Deal or no deal?

Real Estate Deal Analysis & Advice
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Deal or no deal?

Nicole Williams
Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes

Please help BP
I have a property in Detroit, MI on contract for $20,000. House has been vacant for over a year. House needs the basics:
-Plumbing (bath room and basement)
-Flooring (carpet, hardwood needs to be refinished)
-Paint
-Few holes fixed in the walls
-Sink and kitchen cabinets (rehabber ran out of money)
-Lawn maintenance
-Furnace
-Hot water tank.
-Some wiring

Pros: fireplace, the hardwood floors are really a jewel (once refinished, most houses have the vinyl flooring), new roof, and new siding.

I ran the numbers the ARV= $42,500 and the contractor said there is $15,000 needed in repairs. Still puts the buyer on top. Its close to the freeway and honestly its a decent neighborhood and could be a great cash flow property especially with the new plants opening in Detroit and the build of Downtown Detroit. Ive had this house for almost 44 days now? Ive had houses similar and it was no problem to unload in the 20l ballpark. My question is should I come down on the price, get another contract with the seller, or let my option contract expire?

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Patrick Snyder
Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes
14y

@Michael---It's only a matter of time before the city rebuilds, and when it happens, people who bought the thousand dollar houses will reap the rewards. The auto industry is making a big comeback and when Detroit makes the (necessary) economic adjustments, the progress will gain momentum. It's a cycle, like anything else. Pittsburgh went through similar troubles in the 80's, and now it's one of the bright spots in the housing market.

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  • Ray S.
    Property Manager · houston, TX · Member since 2010 · 48 posts · 20 votes
    14y

    I dont know the first thing about detroit but I would whotail and I would of course get the price lowered if that were an option.

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  • Patrick Snyder
    Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes
    14y

    I think that if you are planning to hold as a rental, and the neighborhood is good, then it may be a decent deal. but, if your plan is to flip, there is very little room for error. Is there any chance you could get the purchase price down to 12 or 13k?

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  • Nicole Williams
    OP
    Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes
    14y

    Patrick,
    We lowered the price now its just a waiting game

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  • Patrick Snyder
    Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes
    14y

    I'll be interested to hear what happens. At some point, people who have purchased houses in Detroit are going to get paid off. The unknown part is when that will happen. I hope it works out for you!

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  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    14y

    Patrick, can you explain how they are going to get paid off?

    0Reply
  • Tom A.
    Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
    14y

    Tenisha, where in the city is the house?

    0Reply
  • Nicole Williams
    OP
    Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes
    14y

    On the Westide,near southfield freeway

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  • Patrick Snyder
    Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes
    14y

    @Michael---It's only a matter of time before the city rebuilds, and when it happens, people who bought the thousand dollar houses will reap the rewards. The auto industry is making a big comeback and when Detroit makes the (necessary) economic adjustments, the progress will gain momentum. It's a cycle, like anything else. Pittsburgh went through similar troubles in the 80's, and now it's one of the bright spots in the housing market.

    1Reply
  • Nicole Williams
    OP
    Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes
    14y

    Patrick,
    I agree. People who aren't familiar with the city or only hear whats going on via the news give Detroit a really bad label. Yes Detroit has some not so desirable neighborhoods but that's expected with any large city. Not mention the closing of the big 3 really effected the economy. Im sorry you feel that way Michael, in regards to Detroit but if were familiar with the city (like I am) you would know the renovations the city and surrounding metro area are going through. There are a lot of plants that are/will be opening in the area as well as extensive expansion of the casinos in Downtown Detroit. In another forum a gentleman, was trying to slam Detroit, saying its the worst America has to offer and he couldn't sleep at night selling anyone a property in Detroit. However he sells from Memphis TN (have you ever seen The First 48?) I could not disagree more. With beautiful neighborhoods like Indian Village Detroit is a diamond in the rough and investing in Detroit will certainly pay off. I will definitely keep you posted.

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  • Ray S.
    Property Manager · houston, TX · Member since 2010 · 48 posts · 20 votes
    14y

    Hi Tenisha, probably the last place( no real knowledge on my part) in the world I would think about buying marginal properties would be in Detroit, because they might go up in value. Two miles from where I live, they have the largest construction job going on in North America. Where do you think you should be buying? Also the numbers you first presented won't work and you have to change the deal or Whotail. I am not sure if you know what that means but it can make your original scenario work. I will explain if you need me to.

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  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    14y

    I have been to both memphis and Detroit. I do not own anything in neither city but I do feel detroit is worse. Where i invest in upstate NY the city keeps dumping money to make improvements and things are looking lots better however I can still buy a house for 5k. Just because the city is rebuilding does not mean things will turn around. It is great that you support the city and hopefully things will turn around and you will all reap the rewards. All cities have their bad spots and lets face it some cities are not going to be what they once were. Cities like Buffalo NY are similar to Detroit. The downtown is nice but the whole east side is a waste land. Population is in decline. Was once a nice area, lots of old historic houses, but it is what it is. Also the known corruption is Detroit would scare me away from investing there. Hopefully it pays off for you.

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  • Nicole Williams
    OP
    Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes
    14y

    Michael,
    No need to beat a dead horse. This post was intended for those interested in making deals not too put down others deals. We are all here for a common goal which is too better ourselves. Lets keep it positive. Best of luck!

    0Reply
  • Ray S.
    Property Manager · houston, TX · Member since 2010 · 48 posts · 20 votes
    14y

    Hi Tenisha, when I started buying houses we bought them in the wrong area's because they were easy to buy. That should have been my tipoff, but no, I was smarter than the market. At the same time another friend of mine bought fewer but only in good areas. We were just beginners. It turns out that he made a lot more money, did a lot less work and had a lot less grief than I did. Hopefully you learn from my mistake. I can't tell you anything about Detroit other than what the numbers tell me. In each of my post I suggested a strategy that would work except your origninal numbers were marginal. You never inquired about the strategy, so I am assuming you understand.

    Just recently in my carreer I have begin to really understand what the market numbers mean. Thats what you should be looking at. Like are values going up, is there an oversupply. Look at the office and appartment and housing occuapancy, building permits. THere is also something called the hotness ratio. Learn what that is. The numbers dont lie, people do. Finally my theory is have a plan. I have seen a hundred plans that rely on niches that work, no matter what the experts think. In my opinion Yours could work if it involved whotailing or a wrap, no personal liability/instititional financing. And your spread has to be better.

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  • Nicole Williams
    OP
    Involved In Real Estate · Virginia Beach, VA · Member since 2012 · 48 posts · 11 votes
    14y

    Ray,
    I completely understand. I'm rearranging the deal as we speak. As I said in my initial post Ive had houses similar and it was no problem to unload in the 20k ballpark. However every deal is different. I really appreciate your advice. If you have any other ideas please continue to share. That is one thing I love about BP, the plethora of knowledge. I will keep you all posted on the outcome!

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Tenisha: how do you handle that Detroit is planning to reign in the city limits by significantly reducing city sq. mileage and the houses outside those limits will no longer have services and/or will be condemned via imminent domain? Is the city plan available or concrete enough so that investors know which areas will no longer be in the city? Or is the plan far enough off that it isn't affecting sales in those areas?

    I say if Pittsburgh could have a come back then Detroit has potential too. Pittsburgh replaced the missing mfg. jobs with medical and tech jobs. Detroit's going to need more than the auto industry this time around.

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  • Craig Shute
    Landlord · Syracuse, NY · Member since 2011 · 120 posts · 96 votes
    14y

    What's "whotaling"?

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Craig: I think it's being spelled differently in this thread, but I am assuming people here are talking about "wholetailing". Something not quite a wholesale deal and not quite a retail deal. Property is not in good enough condition to qualify for a retail sale to an end user and wouldn't qualify for an FHA or most conventional loans. But is in good enough condition to sell to an end user with cash or hard money that would pay more than a rehabber. Maybe a buy and hold landlord, maybe a first time investor looking to live in it and fix it.

    Many of the the phrases that RE investors use, "flipping" and "wholesaling" in particular, could use an overall and some redefining, if you ask me. But for the time being you get the idea. "Wholetailing" is a way to sell to an end buyer for a better profit than selling to a rehabber.

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  • Tom A.
    Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
    14y
    Originally posted by Tenisha & Nicole Williams:
    On the Westide,near southfield freeway

    Thanks, but that covers a lot of ground. What cross street, or neighborhood are you talking about? I have a few Detroit buyers depending on the exact area. As you know, Detroit is kind of block by block.
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