We bought 2817 Violet Ave - 21215 from a local wholesaler who forecloses on folks who don’t pay their ground rents. Nice huh?

I wish I had better “before” pictures, but we were pretty spooked walking through this one. I’ve seen a lot of BAD houses over the past 5 years, but this one was really rough. Walking through, I was more in survival mode rather than trying to capture a historical perspective. From the used syringes to the mounds of trash, to the “filled” toilets, we needed all eyes forward as we took our initial walk-through.

We initially purchased the property with the intentions of rehabbing it as a rental. While rehabbing two others in the neighborhood, we saw that houses were selling for about $120,000.

Our feelings were - if we could NET our standard $30K+ on a rehab for a homeowner - why make a pittly $250/month on a rental. You need to make a whole slew $250’s to get to $30,000.

Property Description:
Before: 4BR, 1BA
After: 4BR (with a finished attic), 2BA
House was nearly a full-gut rehab. So it was for the most part brand new.

When I say, “nearly-gutted” I mean: All new electric, plumbing, HVAC, roof and windows. The kitchens and baths were gutted. The 2 story addition on the rear of the house was completely demolished and rebuilt as a first story deck, and 2nd story full-bath. Most of the walls were laminated with new drywall. All new fixtures, cabinets, vanities, and lighting were installed. Ceramic tile was used for the floors and tub surrounds. New laminate flooring and carpet was installed through-out. So for all intents, this house was better than new.

Incidentally, a full-gut rehab would have included the full removal of ALL the plaster and lathe. “Going back to the studs and bricks,” as we say. In this case, the walls and ceilings were fairly straight and level, so we simply went over (laminated) the existing walls and ceilings with new 1/4″ dry wall.

Well, I wish I could say we made $30,000 but we put more money into the rehab than we intended.

Here’s the breakdown:
Purchase: $39,000
Rehab: $65,000
Sold: $148,000

With closing and holding costs, and Realtor fees - I think we made about $19,000 bucks on this one. Not a stellar showing and certainly our typical payday. But the house sold lightening fast in about 21 days, and we were able to move on to our other projects.

What we learned:

• Never buy a property with the intentions of doing a “rental” rehab, then switch to a “retail” rehab. Here’s why: when you finance a property, the bank will ask you how much you need for the rehab. If you say, “$25,000″ - they’ll give you $25,000. If you later decide to do a much nicer rehab because you want to sell the house rather than rent - and that nicer rehab costs you $65,000 rather than $25,000, well guess, where that extra $40,000 is coming from?
• You can make money in transitional “gritty” neighborhoods so long as you offer overwhelming value. 2817 Violet Ave is a TON of house for $148,000. In some trendier parts of Baltimore City, a house of this size would go for over $400,000 Sometimes you can make the market in tough neighborhoods. Now, I’m a staunch-believer in the “You Can’t Beat The Market” theory of RE investing, but in the case of this particular (very run down) neighborhood of Baltimore City, we along with a few other investors are making the market. We are setting the prices higher and higher and we’re selling houses.

Click on the picture for all the before-and-after shots!

For more information on ground rents: Google Search Results

Popularity: 100% [?]