First Investment Property Under Contract in Maryland

[James Bowerman]

After several months of preparation and searching I've finally got my first property under contract. My goal is to rehab and flip the property within 3 months. Any feedback would be greatly appreciated. Here are the particulars:

Property is a 3/2 rancher, just under 1400sq/ft, located in Pasadena, MD. The house is in Anne Arundel County, in a water accessible community, and in a good school district. It is a HUD property and was listed at $171k on HUDHomestore.com. I offered $150k with the help of my real estate agent, which was accepted. A $1k earnest money has been deposited in escrow.

Estimated ARV is $250-275k and repairs $35-45k depending on rehab and product. I'm working with a hard money lender who will loan 100% of acquisition at 15% and 4 points, interest only. The rehab will be paid for through seed capital I've acquired through credit card stacking.

I'm set to have the property inspected on Thursday (10/8) at which point I'll put together a final SOW. I've already had one contractor look at the property and I'll be scheduling at least two more after the inspection is complete.

Scheduled closing date is 10/28, but I have until the 16th to back out if the inspection is not satisfactory. Thoughts and concerns?

[Russell Brazil]

@James Bowerman Congratulations! I do agree with @Marc M. that the deal does seem a little thin. I think I would have needed to target a price of $135k or less on this.  Many locals in Maryland say that our rule should be the 65% rule as opposed to the 70% rule that most on BP espouse.  We just have a few costs here that run absurdly high compared to some other locals such as the transfer taxes.

Also keep in mind it is almost a universal fact that whatever quote you get from the GC, the cost at the end is likely to be higher than the original quote.  So that $42k quote, could easily turn into $48k or $50k.

Your real estate agent can give you the average and median Days on Market. If he can't, feel free to contact me for the information. Although also keep in mind the quote "There are lies, damn lies, and.....and then there are statistics." The stats on DOM only tell part of the story. You need to know how to interpret that data.  Just because the average DOM is say 30 days, doesnt mean your property will take 30 days to get a contract. It could take more, or it could take less. You need to get a sense of how quickly the properties like yours are moving at. So other 3/2 rehabbed ranchers. They may move faster than the DOM or they may move slower.  Also you need to understand how fast the market moves in different months in Pasadena. If you are listing in December, its going to take a lot longer to get a contract for instance (Thats pretty generally a rule everywhere).

Keep us all updated though, we have a lot of locals interested in project.