If you west of Fulton you for sure won’t be able to refi for that amount so you are going to have your cash parked. What’s the cross street?

Sorry to be a wet blanket but it sounds like you are going to be underwater on this project and will have most of your money stuck when your rehab goes over budget and your cannot refi for enough to pull your money out. Before i spent a penny on underpinning, which i have done before, i would get an appraiser to give you a realistic idea of what your house will be worth after your complete your proposed rehab. Remember that most lenders are not going to be generous with a non owner occupied appraisal in a rough area and you will likely only be able to be get 65-70 LTV. Learning a lot is great but if you cant break even you will be stuck renting for a long time before your loan is paid down enough to get you out without bringing money to settlement. I ran into this exact same situation in 2008 with a rowhome on South Carey st (aka SCAREY st) and the only thing that saved me was i did a lot of the work and acted as my own general contractor. Do you have $120k cash for the rehab ? You need to talk to some local banks to get a better idea of what loan terms you could get. Ask them what appraisers they use regularly and then call them up.

@BOB CRANEY well I plan on keeping this property as a long term rental regardless ( I want to create cash flow). On hand I have about 80k liquid and about 250k in credit of my own I can use . My latest quote for underpinning is $26500 which is the cheapest so far. I haven’t done anything yet besides the demo .. still getting all the info before starting.

With that kind of cash available, sell the shell you have for what you have in it, f you can get that much. Then go buy a better house that needs less work in a better area . If you continue with the rehab you will have a lot of trapped cash after you refi. You will not net enough off that mortgaged rental at $1100-1200 per month for it to be worth all the effort. 

You have to work out the math backwards by first establishing the max you can safely rent the property for after the rehab. A basic rule of thumb for rentals is you can rent for at least 1% of the property value, but you dont make any money at 1%. If your value is $120,000 you really need to be able to get 1.3-2% on a single family or small multi family before it starts to make sense. Your $120k property would need to rent for $1560-$2400 per month. You will never get rents that high for a 2br over there and likely not even for a 3 BR. Maybe could get it for a 4 BR over there but you dont have enough gross sqftg to make that happen. Im trying to give you a glimpse from the future. Put what i am saying in an envelope and seal it up, then open it in 1-2 years and tell me how wrong i was. 

If you are from Baltimore or nearby area,l i would recommend joining/attending a REIA. Go and meet some people doing rehab and rentals and you will get a better idea of where the better returns are. The key with rentals is to be in a zone where you have 50-70% homeowners. When you have an area with to many renters, the values will be low and will only appreciate at a pathetic rate due to the landlord investors who dont want to put enough money into their properties to maintain them and tenants who are to hood. You need to drive thru blocks and blocks of areas surrounding a house you like to get the local flavor. If there are lots of young boys with pants below their butts, hangin on corners, by liquor stores and markets its a rough/edgy area. Keep driving until you dont see this scenario much anymore. Start looking closer around the inside of 695. Consider small multifamily 2-4 units as they will cash flow much better and you can still finance at good rates.