My First BRRRR in Baltimore

35 Replies

I'm writing this post to track progress of my first attempt to BRRRR a property in Baltimore City (it is a length post). After two years of reading books, studying BiggerPockets, researching neighborhoods in Baltimore and saving money living at home, I'm happy to say that I've taken action and acquired my first property. My hope is that this will inspire someone else to take action and help inform of some of the nuances and headaches I've encountered thus far:

Property Details:

The property was a semi-detached 3 bedroom, 2 bathroom foreclosure (1200 sq. ft) located in the 21229 area code. 2 levels w/ basement, HVAC and wooden deck. It listed at $73,000, with most properties selling between $130k-$140k after repair within 0.5 mile radius. There was evidence of water damage in the basement (you could see mold on the drywall sections around the laundry room, baseboards separating from the wall, splintered doors, etc.) Everything else in the home appeared to be purely cosmetic.

Rationale for purchase:

Rents are good in this area ($1400 median rent for 3 br). The property appeared to have been updated (DIY job perhaps) with stainless appliances, granite countertops, new hardwood floors so that lowered my basis for rehab . There was a bonus room in the basement that I envisioned could be converted into a 4th legal bedroom, increasing the value of the home. Using "The Book of Estimating Rehab Costs," I roughly predicted the rehab would cost little more than $20,000. With an all-in cost of $105,000 (73,000+20,000 + ~12,000 in closing costs), this would meet my 75% of ARV criteria for the BRRRR strategy with >22% CoC return.

Before/During Contract (in order):

  • Set up my LLC and pre-qualified with Lima One Capital (HML)
  • Viewed the property with my agent and wrote an offer below asking w/ 10-day inspection contingency (unless you are sophisticated or plan to do a full gut renovation, DO NOT OMIT THIS, I was under contract for a property in Baltimore City prior to this one and I did not include the contingency to be competitive. Two days after the contract was ratified, squatters moved into the property and the bank told me there was nothing they could do. Fortunately, there was language in the purchase and sale agreement stating the home must be delivered in an unoccupied state and my EMD was returned.)
  • The property had multiple offers, so I gave my H&B offer at 77,000 with the same contingencies. The offer was accepted and I used the seller's title company since they agreed to cover all title-related closing costs.
  • Day 7 - had the home inspection completed. The only CAPEX expenditures needing replacement were the hot water heater (it was on it's last leg at 10 years old). The only utility on at the property was electric (no water, gas) so the other fixtures could not be inspected. The home inspector was also a contractor that my agent referred me to, so he completed the construction budget based on what he discovered. That amounted to $22,000 including 10% contingency. I moved forward with the purchase.
  • Day 8 - Ordered lead inspection with LeadProbe for $295. Because all of the interior surfaces had been painted over (albeit sloppily), there was no lead found inside the house. Exterior showed presence of chipping paint. I plan to go for the limited lead free cert at a minimum.
  • Day 10 - Appraisal ordered. The report he provided me showed a slightly lower post-rehab appraisal than I hoped for ($130,000). I inquired about the addition of a 4th legal bedroom - the appraiser told me that because the room is below grade, it would make little difference in the value. With that, I abandoned the expense of doing the work to make the basement room legal and adjusted my budget.
  • Day 11-15 (closing): I began soliciting bids from 4 other contractors for the work. One was referred by another agent friend, the other from BiggerPockets, and two from the local REIA list. The lender and title company were not really communicating with one another, so I took on the task of reaching out to each party and make sure that documents were being sent to the appropriate parties. I prepaid an annual Builder's Risk Policy with Luray Insurance. I retained an attorney recommended by another BiggerPockets member to review an Independent Contract Agreement I prepared for the rehab portion of the project.
  • Day 16 (closing): I received my final HUD for closing costs with a bit of sticker shock. Costs that I did not account for/underestimated (transfer taxes, ground rent redemption, crediting the seller for taxes already paid) showed up, but I became a homeowner.

Predicting the numbers using BP Calculator:

Purchase Price: $77,000

Rehab (financed using HML) : $22,140

Final Down Payment/Closing Costs:   $16,000

Total All In: $115,000


Assuming refinance at 75% appraisal:

Rent:  $1500

Mortgage after refinancing ($105k, 30 year, @7%):    -$593

Expenses (insurance, taxes, Capex, vacancy): -$570

Net Monthly Cash Flow:   $385

Equity: $35,000 w/ $10,000 left in the property


After closing:

  • The day of closing I went straight to Home Depot, picked up some cheap Kwikset locks and changed the locks on the house
  • Baltimore City requires you to register the property with the city within 10 days or they will fine you. I submitted the registration online, it was a fairly simple application.
  • Changed all utilities to my name and had the property de-winterized. Discovered the water pressure is low at the main value (~40 psi) and water is not made made it to some of the fixtures. Turned on the gas and verified the furnace and stove are working.
  • Continuing to collect bids for the rehab work

What I have learned thus far:

  • The hardest part of this process was getting started and overcoming fear. It feels good to be on the other side of the analysis paralysis.
  • Below-grade bedrooms do not matter from an appraisal standpoint and it is ok to have ( I would love for someone to confirm or refute that). 
  • My hard money lender required me to prepay for an annual (12-month) insurance policy. In addition, they required the property to be a "fee simple" transaction - the property has ground rent associated with it, so they required me to redeem it at closing. Those were additional expenses that I did not initially account for at closing. 
  • Contractors in Baltimore City are not the best communicators at all. It's somewhat surprising the amount of headache I've had before hiring anyone for the job.
  • "The Book on Estimating Rehab Costs" has been a tremendous help for me to ballpark the rehab costs for this project using various finishes.

My current challenges:

  • The appraisal came back lower than I expected, which will squeeze me for cash left in the deal at refinancing. This is the biggest risk with implementing this strategy as it depends heavily on the appraisal and your ability to refinance.
  • Many lenders that I've spoken with in Baltimore
  • My real estate agent lives closer to Washington DC than Baltimore, so he would have his assistant show me properties. I feel as though he lost interest in working with me as my ambitions changed from wanting to own my own primary residence to pursuing rentals. Communication became poor and I would rarely get a call back within reasonable time, which made this process more stressful for me as a first-time homebuyer.  I plan to pursue a new agent that wants to help me build. 
  • I have interviewed and solicited bids from four (4) contractors and they have not yet worked out for various reasons. 
    • Contractor 1 (my home inspector) does not carry an MHIC license and has lagged in communication with me despite providing the initial estimate and expressing interest in performing the work. 
    • Contractors 2 and 3 carried verifiable license and insurance, both knowledgeable and pointed out things my first contractor missed. Both had very poor communication with respect to bid turn around and answering questions and quoted me ridiculous prices for the rehab ( ~$36,000 for the work omitting HVAC and plumbing), most of what I deem cosmetic. As an example, I was quoted $5000 for interior paint, $4000 for exterior paint, and $4500 for refinishing cabinets - maybe they thought they could take advantage of me?). Contractor 3 told me it would take him 7-10 days to turn around a bid. I did not receive the bid until day 13. That same day, I submitted questions about the bid and have not received a call/email back.
    • Contractor 4 is licensed and insured, had great references, took notes and measurements during the walkthrough and was generally a better communicator. His estimate was slightly higher than the initial $22,000 bid I received but it was not unreasonable and he was willing to work with me on price. However, it seems to take days to send me information that he would promise within 24 hours (ehh, is this to be expected). Still ongoing discussions...

What I need to do next:

  • I am still seeking licensed, insured contractors that are interested in performing work. I would prefer not to GC the job myself since I work full-time, but I am desperate to get the project started at this point.
  • Determine what my long term strategy for keying the properties (master key vs. separate keys for each). I've read a lot of landlords are using LandlordLocks.com, but it seems like an expensive buy in. Need to do more research.
  • Prepare for the inevitable completion of this project and preparing to market it for rental. 

I plan to update this post as the project progresses and include my final SOW, but I am happy to answer any questions and welcome feedback from others. 

Keenan

Thanks so much for taking the time to write up your experience so far, looking forward to hearing how the rest of it goes. There are a few local contractors here on bigger pockets, I would look back through some recent threads and see who's around or post a new thread specifically asking for local contractors to speak up

Awesome Keenan! Way to take action and thank you for sharing such a detailed journal of your progress and challenges. Looking forward to hearing more!

Great job Keenan and this is an awesome recap for new investors like me.

If you're up for it I can refer you to a great contractor - he is a licensed MHIC and a licensed home inspector (as am I  - we work together).

Reach out to me on BP and I'd be happy to connect you.

@Keenan Rusk Thank you for taking the time to spell out your experience so far! Awesome information in here. Good luck on the rest of the project, looking forward to reading your follow-ups. 

Thanks for going into depth - really good information. How'd you find your HML?

Thanks so much for taking the time to explain your process. Looking forward to using this to buy my first rental property soon :)

@Keenan Rusk - I'm in Washington, DC and I'd love to sit down with you sometime and pick your brain (relatively new investor to relatively new investor). I have a couple of buy and hold properties already and am looking to employ the BRRRR strategy moving forward to add to my portfolio.

Great recap. Im new to investing myself and it was really good to see this outlined with very good detail and things to look out for!....Thanks for the post!

Thanks for the recap and continue to push through any and all frustrations. 

Good stuff, thank you for sharing.

I'm also in MD and am starting up, but am having a hard time getting a lawyer to call me back to set up my LLC. How did you go about doing that step...mind offering a reference?

Thanks for the details @Keenan Rusk ! I was also planning on forcing equity by adding a bedroom to the basement. Thanks for the cautionary tale, and good luck!

Thank you for the in-depth detail.  This was very helpful!

Helpful sharing for sure.  I have a good pool of potential contractors in MD from my professional Rolodex. So hit me up if you still need help on this front. 

I am still looking for that first deal myself. Both of my offers last weekend got outbid so the search continues. 

Good luck on your project. 

Awesome, thanks for sharing your experience in great detail! 

Thanks for putting the time and detail into this write-up!  

great post! thanks for all the detail

Great job Keenan, this is incredibly helpful for a new investor like me. 

Do you wish you had started sooner or were those two years of preparation invaluable?

Originally posted by @Mike Flint :

Good stuff, thank you for sharing.

I'm also in MD and am starting up, but am having a hard time getting a lawyer to call me back to set up my LLC. How did you go about doing that step...mind offering a reference?

I drove to Baltimore to setup my LLC. They do it the same day.

Originally posted by @Keenan Rusk :

I'm writing this post to track progress of my first attempt to BRRRR a property in Baltimore City (it is a length post). After two years of reading books, studying BiggerPockets, researching neighborhoods in Baltimore and saving money living at home, I'm happy to say that I've taken action and acquired my first property. My hope is that this will inspire someone else to take action and help inform of some of the nuances and headaches I've encountered thus far:

Property Details:

The property was a semi-detached 3 bedroom, 2 bathroom foreclosure (1200 sq. ft) located in the 21229 area code. 2 levels w/ basement, HVAC and wooden deck. It listed at $73,000, with most properties selling between $130k-$140k after repair within 0.5 mile radius. There was evidence of water damage in the basement (you could see mold on the drywall sections around the laundry room, baseboards separating from the wall, splintered doors, etc.) Everything else in the home appeared to be purely cosmetic.

Rationale for purchase:

Rents are good in this area ($1400 median rent for 3 br). The property appeared to have been updated (DIY job perhaps) with stainless appliances, granite countertops, new hardwood floors so that lowered my basis for rehab . There was a bonus room in the basement that I envisioned could be converted into a 4th legal bedroom, increasing the value of the home. Using "The Book of Estimating Rehab Costs," I roughly predicted the rehab would cost little more than $20,000. With an all-in cost of $105,000 (73,000+20,000 + ~12,000 in closing costs), this would meet my 75% of ARV criteria for the BRRRR strategy with >22% CoC return.

Before/During Contract (in order):

  • Set up my LLC and pre-qualified with Lima One Capital (HML)
  • Viewed the property with my agent and wrote an offer below asking w/ 10-day inspection contingency (unless you are sophisticated or plan to do a full gut renovation, DO NOT OMIT THIS, I was under contract for a property in Baltimore City prior to this one and I did not include the contingency to be competitive. Two days after the contract was ratified, squatters moved into the property and the bank told me there was nothing they could do. Fortunately, there was language in the purchase and sale agreement stating the home must be delivered in an unoccupied state and my EMD was returned.)
  • The property had multiple offers, so I gave my H&B offer at 77,000 with the same contingencies. The offer was accepted and I used the seller's title company since they agreed to cover all title-related closing costs.
  • Day 7 - had the home inspection completed. The only CAPEX expenditures needing replacement were the hot water heater (it was on it's last leg at 10 years old). The only utility on at the property was electric (no water, gas) so the other fixtures could not be inspected. The home inspector was also a contractor that my agent referred me to, so he completed the construction budget based on what he discovered. That amounted to $22,000 including 10% contingency. I moved forward with the purchase.
  • Day 8 - Ordered lead inspection with LeadProbe for $295. Because all of the interior surfaces had been painted over (albeit sloppily), there was no lead found inside the house. Exterior showed presence of chipping paint. I plan to go for the limited lead free cert at a minimum.
  • Day 10 - Appraisal ordered. The report he provided me showed a slightly lower post-rehab appraisal than I hoped for ($130,000). I inquired about the addition of a 4th legal bedroom - the appraiser told me that because the room is below grade, it would make little difference in the value. With that, I abandoned the expense of doing the work to make the basement room legal and adjusted my budget.
  • Day 11-15 (closing): I began soliciting bids from 4 other contractors for the work. One was referred by another agent friend, the other from BiggerPockets, and two from the local REIA list. The lender and title company were not really communicating with one another, so I took on the task of reaching out to each party and make sure that documents were being sent to the appropriate parties. I prepaid an annual Builder's Risk Policy with Luray Insurance. I retained an attorney recommended by another BiggerPockets member to review an Independent Contract Agreement I prepared for the rehab portion of the project.
  • Day 16 (closing): I received my final HUD for closing costs with a bit of sticker shock. Costs that I did not account for/underestimated (transfer taxes, ground rent redemption, crediting the seller for taxes already paid) showed up, but I became a homeowner.

Predicting the numbers using BP Calculator:

Purchase Price: $77,000

Rehab (financed using HML) : $22,140

Final Down Payment/Closing Costs:   $16,000

Total All In: $115,000


Assuming refinance at 75% appraisal:

Rent:  $1500

Mortgage after refinancing ($105k, 30 year, @7%):    -$593

Expenses (insurance, taxes, Capex, vacancy): -$570

Net Monthly Cash Flow:   $385

Equity: $35,000 w/ $10,000 left in the property

After closing:

  • The day of closing I went straight to Home Depot, picked up some cheap Kwikset locks and changed the locks on the house
  • Baltimore City requires you to register the property with the city within 10 days or they will fine you. I submitted the registration online, it was a fairly simple application.
  • Changed all utilities to my name and had the property de-winterized. Discovered the water pressure is low at the main value (~40 psi) and water is not made made it to some of the fixtures. Turned on the gas and verified the furnace and stove are working.
  • Continuing to collect bids for the rehab work

What I have learned thus far:

  • The hardest part of this process was getting started and overcoming fear. It feels good to be on the other side of the analysis paralysis.
  • Below-grade bedrooms do not matter from an appraisal standpoint and it is ok to have ( I would love for someone to confirm or refute that). 
  • My hard money lender required me to prepay for an annual (12-month) insurance policy. In addition, they required the property to be a "fee simple" transaction - the property has ground rent associated with it, so they required me to redeem it at closing. Those were additional expenses that I did not initially account for at closing. 
  • Contractors in Baltimore City are not the best communicators at all. It's somewhat surprising the amount of headache I've had before hiring anyone for the job.
  • "The Book on Estimating Rehab Costs" has been a tremendous help for me to ballpark the rehab costs for this project using various finishes.

My current challenges:

  • The appraisal came back lower than I expected, which will squeeze me for cash left in the deal at refinancing. This is the biggest risk with implementing this strategy as it depends heavily on the appraisal and your ability to refinance.
  • Many lenders that I've spoken with in Baltimore
  • My real estate agent lives closer to Washington DC than Baltimore, so he would have his assistant show me properties. I feel as though he lost interest in working with me as my ambitions changed from wanting to own my own primary residence to pursuing rentals. Communication became poor and I would rarely get a call back within reasonable time, which made this process more stressful for me as a first-time homebuyer.  I plan to pursue a new agent that wants to help me build. 
  • I have interviewed and solicited bids from four (4) contractors and they have not yet worked out for various reasons. 
    • Contractor 1 (my home inspector) does not carry an MHIC license and has lagged in communication with me despite providing the initial estimate and expressing interest in performing the work. 
    • Contractors 2 and 3 carried verifiable license and insurance, both knowledgeable and pointed out things my first contractor missed. Both had very poor communication with respect to bid turn around and answering questions and quoted me ridiculous prices for the rehab ( ~$36,000 for the work omitting HVAC and plumbing), most of what I deem cosmetic. As an example, I was quoted $5000 for interior paint, $4000 for exterior paint, and $4500 for refinishing cabinets - maybe they thought they could take advantage of me?). Contractor 3 told me it would take him 7-10 days to turn around a bid. I did not receive the bid until day 13. That same day, I submitted questions about the bid and have not received a call/email back.
    • Contractor 4 is licensed and insured, had great references, took notes and measurements during the walkthrough and was generally a better communicator. His estimate was slightly higher than the initial $22,000 bid I received but it was not unreasonable and he was willing to work with me on price. However, it seems to take days to send me information that he would promise within 24 hours (ehh, is this to be expected). Still ongoing discussions...

What I need to do next:

  • I am still seeking licensed, insured contractors that are interested in performing work. I would prefer not to GC the job myself since I work full-time, but I am desperate to get the project started at this point.
  • Determine what my long term strategy for keying the properties (master key vs. separate keys for each). I've read a lot of landlords are using LandlordLocks.com, but it seems like an expensive buy in. Need to do more research.
  • Prepare for the inevitable completion of this project and preparing to market it for rental. 

I plan to update this post as the project progresses and include my final SOW, but I am happy to answer any questions and welcome feedback from others. 

Keenan

Thanks Keenan for providing the details of your progress. 

Thank you for sharing. I am also looking to purchase homes to run as rental properties. Currently, I am trying to identify how to qualify for a HML? Was it a challenge getting approved and did you get approved prior to making an offer?

Again, thank you!

Hey I appreciate you posting this, I live in Arizona and I am actually in the middle of a negotiation/closing myself, sounds like you made off way better than I did. I look forward to reading the future post by you to see how this all turns out. This will be my first property myself. I also work full time and the quotes I have gotten have been nuts myself. I decided I am going to try and tackle some of the work myself and sub contract what I dont feel like I can do.  I am going to use some PTO/PDO/SICK time for this. I might think about posting something like this myself when I am done with closing. Its motivating to read your post for sure. Good Luck. 

Originally posted by @Mike Flint :

Good stuff, thank you for sharing.

I'm also in MD and am starting up, but am having a hard time getting a lawyer to call me back to set up my LLC. How did you go about doing that step...mind offering a reference?

Mike , forget about lawyers. Legal zoom dot com sets up your LLC for around $300, super easy!

Originally posted by @Keenan Rusk :

I'm writing this post to track progress of my first attempt to BRRRR a property in Baltimore City (it is a length post). After two years of reading books, studying BiggerPockets, researching neighborhoods in Baltimore and saving money living at home, I'm happy to say that I've taken action and acquired my first property. My hope is that this will inspire someone else to take action and help inform of some of the nuances and headaches I've encountered thus far:

Property Details:

The property was a semi-detached 3 bedroom, 2 bathroom foreclosure (1200 sq. ft) located in the 21229 area code. 2 levels w/ basement, HVAC and wooden deck. It listed at $73,000, with most properties selling between $130k-$140k after repair within 0.5 mile radius. There was evidence of water damage in the basement (you could see mold on the drywall sections around the laundry room, baseboards separating from the wall, splintered doors, etc.) Everything else in the home appeared to be purely cosmetic.

Rationale for purchase:

Rents are good in this area ($1400 median rent for 3 br). The property appeared to have been updated (DIY job perhaps) with stainless appliances, granite countertops, new hardwood floors so that lowered my basis for rehab . There was a bonus room in the basement that I envisioned could be converted into a 4th legal bedroom, increasing the value of the home. Using "The Book of Estimating Rehab Costs," I roughly predicted the rehab would cost little more than $20,000. With an all-in cost of $105,000 (73,000+20,000 + ~12,000 in closing costs), this would meet my 75% of ARV criteria for the BRRRR strategy with >22% CoC return.

Before/During Contract (in order):

  • Set up my LLC and pre-qualified with Lima One Capital (HML)
  • Viewed the property with my agent and wrote an offer below asking w/ 10-day inspection contingency (unless you are sophisticated or plan to do a full gut renovation, DO NOT OMIT THIS, I was under contract for a property in Baltimore City prior to this one and I did not include the contingency to be competitive. Two days after the contract was ratified, squatters moved into the property and the bank told me there was nothing they could do. Fortunately, there was language in the purchase and sale agreement stating the home must be delivered in an unoccupied state and my EMD was returned.)
  • The property had multiple offers, so I gave my H&B offer at 77,000 with the same contingencies. The offer was accepted and I used the seller's title company since they agreed to cover all title-related closing costs.
  • Day 7 - had the home inspection completed. The only CAPEX expenditures needing replacement were the hot water heater (it was on it's last leg at 10 years old). The only utility on at the property was electric (no water, gas) so the other fixtures could not be inspected. The home inspector was also a contractor that my agent referred me to, so he completed the construction budget based on what he discovered. That amounted to $22,000 including 10% contingency. I moved forward with the purchase.
  • Day 8 - Ordered lead inspection with LeadProbe for $295. Because all of the interior surfaces had been painted over (albeit sloppily), there was no lead found inside the house. Exterior showed presence of chipping paint. I plan to go for the limited lead free cert at a minimum.
  • Day 10 - Appraisal ordered. The report he provided me showed a slightly lower post-rehab appraisal than I hoped for ($130,000). I inquired about the addition of a 4th legal bedroom - the appraiser told me that because the room is below grade, it would make little difference in the value. With that, I abandoned the expense of doing the work to make the basement room legal and adjusted my budget.
  • Day 11-15 (closing): I began soliciting bids from 4 other contractors for the work. One was referred by another agent friend, the other from BiggerPockets, and two from the local REIA list. The lender and title company were not really communicating with one another, so I took on the task of reaching out to each party and make sure that documents were being sent to the appropriate parties. I prepaid an annual Builder's Risk Policy with Luray Insurance. I retained an attorney recommended by another BiggerPockets member to review an Independent Contract Agreement I prepared for the rehab portion of the project.
  • Day 16 (closing): I received my final HUD for closing costs with a bit of sticker shock. Costs that I did not account for/underestimated (transfer taxes, ground rent redemption, crediting the seller for taxes already paid) showed up, but I became a homeowner.

Predicting the numbers using BP Calculator:

Purchase Price: $77,000

Rehab (financed using HML) : $22,140

Final Down Payment/Closing Costs:   $16,000

Total All In: $115,000


Assuming refinance at 75% appraisal:

Rent:  $1500

Mortgage after refinancing ($105k, 30 year, @7%):    -$593

Expenses (insurance, taxes, Capex, vacancy): -$570

Net Monthly Cash Flow:   $385

Equity: $35,000 w/ $10,000 left in the property

After closing:

  • The day of closing I went straight to Home Depot, picked up some cheap Kwikset locks and changed the locks on the house
  • Baltimore City requires you to register the property with the city within 10 days or they will fine you. I submitted the registration online, it was a fairly simple application.
  • Changed all utilities to my name and had the property de-winterized. Discovered the water pressure is low at the main value (~40 psi) and water is not made made it to some of the fixtures. Turned on the gas and verified the furnace and stove are working.
  • Continuing to collect bids for the rehab work

What I have learned thus far:

  • The hardest part of this process was getting started and overcoming fear. It feels good to be on the other side of the analysis paralysis.
  • Below-grade bedrooms do not matter from an appraisal standpoint and it is ok to have ( I would love for someone to confirm or refute that). 
  • My hard money lender required me to prepay for an annual (12-month) insurance policy. In addition, they required the property to be a "fee simple" transaction - the property has ground rent associated with it, so they required me to redeem it at closing. Those were additional expenses that I did not initially account for at closing. 
  • Contractors in Baltimore City are not the best communicators at all. It's somewhat surprising the amount of headache I've had before hiring anyone for the job.
  • "The Book on Estimating Rehab Costs" has been a tremendous help for me to ballpark the rehab costs for this project using various finishes.

My current challenges:

  • The appraisal came back lower than I expected, which will squeeze me for cash left in the deal at refinancing. This is the biggest risk with implementing this strategy as it depends heavily on the appraisal and your ability to refinance.
  • Many lenders that I've spoken with in Baltimore
  • My real estate agent lives closer to Washington DC than Baltimore, so he would have his assistant show me properties. I feel as though he lost interest in working with me as my ambitions changed from wanting to own my own primary residence to pursuing rentals. Communication became poor and I would rarely get a call back within reasonable time, which made this process more stressful for me as a first-time homebuyer.  I plan to pursue a new agent that wants to help me build. 
  • I have interviewed and solicited bids from four (4) contractors and they have not yet worked out for various reasons. 
    • Contractor 1 (my home inspector) does not carry an MHIC license and has lagged in communication with me despite providing the initial estimate and expressing interest in performing the work. 
    • Contractors 2 and 3 carried verifiable license and insurance, both knowledgeable and pointed out things my first contractor missed. Both had very poor communication with respect to bid turn around and answering questions and quoted me ridiculous prices for the rehab ( ~$36,000 for the work omitting HVAC and plumbing), most of what I deem cosmetic. As an example, I was quoted $5000 for interior paint, $4000 for exterior paint, and $4500 for refinishing cabinets - maybe they thought they could take advantage of me?). Contractor 3 told me it would take him 7-10 days to turn around a bid. I did not receive the bid until day 13. That same day, I submitted questions about the bid and have not received a call/email back.
    • Contractor 4 is licensed and insured, had great references, took notes and measurements during the walkthrough and was generally a better communicator. His estimate was slightly higher than the initial $22,000 bid I received but it was not unreasonable and he was willing to work with me on price. However, it seems to take days to send me information that he would promise within 24 hours (ehh, is this to be expected). Still ongoing discussions...

What I need to do next:

  • I am still seeking licensed, insured contractors that are interested in performing work. I would prefer not to GC the job myself since I work full-time, but I am desperate to get the project started at this point.
  • Determine what my long term strategy for keying the properties (master key vs. separate keys for each). I've read a lot of landlords are using LandlordLocks.com, but it seems like an expensive buy in. Need to do more research.
  • Prepare for the inevitable completion of this project and preparing to market it for rental. 

I plan to update this post as the project progresses and include my final SOW, but I am happy to answer any questions and welcome feedback from others. 

Keenan

 Hey Keenan, good work on diving in here. I'd be a little more conservative with your numbers, though. Specifically, I don't see any line item for property management.  Here's how I might figure your numbers:

Rent +1500

Mortgage -600

Tax -220

Insurance -60

Vacancy -120

Maintenance/Capex -200

Property Mgmt -150

___________________________

Total return plus or minus 150 a month; of course, you can manage on your own, but you shouldn't include it in your CoC returns, since it's a labor cost that you're injecting into your investment.

What part of town is this one in?

@LuAnn Leighton you should contact the HML(s) that you are interested in. They will ask you some basic questions about what resources you have and what you are trying to get into. And similar to a conventional loan you will probably have to provide them with some financial information (tax returns and bank statements), and then they will let you know what you are qualified for.

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