Those of you who know me, know 2009 was a year that took me all over the map for investing. From Indy to Arizona and back to Maryland, yeah – I did that. What did I have to show for all the globe-trotting? Skymiles and an extra few bucks, to be perfectly frank.

In early 2009 I got a call from a friend (huge tax lien company) who was looking to move 150 houses in Indianapolis. We did all we could do to sell the crap through wholesalers in the area, but we could not get one bite. So, I hopped on a plane and met my good buddy Bob Norton for what turned out to be a very interesting 36 hour trip. We had more laughs than two guys should have – but what we figured was all the houses amongst the 150 were JUNK. We also discovered that Indy might be a hot-pocket and the perfect economy to invest in. Or so we thought.

In a nutshell, it wasn’t. I could bore you with all the details, but suffice it to say that Indy is a great Landlord market, but for rehabbers, its pretty sleepy. And you’d be hard pressed to find any banks out there willing to lend.

So as Indy was winding down, Bob got intrigued with Arizona. After a pretty lengthy discussion, I agreed that I too would drop Indy and trek to AZ to make a ton of deals. Long and short, we did a few – and yeah we made a few bucks, but frankly, I’m not in the game to make a few bucks. If I can’t be the biggest and best in a market, I don’t wanna play the game. I found investing in AZ to be more frustrating than it was worth. Don’t get me wrong, there is a crap-pile of money to be made out there, but the market is changing so rapidly, you just can not keep up if you’re not in it every day. You truly have to live in the market to be really successful.

That brings me to the last 6 weeks. After a long talk with Bob, we both agreed that AZ was too frustrating and that I needed to focus on my own back yard. Folks – since making that one simple focal shift, my business has BLOWN UP!

My Current Pipeline
I’m now working on 2 rehabs in Prince Georges County (stay tuned for those updates), one rehab in Glen Burnie, one in Hamilton and one in Parkville. I’ll be closing one two more row houses in the next 30 days. Count ‘em up, that’s 7 rehabs in the pipe folks. And every one of them is an ass-kicking, smoking, high-profit deal!

So why am I telling you this? I’m telling you because we investors have so many ways of outsmarting ourselves and self-sabaotging our own success. One day you’re a wholesaler, the next day you’re a short-saler, the next day you’re a landlord. To have success you MUST focus on what truly gets you juiced!

I know that I love to rehab houses. I freakin’ LOVE IT and I’m good at it! I’m supremely focussed on being the best rehabber I can be. Look at the results over the past 6 weeks. I think they clearly speak for themselves. If all goes well, I should make more money by February or March of 2010 than I made in all of 2009. Not a bad way to start the year, huh? Imagine.

Figure out how you will make money in real esate – then work the crap out of your plan until the wheels fall off! Focus, Focus, Focus! Don’t get caught up in the latest greatest fad, or the Guru of the day. Make your plan, put your blinders on, and WORK!

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C’mon you’ve got to admit, this is already an amazing transformation, and we haven’t even hung one piece of drywall.  This ain’t just lipstick on a pig – this is an extreme-makeover!  We’re about 3.5 weeks into putting this house back together.

For the first installment of this rehab go here:  5204 Wesley Rd – Part 1

How about that new dormer and front porch?  Both are 100% rebuilt.  Nothing was salvageable.  Just about the only the only things we saved in this house were the roof joists, the exterior walls, some interior studs and the floor joists.

The second floor of this house has been totally transformed, from basically an attic to a REAL floor with two nice bedrooms, and a spacious full bathroom.  To make the transformation, my student Joann opted for a much larger dormer to create the bath space.  The bathroom ceiling will be vaulted to create an even bigger feel.  We also rolled backed the walls 16 inches to create more space in the dormer bedrooms .  And most important, we created more ceiling height by raising the ceiling trusses by about a foot.  It doesn’t feel like a cavern anymore.

CHECK THE PICS!

The first four photos of the set below are essentially exterior shots of the new porch, new roof, and new dormer.

The next four photos show the first floor framing and how we’ve opened up the first floor to create a more modern feel and functionality.

The next 9 pictures are of the second floor framing.  There you will see all that we’ve done to create the great new space that is the 2nd floor.

The final four pictures are pretty cool.  I’m often asked, “What do you do with uneven floors that are often found in old houses that have settled over time?”

The answer – We jack up the floors and make them even again.  When you’re doing a full-gut rehab, this is a very easy task.  If however you are doing a rehab where you are not removing all the plaster or sheetrock, plan on doing some serious wall repair if you jack up the floors.  Look closely at the final few pictures and you’ll see that we used blocks of treated lumber to bring these floors up 1-3 inches in some spots.  Pretty cool.

Even better – look at the last two pictures.  That should give you some indication as to why the floors were so uneven.  This is one of two rotted columns trying desperately to hold up up the main beam in the basement.  To give you an idea of how bad each column was – my contractor needed only a good kick with his boot to remove them!

Not shown in all the pictures is the new electric, plumbing and HVAC.  Today, we’re waiting on rough inspections.  Once we get the green light from Baltimore City, we’ll insulate and start hanging drywall.

So, that’s it for now.  I’ll have a lot more to show you in about a week.

Click for all the latest pics!

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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

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