Don't buy real estate in Detroit...

Detroit, Michigan
Buying & Selling Real Estate
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Don't buy real estate in Detroit...

Jonathan Weinberger
Member since 2023 · 74 posts · 134 votes

Attached is my $2.4M+ portfolio consisting of 27 properties. 

I received dozens of DM's about investing in Detroit. Many are trying to purchase their first investment homes. 

Here's the truth. I probably wouldn't do this again. Knowing what I know now...this is an extremely long game towards wealth building. There's faster ways. 

I honestly thought I'd be riding lambo's and private jets. The reality is this portfolio is equity rich and cash poor. I took the path of using leverage to build a sizable portfolio. 

I'm not 100% sure that's actually the best option. I met someone recently who owns 90 doors. All 100% paid for. Makes stupid money. Spent the last 9 years growing his portfolio and would only add a new house when he could buy it in cash. 

For the amount of equity he owns, he could easily have 500 doors... but that's 500 more expenses... 

The reality here is I have 27 doors...leveraged. In 30 years...my tenants will have paid them off and I'll finally be able to buy myself the Lamborghini. 

Or... What if I just kept 12 doors with $1M invested? Immediately earning $12k with no mortgage....fewer expenses... Would I be happier? 

The reality of this strategy is that it's a LONG game. I'm equity rich but cash poor. The other thing here is these homes are cheap. I have no better way to describe the Detroit properties other than "cheap" 

Cheap homes have problems. Many of the people DM'ing me are asking about buying their first property and can only afford 1 with a 20% down payment. 

I will tell you this right now -- The Detroit market requires economy of scale. If you can't leverage 10 homes -- I don't know that I would touch these sub $100k properties. (now all $100k properties) 

They have problems. Water tanks go out. Furnaces go out. Basements leak. Plumbing issues and electrical. Foundation issues can be more common in this market. 

I've received dozens of request to view inspection reports for people...The NORM in Detroit is that you can expect a 70 page inspection report lol 

I advise working with a trusted contractor and PM company who can help you navigate the acquisition of properties in Detroit. There are things you can live with and things you can't. A trusted PM will help you identify that. 

Ultimately -- I don't know that I would do this again. Right now -- I feel like I'm just sitting on equity and it's increasing well because the Detroit market is still on a bull run -- but I'm far from living the dream of some of those YouTube/tik Tok influencers we've all seen. 

I mostly made this post to help beginners understand this market better. If you can't leverage 10 homes, I wouldn't touch these type of markets. That means you would need capital in the realm of: $225,000 or so.

Anything less than that -- I would probably not touch Detroit. (can only speak on these markets) 








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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1y

Cool post and it mostly aligns with what we ALWAYS tell investors!

SUMMARY:
Class D Properties: don't buy unless you are local and can keep an eye on them 2-3 each week.

Class C Properties: be careful as the majority of tenant pool has FICO scores well under 600 and are not flustered by threats of eviction. Section 8 tenants are NOT the solution as they just bring different problems. Many gurus promote these properties misrepresenting they are getting Class A or B results or S8 tenants are easy to deal with:(

Class B Properties: we believe this is the "sweet spot" for investors in any market and has historically been also true (look at what average investor was buying before the Great Real Estate Crash!). Will often take 1-3 years to positive cashflow, but better tenants make life easier.

Class A Properties: what every investor wants and newbies think of when they dream of being rich! Usually takes 3-5 years for positive cashflow, but attract the best tenants for few headaches. 

We've laid all this out on an interactive map on our website to try and properly set investor expectations. Many don't listen to us, but the ones that do usually (but not always) succeed - even with one property.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    Cool post and it mostly aligns with what we ALWAYS tell investors!

    SUMMARY:
    Class D Propertie    s: don't buy unless you are local and can keep an eye on them 2-3 each week.

    Class C Properties: be careful as the majority of tenant pool has FICO scores well under 600 and are not flustered by threats of eviction. Section 8 tenants are NOT the solution as they just bring different problems. Many gurus promote these properties misrepresenting they are getting Class A or B results or S8 tenants are easy to deal with:(

    Class B Properties: we believe this is the "sweet spot" for investors in any market and has historically been also true (look at what average investor was buying before the Great Real Estate Crash!). Will often take 1-3 years to positive cashflow, but better tenants make life easier.

    Class A Properties: what every investor wants and newbies think of when they dream of being rich! Usually takes 3-5 years for positive cashflow, but attract the best tenants for few headaches. 

    We've laid all this out on an interactive map on our website to try and properly set investor expectations. Many don't listen to us, but the ones that do usually (but not always) succeed - even with one property.

    [email protected]248-209-6824
    Logical Property Management4.9460 Reviews
    WebsiteView Page
    12Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Drew Sygit:

      Cool post and it mostly aligns with what we ALWAYS tell investors!

      SUMMARY:
      Class D Propertie      s: don't buy unless you are local and can keep an eye on them 2-3 each week.

      Class C Properties: be careful as the majority of tenant pool has FICO scores well under 600 and are not flustered by threats of eviction. Section 8 tenants are NOT the solution as they just bring different problems. Many gurus promote these properties misrepresenting they are getting Class A or B results or S8 tenants are easy to deal with:(

      Class B Properties: we believe this is the "sweet spot" for investors in any market and has historically been also true (look at what average investor was buying before the Great Real Estate Crash!). Will often take 1-3 years to positive cashflow, but better tenants make life easier.

      Class A Properties: what every investor wants and newbies think of when they dream of being rich! Usually takes 3-5 years for positive cashflow, but attract the best tenants for few headaches. 

      We've laid all this out on an interactive map on our website to try and properly set investor expectations. Many don't listen to us, but the ones that do usually (but not always) succeed - even with one property.


      If anyone is reading this. I’ve used drew and logical PM. They took over the mess from Mousa and stabilized the portfolio. 

      That being said - we parted way to expand the portfolio. Drew himself is fantastic but his team and organization runs like it's ran by a team of VA's

      I was looking for more connection with growing my portfolio. I felt the offboarding of logical PM was more of a hassle than I would like - (almost had to write an article about it lol) but no bad blood. 

      You can always DM me for my property management recommendation. 


      2Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    1y

    @Jonathan Weinberger You hit on a number of the challenges of operating lower value properties but who is the buyer for your homes? Do you believe you can sell them for the appraised values? From my experience the equity in these portfolios is difficult to realize. If the neighborhoods support home ownership, it's a painful process with home inspections/repair addendums that are crushing, seller assist requests of 6%, and dealing with the most inexperienced and unprofessional real estate agents (because that's who represents these home owners). 

    I've tried exiting portfolios similar to this earlier in my career and it was difficult. Many try and pivot to selling as a package portfolio. The buyer who will buy the package is going to look for a steep discount, particularly in a market with limited barriers of entry like your market.  Also, these are not easy portfolios to sustain over time due to the upkeep and maintenance challenges. Very few hold these assets for long enough to pay down the debt. Most get frustrated and move on. That Lambo may be further away than you think. Also, I'd want a much nicer reward for owning 30 doors in Detroit long enough to pay the debt down to zero than a sports car :) The risk vs. reward doesn't get me excited.

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    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Stuart Udis:

      @Jonathan Weinberger You hit on a number of the challenges of operating lower value properties but who is the buyer for your homes? Do you believe you can sell them for the appraised values? From my experience the equity in these portfolios is difficult to realize. If the neighborhoods support home ownership, it's a painful process with home inspections/repair addendums that are crushing, seller assist requests of 6%, and dealing with the most inexperienced and unprofessional real estate agents (because that's who represents these home owners). 

      I've tried exiting portfolios similar to this earlier in my career and it was difficult. Many try and pivot to selling as a package portfolio. The buyer who will buy the package is going to look for a steep discount, particularly in a market with limited barriers of entry like your market.  Also, these are not easy portfolios to sustain over time due to the upkeep and maintenance challenges. Very few hold these assets for long enough to pay down the debt. Most get frustrated and move on. That Lambo may be further away than you think. Also, I'd want a much nicer reward for owning 30 doors in Detroit long enough to pay the debt down to zero than a sports car :) The risk vs. reward doesn't get me excited.


       Yeah, that’s a good thought. I have sold a few properties - they are typically home owners and I haven’t ran into issues not realizing the gains. 

      One of my duplex projects early on was all in at $90k and I flipped it to an investor for $130k 

      i think it depends. Half of my portfolio is section 8 - and I've already had at ARV offers for them. right now, I'm just holding. Likely would take a good minute to liquidate this portfolio.


      0Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @Stuart Udis:

      @Jonathan Weinberger You hit on a number of the challenges of operating lower value properties but who is the buyer for your homes? Do you believe you can sell them for the appraised values? From my experience the equity in these portfolios is difficult to realize. If the neighborhoods support home ownership, it's a painful process with home inspections/repair addendums that are crushing, seller assist requests of 6%, and dealing with the most inexperienced and unprofessional real estate agents (because that's who represents these home owners). 

      I've tried exiting portfolios similar to this earlier in my career and it was difficult. Many try and pivot to selling as a package portfolio. The buyer who will buy the package is going to look for a steep discount, particularly in a market with limited barriers of entry like your market.  Also, these are not easy portfolios to sustain over time due to the upkeep and maintenance challenges. Very few hold these assets for long enough to pay down the debt. Most get frustrated and move on. That Lambo may be further away than you think. Also, I'd want a much nicer reward for owning 30 doors in Detroit long enough to pay the debt down to zero than a sports car :) The risk vs. reward doesn't get me excited.


       Yeah, that’s a good thought. I have sold a few properties - they are typically home owners and I haven’t ran into issues not realizing the gains. 

      One of my duplex projects early on was all in at $90k and I flipped it to an investor for $130k 

      i think it depends. Half of my portfolio is section 8 - and I've already had at ARV offers for them. right now, I'm just holding. Likely would take a good minute to liquidate this portfolio.



      I have been preaching this for the last 15 years on BP  low value assets in the mid west should be bought for cash.. and 10 paid for assets is far better than 30  max leverage.. U take on a ton of risk .. well maybe not you as you have the wherewithal to with stand a bad day but many dont. and with max leverage comes loss's. your on the right track sell off as many as you can and move to rentals in cash if you want to stay in the rental game.. But hey thats just me I am risk adverse. And at full retirement age so the thought of 30 mortgages is a non starter.. 

      what few rentals we have are paid for and its exceeds your equity by quite a bit.. so instead of buying more we just rent our cash to others that want to flip homes.. thats a happy medium and far more true cash flow than owning the homes.. Not as great on tax advantages but hey cant have it all there has to be some trade off.
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    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Jay Hinrichs:
      Quote from @Jonathan Weinberger:
      Quote from @Stuart Udis:

      @Jonathan Weinberger You hit on a number of the challenges of operating lower value properties but who is the buyer for your homes? Do you believe you can sell them for the appraised values? From my experience the equity in these portfolios is difficult to realize. If the neighborhoods support home ownership, it's a painful process with home inspections/repair addendums that are crushing, seller assist requests of 6%, and dealing with the most inexperienced and unprofessional real estate agents (because that's who represents these home owners). 

      I've tried exiting portfolios similar to this earlier in my career and it was difficult. Many try and pivot to selling as a package portfolio. The buyer who will buy the package is going to look for a steep discount, particularly in a market with limited barriers of entry like your market.  Also, these are not easy portfolios to sustain over time due to the upkeep and maintenance challenges. Very few hold these assets for long enough to pay down the debt. Most get frustrated and move on. That Lambo may be further away than you think. Also, I'd want a much nicer reward for owning 30 doors in Detroit long enough to pay the debt down to zero than a sports car :) The risk vs. reward doesn't get me excited.


       Yeah, that’s a good thought. I have sold a few properties - they are typically home owners and I haven’t ran into issues not realizing the gains. 

      One of my duplex projects early on was all in at $90k and I flipped it to an investor for $130k 

      i think it depends. Half of my portfolio is section 8 - and I've already had at ARV offers for them. right now, I'm just holding. Likely would take a good minute to liquidate this portfolio.



      I have been preaching this for the last 15 years on BP  low value assets in the mid west should be bought for cash.. and 10 paid for assets is far better than 30  max leverage.. U take on a ton of risk .. well maybe not you as you have the wherewithal to with stand a bad day but many dont. and with max leverage comes loss's. your on the right track sell off as many as you can and move to rentals in cash if you want to stay in the rental game.. But hey thats just me I am risk adverse. And at full retirement age so the thought of 30 mortgages is a non starter.. 

      what few rentals we have are paid for and its exceeds your equity by quite a bit.. so instead of buying more we just rent our cash to others that want to flip homes.. thats a happy medium and far more true cash flow than owning the homes.. Not as great on tax advantages but hey cant have it all there has to be some trade off.

       Yeah -- appreciate this insight. It's a thought. Right now -- I'm holding. If an offer for the portfolio comes along -- I'll entertain it. But I could start selling off 1 by 1 -- but that ruins my chances I feel to 1031 this baby into a Detroit apartment building lol 

      As for risk adverse -- I have an extremely high risk tolerance. And I think it's important for beginners reading this -- don't ****ing do this. I got lucky with the market timing and the affordability of these homes. And I went through 12-18 months of hell with nothing cash flowing but stayed persistent. (I knew eventually it would be okay) 

      My first 10 doors with Mousa -- they were all construction projects lol -- Saw $0 in revenue for a bit. Prayed I wasn't getting scammed. 

      Today -- If I could own the properties in full cash -- maybe I'd be excited. Maybe that's a goal. Start paying down the debt. Who knows. 


      2Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y

    Thank you for posting this 

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  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    1y
    0Reply
  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    1y

    With the knowledge and experience you have gained what about unloading them and starting with a few doors in better neighborhoods? 

    1Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Jules Aton:

      With the knowledge and experience you have gained what about unloading them and starting with a few doors in better neighborhoods? 


      I honestly spent so much time obsessing over the affordable housing chrisis...buying middle class American homes and renting them out terrifies me. The jobs market is tough. The middle class is shrinking. I'd be worried about having such an expensive asset sitting vacant. 

      With Detroit... I will always have a tenant. I will always have section 8. There is always a need for affordable housing. It's why I got in to this. It was so obvious to me the opportunity in Detroit. 

      I don't think I have the patience to start over again 

      1Reply
    • Jules Aton
      MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @Jules Aton:

      With the knowledge and experience you have gained what about unloading them and starting with a few doors in better neighborhoods? 


      I honestly spent so much time obsessing over the affordable housing chrisis...buying middle class American homes and renting them out terrifies me. The jobs market is tough. The middle class is shrinking. I'd be worried about having such an expensive asset sitting vacant. 

      With Detroit... I will always have a tenant. I will always have section 8. There is always a need for affordable housing. It's why I got in to this. It was so obvious to me the opportunity in Detroit. 

      I don't think I have the patience to start over again 

      I would consider challenging this assumption? You might actually find it exciting and it's not starting over it's shifting as you learn and grow. The neighborhoods I have experience with attract young professionals in excellent school districts. Consider upscale townhomes in desirable areas largely made up of SFH or high end popular inner city neighborhoods. That working class isn't going anywhere anytime soon and generally come from families that can offer financial assistance if needed. They usually take good care of the property and pay the rent. Over 30 years max 5 properties at a time so small sample but I have never had more than a few weeks vacancy to turn over and I owned a duplex that was not vacant 1 day in 10 years. Largely personal preference i suppose but I'd rather have a few quality properties than a spreadsheet full of section 8.

      1Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Jules Aton:
      Quote from @Jonathan Weinberger:
      Quote from @Jules Aton:

      With the knowledge and experience you have gained what about unloading them and starting with a few doors in better neighborhoods? 


      I honestly spent so much time obsessing over the affordable housing chrisis...buying middle class American homes and renting them out terrifies me. The jobs market is tough. The middle class is shrinking. I'd be worried about having such an expensive asset sitting vacant. 

      With Detroit... I will always have a tenant. I will always have section 8. There is always a need for affordable housing. It's why I got in to this. It was so obvious to me the opportunity in Detroit. 

      I don't think I have the patience to start over again 

      I would consider challenging this assumption? You might actually find it exciting and it's not starting over it's shifting as you learn and grow. The neighborhoods I have experience with attract young professionals in excellent school districts. Consider upscale townhomes in desirable areas largely made up of SFH or high end popular inner city neighborhoods. That working class isn't going anywhere anytime soon and generally come from families that can offer financial assistance if needed. They usually take good care of the property and pay the rent. Over 30 years max 5 properties at a time so small sample but I have never had more than a few weeks vacancy to turn over and I owned a duplex that was not vacant 1 day in 10 years. Largely personal preference i suppose but I'd rather have a few quality properties than a spreadsheet full of section 8.


       Hey now - those section 8 are my children lol 

      It’s a possibility. Thanks for sharing!


      1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    1y
    Quote from @Jonathan Weinberger:

    Attached is my $2.4M+ portfolio consisting of 27 properties. 

    I received dozens of DM's about investing in Detroit. Many are trying to purchase their first investment homes. 

    Here's the truth. I probably wouldn't do this again. Knowing what I know now...this is an extremely long game towards wealth building. There's faster ways. 

    I honestly thought I'd be riding lambo's and private jets. The reality is this portfolio is equity rich and cash poor. I took the path of using leverage to build a sizable portfolio. 

    I'm not 100% sure that's actually the best option. I met someone recently who owns 90 doors. All 100% paid for. Makes stupid money. Spent the last 9 years growing his portfolio and would only add a new house when he could buy it in cash. 

    For the amount of equity he owns, he could easily have 500 doors... but that's 500 more expenses... 

    The reality here is I have 27 doors...leveraged. In 30 years...my tenants will have paid them off and I'll finally be able to buy myself the Lamborghini. 

    Or... What if I just kept 12 doors with $1M invested? Immediately earning $12k with no mortgage....fewer expenses... Would I be happier? 

    The reality of this strategy is that it's a LONG game. I'm equity rich but cash poor. The other thing here is these homes are cheap. I have no better way to describe the Detroit properties other than "cheap" 

    Cheap homes have problems. Many of the people DM'ing me are asking about buying their first property and can only afford 1 with a 20% down payment. 

    I will tell you this right now -- The Detroit market requires economy of scale. If you can't leverage 10 homes -- I don't know that I would touch these sub $100k properties. (now all $100k properties) 

    They have problems. Water tanks go out. Furnaces go out. Basements leak. Plumbing issues and electrical. Foundation issues can be more common in this market. 

    I've received dozens of request to view inspection reports for people...The NORM in Detroit is that you can expect a 70 page inspection report lol 

    I advise working with a trusted contractor and PM company who can help you navigate the acquisition of properties in Detroit. There are things you can live with and things you can't. A trusted PM will help you identify that. 

    Ultimately -- I don't know that I would do this again. Right now -- I feel like I'm just sitting on equity and it's increasing well because the Detroit market is still on a bull run -- but I'm far from living the dream of some of those YouTube/tik Tok influencers we've all seen. 

    I mostly made this post to help beginners understand this market better. If you can't leverage 10 homes, I wouldn't touch these type of markets. That means you would need capital in the realm of: $225,000 or so.

    Anything less than that -- I would probably not touch Detroit. (can only speak on these markets) 








     I always enjoyed reading your promising post about Detroit.  I’m kind of bummed out when one of Detroit’s  main cheerleaders on Bigger Pockets is pumping the brakes. 

    2Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Joe S.:
      Quote from @Jonathan Weinberger:

      Attached is my $2.4M+ portfolio consisting of 27 properties. 

      I received dozens of DM's about investing in Detroit. Many are trying to purchase their first investment homes. 

      Here's the truth. I probably wouldn't do this again. Knowing what I know now...this is an extremely long game towards wealth building. There's faster ways. 

      I honestly thought I'd be riding lambo's and private jets. The reality is this portfolio is equity rich and cash poor. I took the path of using leverage to build a sizable portfolio. 

      I'm not 100% sure that's actually the best option. I met someone recently who owns 90 doors. All 100% paid for. Makes stupid money. Spent the last 9 years growing his portfolio and would only add a new house when he could buy it in cash. 

      For the amount of equity he owns, he could easily have 500 doors... but that's 500 more expenses... 

      The reality here is I have 27 doors...leveraged. In 30 years...my tenants will have paid them off and I'll finally be able to buy myself the Lamborghini. 

      Or... What if I just kept 12 doors with $1M invested? Immediately earning $12k with no mortgage....fewer expenses... Would I be happier? 

      The reality of this strategy is that it's a LONG game. I'm equity rich but cash poor. The other thing here is these homes are cheap. I have no better way to describe the Detroit properties other than "cheap" 

      Cheap homes have problems. Many of the people DM'ing me are asking about buying their first property and can only afford 1 with a 20% down payment. 

      I will tell you this right now -- The Detroit market requires economy of scale. If you can't leverage 10 homes -- I don't know that I would touch these sub $100k properties. (now all $100k properties) 

      They have problems. Water tanks go out. Furnaces go out. Basements leak. Plumbing issues and electrical. Foundation issues can be more common in this market. 

      I've received dozens of request to view inspection reports for people...The NORM in Detroit is that you can expect a 70 page inspection report lol 

      I advise working with a trusted contractor and PM company who can help you navigate the acquisition of properties in Detroit. There are things you can live with and things you can't. A trusted PM will help you identify that. 

      Ultimately -- I don't know that I would do this again. Right now -- I feel like I'm just sitting on equity and it's increasing well because the Detroit market is still on a bull run -- but I'm far from living the dream of some of those YouTube/tik Tok influencers we've all seen. 

      I mostly made this post to help beginners understand this market better. If you can't leverage 10 homes, I wouldn't touch these type of markets. That means you would need capital in the realm of: $225,000 or so.

      Anything less than that -- I would probably not touch Detroit. (can only speak on these markets) 








       I always enjoyed reading your promising post about Detroit.  I’m kind of bummed out when one of Detroit’s  main cheerleaders on Bigger Pockets is pumping the brakes. 


       Haha -- Sadly the market rising has made me cautious. I was scooping properties up like it was candy. The market appreciation has slowed (steadily climbing but nothing like it was) 

      and so many of my properties were purchased for $50-65k... Those deals are done. 

      Now that things have stabilized -- It's time to reflect. 

      The reality is this. 

      1. I got lucky as **** lol 
      2. These properties and markets are CHEAP. 1000% buyer beware. 
      3. My conclusion is: Only buy If you can leverage 10. You'll need the economy of scale. 

      2Reply
  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    1y
    Quote from @Jonathan Weinberger:

    Attached is my $2.4M+ portfolio consisting of 27 properties. 

    I received dozens of DM's about investing in Detroit. Many are trying to purchase their first investment homes. 

    Here's the truth. I probably wouldn't do this again. Knowing what I know now...this is an extremely long game towards wealth building. There's faster ways. 

    I honestly thought I'd be riding lambo's and private jets. The reality is this portfolio is equity rich and cash poor. I took the path of using leverage to build a sizable portfolio. 

    I'm not 100% sure that's actually the best option. I met someone recently who owns 90 doors. All 100% paid for. Makes stupid money. Spent the last 9 years growing his portfolio and would only add a new house when he could buy it in cash. 

    For the amount of equity he owns, he could easily have 500 doors... but that's 500 more expenses... 

    The reality here is I have 27 doors...leveraged. In 30 years...my tenants will have paid them off and I'll finally be able to buy myself the Lamborghini. 

    Or... What if I just kept 12 doors with $1M invested? Immediately earning $12k with no mortgage....fewer expenses... Would I be happier? 

    The reality of this strategy is that it's a LONG game. I'm equity rich but cash poor. The other thing here is these homes are cheap. I have no better way to describe the Detroit properties other than "cheap" 

    Cheap homes have problems. Many of the people DM'ing me are asking about buying their first property and can only afford 1 with a 20% down payment. 

    I will tell you this right now -- The Detroit market requires economy of scale. If you can't leverage 10 homes -- I don't know that I would touch these sub $100k properties. (now all $100k properties) 

    They have problems. Water tanks go out. Furnaces go out. Basements leak. Plumbing issues and electrical. Foundation issues can be more common in this market. 

    I've received dozens of request to view inspection reports for people...The NORM in Detroit is that you can expect a 70 page inspection report lol 

    I advise working with a trusted contractor and PM company who can help you navigate the acquisition of properties in Detroit. There are things you can live with and things you can't. A trusted PM will help you identify that. 

    Ultimately -- I don't know that I would do this again. Right now -- I feel like I'm just sitting on equity and it's increasing well because the Detroit market is still on a bull run -- but I'm far from living the dream of some of those YouTube/tik Tok influencers we've all seen. 

    I mostly made this post to help beginners understand this market better. If you can't leverage 10 homes, I wouldn't touch these type of markets. That means you would need capital in the realm of: $225,000 or so.

    Anything less than that -- I would probably not touch Detroit. (can only speak on these markets) 









     Great post, for the most part I agree with everything you have said.  Spending a lot of time and money buying a C/D class portfolio is not worth the headache and there are better ways to invest.  There is an opportunity and time cost to building a portfolio like this. 

    If you are at $30,681 in total rent and $19,645 in mortgage costs monthly I would assume you are losing money every month. There does not seem to be enough meat on the bone for taxes, insurance, CapEx, maintenance, fee's, etc...

    On BP most investors have to start small, I was one of them.  To keep building a portfolio of smaller cheaper units in the long run is not the best strategy in my opinion. I think you lay out all of the reasons why.  If you can flip your portfolio into one larger B/A class property it might all be worth it though. 

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    1y

    Have you thought about selling the entire portfolio all at once rather than one at a time? A small class B multifamily using a Starker exchange would be a lot less headache.

    0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @John Clark:

      Have you thought about selling the entire portfolio all at once rather than one at a time? A small class B multifamily using a Starker exchange would be a lot less headache.


      Open to this 

      0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    1y

    Clearly your cash flow is not good (likely negative if the mortgage is only P&I) considering the number of units but your spreadsheet did not include purchase price.   You indicate you purchased many of them for between $50k and $60k.  The balance indicates you have already extracted cash from many of these properties.

    If you purchased at an average price of $70k you paid $1.89m (not including closing costs) for $2.4m of value.   $0.5m of appreciation with various length holds up to 30 years.  It seems lean, but I suspect some people would be happy with $0.5m of appreciation for a ‘passive” (residential RE is not passive and the lower the class area the less passive it is) investment.  Knowing what you paid for each property would provide a clearer picture of the returns you are obtaining.

    I believe your analysis on all cash being superior in that market is likely accurate.  I believe at that rent point a 50% expense/vacancy ratio is aggressive so I will use 55%.

    $30,681 * 0.45 * 12 =$165,677.40/year

    $165k / $2.4m = 14.5% return.   Not Nvidia returns but not bad return.   $166k with the depreciation and other write offs would not likely suffer a heavy tax burden.  I think a lot of people would be very content making that via residential RE.

    Good luck

    0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Dan H.:

      Clearly your cash flow is not good (likely negative if the mortgage is only P&I) considering the number of units but your spreadsheet did not include purchase price.   You indicate you purchased many of them for between $50k and $60k.  The balance indicates you have already extracted cash from many of these properties.

      If you purchased at an average price of $70k you paid $1.89m (not including closing costs) for $2.4m of value.   $0.5m of appreciation with various length holds up to 30 years.  It seems lean, but I suspect some people would be happy with $0.5m of appreciation for a ‘passive” (residential RE is not passive and the lower the class area the less passive it is) investment.  Knowing what you paid for each property would provide a clearer picture of the returns you are obtaining.

      I believe your analysis on all cash being superior in that market is likely accurate.  I believe at that rent point a 50% expense/vacancy ratio is aggressive so I will use 55%.

      $30,681 * 0.45 * 12 =$165,677.40/year

      $165k / $2.4m = 14.5% return.   Not Nvidia returns but not bad return.   $166k with the depreciation and other write offs would not likely suffer a heavy tax burden.  I think a lot of people would be very content making that via residential RE.

      Good luck


       My previous post have the full breakdown numbers 

      0Reply
  • Henry T.
    Member since 2022 · 1k+ posts · 1k+ votes
    1y

    I love single family and marvel at the old craftsman construction. I'd look at those Detroit houses at $40k and want to buy them all. I could leave them vacant and just sit and look at those beauties. (but hey, snap out of it!) My paranoia tells me they'd be torched within a month. Rented out, forget it, no thanks, I don't have the stomach. You do, but I'd guess you're also half my age. I think you're doing it right, especially being that you're local. It may take a while but you'll get your Lambo. For what it's worth I'd bet more on appreciation than rising rent. Seems rent is being squeezed everywhere.

    0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Henry T.:

      I love single family and marvel at the old craftsman construction. I'd look at those Detroit houses at $40k and want to buy them all. I could leave them vacant and just sit and look at those beauties. (but hey, snap out of it!) My paranoia tells me they'd be torched within a month. Rented out, forget it, no thanks, I don't have the stomach. You do, but I'd guess you're also half my age. I think you're doing it right, especially being that you're local. It may take a while but you'll get your Lambo. For what it's worth I'd bet more on appreciation than rising rent. Seems rent is being squeezed everywhere.

      lol - I’ve never stepped foot into the state of Michigan 
      0Reply
    • Todd Jones
      Member since 2023 · 243 posts · 199 votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @Henry T.:

      I love single family and marvel at the old craftsman construction. I'd look at those Detroit houses at $40k and want to buy them all. I could leave them vacant and just sit and look at those beauties. (but hey, snap out of it!) My paranoia tells me they'd be torched within a month. Rented out, forget it, no thanks, I don't have the stomach. You do, but I'd guess you're also half my age. I think you're doing it right, especially being that you're local. It may take a while but you'll get your Lambo. For what it's worth I'd bet more on appreciation than rising rent. Seems rent is being squeezed everywhere.

      lol - I’ve never stepped foot into the state of Michigan 

       You had your team view the properties?

      0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Todd Jones:
      Quote from @Jonathan Weinberger:
      Quote from @Henry T.:

      I love single family and marvel at the old craftsman construction. I'd look at those Detroit houses at $40k and want to buy them all. I could leave them vacant and just sit and look at those beauties. (but hey, snap out of it!) My paranoia tells me they'd be torched within a month. Rented out, forget it, no thanks, I don't have the stomach. You do, but I'd guess you're also half my age. I think you're doing it right, especially being that you're local. It may take a while but you'll get your Lambo. For what it's worth I'd bet more on appreciation than rising rent. Seems rent is being squeezed everywhere.

      lol - I’ve never stepped foot into the state of Michigan 

       You had your team view the properties?

      Of course!
      0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    1y

    We knew this already.

    To think you'd be driving lambo's and riding private jets off of a $2.4M investment in Detroit of all places?

    You're not even that equity rich per unit. Concentration is the name of the game to get the wealth. Not necessarily scale.

    0Reply
    • Matthew Irish-JonesBusiness Member
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      1y
      Quote from @V.G Jason:

      We knew this already.

      To think you'd be driving lambo's and riding private jets off of a $2.4M investment in Detroit of all places?

      You're not even that equity rich per unit. Concentration is the name of the game to get the wealth. Not necessarily scale.


       Do you mean concentration of assets like a large multi family building?

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    • V.G JasonPro Member
      Investor · Member since 2022 · 3k+ posts · 3k+ votes
      1y
      Quote from @Matthew Irish-Jones:
      Quote from @V.G Jason:

      We knew this already.

      To think you'd be driving lambo's and riding private jets off of a $2.4M investment in Detroit of all places?

      You're not even that equity rich per unit. Concentration is the name of the game to get the wealth. Not necessarily scale.


       Do you mean concentration of assets like a large multi family building?


       Multi family would be more scale, but can be Concentration too  Concentration means more quality less quantity.

      10 houses in Detroit or 2-4 houses in a way better, thriving area? Diversification doesn't generate that run-away wealth; you divest via diversifying a bit once you have large wealth accumulation.

      Most, not all, people that get massive wealth don't generate it by making 100 bets @ 1% hoping for a return. Or in this case 10 @ 10%, you do 2-4 at large weights and understand how the risk sits. If you can't sleep at night with it, you likely shouldn't take it on.


      For real estate it'd be monthly cash flow via opex, capex & tenancy plus hold period. That's almost the case with any phys asset though.

      0Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    1y

    Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 

    4Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

      3Reply
    • V.G JasonPro Member
      Investor · Member since 2022 · 3k+ posts · 3k+ votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 

      0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


       lol 

      $600k to acquire $2.4M? I think I did okay. 

      0Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


      one can get a net jet subscription for about 125 to 150k and depending on the Jet then you burn off 5k to 10k per hour when Use it. 
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    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Jay Hinrichs:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


      one can get a net jet subscription for about 125 to 150k and depending on the Jet then you burn off 5k to 10k per hour when Use it. 

       That sounds like a better idea and more tangible for me right now. Looking into it lol

      0Reply
    • V.G JasonPro Member
      Investor · Member since 2022 · 3k+ posts · 3k+ votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


       lol 

      $600k to acquire $2.4M? I think I did okay. 

      Yet you make a post saying how much of a disaster all this was, when we told you so....
      0Reply
    • V.G JasonPro Member
      Investor · Member since 2022 · 3k+ posts · 3k+ votes
      1y
      Quote from @Jay Hinrichs:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


      one can get a net jet subscription for about 125 to 150k and depending on the Jet then you burn off 5k to 10k per hour when Use it. 

       Still $75-$150k if you're flying 15-20 hours a month. That's WPB to Hamptons 5-6x/month.

      If you're flying less then that, then the time of traveling really isn't costing you unless you're also a larg(er) party or you need privacy status.

      The breakeven point on the point is usually 12 hours/mo of traveling if it's 1-2 folks. That's if your time is actually worth it. If it's just a random thing you want to try once, go for it. If its a way of business life, this is one expense you really want to fine tune as it adds up but also saves your ***.

      International whole other ordeal. Most expensive trip we tried was 6 of us from Miami to Mykonos back in 2021-- $210k. It would be closer to $290k now. We go commercial now internationally. Private domestically. 

      1Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @V.G Jason:
      Quote from @Jay Hinrichs:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


      one can get a net jet subscription for about 125 to 150k and depending on the Jet then you burn off 5k to 10k per hour when Use it. 

       Still $75-$150k if you're flying 15-20 hours a month. That's WPB to Hamptons 5-6x/month.

      If you're flying less then that, then the time of traveling really isn't costing you unless you're also a larg(er) party or you need privacy status.

      The breakeven point on the point is usually 12 hours/mo of traveling if it's 1-2 folks. That's if your time is actually worth it. If it's just a random thing you want to try once, go for it. If its a way of business life, this is one expense you really want to fine tune as it adds up but also saves your ***.

      International whole other ordeal. Most expensive trip we tried was 6 of us from Miami to Mykonos back in 2021-- $210k. It would be closer to $290k now. We go commercial now internationally. Private domestically. 

      LOL  hard to rationalize any private aircraft  I had a Cirrus SR 22 that I bought brand new in 04 for 440k.. and that cost me 600 an hour to operate not including my hanger that I paid 250k for.  And I flew it so no pilot costs.. No way to rationalize cost of flying from say PDX to SFO in 2.5 hours or 1500 bucks one way compared to maybe 500 to 700 first class in those days.. 
      And it was always just my wife and I.. But we did use it for business Most of the time. 

      As you note a plane that you can cross the pond without stopping (Iceland, Azores)  or go to say Maui is going to run you very big bucks owning or renting etc.

       My buddy who has the net jet would use it to go from his home in Napa valley to Palm Springs and fly his kids and dogs.. :)  Flights are inherently longer also on the West coast then most east coast flights.  Or another unique way he would use his net jet subscription was when we went to Play Augusta National one year.. We flew commercial into Atlanta and then did the jet from ATL to Augusta.. Can show up in Augusta in a car for gosh sakes.. LOL that was the pinnacle of my golf career to be able to actually play the course as a guest of a Member.

      I had a deposit on the Cirrus Jet when it was 800k but then the GFC hit program stalled and now they are 3 to 4 mil to buy and I would have flown it myself its a single pilot jet specifically designed for Cirrus owners to move up to the Turbine world..  There are whopper tax write offs though like 80% or so of it year one.. I think we wrote off 350 to 375k when we bought ours.. But you know recapture is a beocth when you or if U have to sell. 

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    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


       lol 

      $600k to acquire $2.4M? I think I did okay. 

      Yet you make a post saying how much of a disaster all this was, when we told you so....

       What? Where did I say that? What disaster? 27 properties. $2.4M. $600k spent. Cashflow positive…

      This was a post for beginners to not buy here. Unless they can buy 10 doors it’s not worth it - without economy of scale - you’ll drown. 

      Far from disaster. The point was $5k in cash flow isn’t buying me a jet anytime soon lol

      1Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @V.G Jason:
      Quote from @Jonathan Weinberger:
      Quote from @Steve K.:

      Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 


       I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

       Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

      You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

      What told you a $2.4million investment in Detroit would create that for you?

      A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 


       lol 

      $600k to acquire $2.4M? I think I did okay. 

      Yet you make a post saying how much of a disaster all this was, when we told you so....

       Nah. Post was about beginners not entering the market here. Can’t afford 10 doors in Detroit? Pass. 

      portfolio is stable. Cash flowing. It’s equity rich. The $5k it makes a month isn’t buying a jet any time soon lol - that was the point 

      1Reply
  • Casey Ahlbrandt-Rains
    Member since 2025 · 14 posts · 4 votes
    1y

    Jonathan,

    Pretty interesting case study here, thank you so much for sharing!

    There are plenty of solid Detroit homes in good-enough neighborhoods that will provide decent cashflow, but I'm guessing those aren't the homes you chose to include in this portfolio. 

    The cap rates for S8 investments around here are pretty attractive, but you likely would have benefited from mixing in a couple speculative properties in emerging neighborhoods. Not as much cashflow relative to the acquisition cost, but substantially more promising from an equity appreciation standpoint. 

    Prioritizing cap rates in the properties you select is a fair play and, objectively speaking, that is a solid return on your investment. At the end of the day, you are getting what you pay for. When you eventually want to unload these properties, you will likely end up having to sell to an investor who is after the same thing, as those houses probably aren't on streets that will turn around in the coming years to the extent that a home buyer with a mortgage will pay over $200k for them.

    The glory days of stabilizing a brick bungalow at $50k and placing a $1,200 Section 8 tenant are long gone, but there is still value to be had (as you have shown us!). 

    Sorry to hear this Detroit endeavor didn't meet your expectations, but I'm also glad it didn't turn out worse!

    All the best!


    1Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 997 posts · 1k+ votes
    1y

    Hello @Jonathan Weinberger,

    The bigger issue with investing in any city where rents don’t outpace inflation is that you can’t achieve lasting financial independence. To maintain lifelong financial independence, rental income must increase faster than inflation. This does not happen in cities without significant and sustained population growth.

    Take Detroit as an example. Its population growth from 2020 to 2024 was only +0.19% (and those were the Covid migration boom years). Rents fell in Detroit last year by 2.7%. U.S. inflation averaged about 4.55% per year over the past five years.

    Looking at the impact of inflation on current buying power. Suppose rents increase at 2%/Yr over the next 30 years, inflation averages 4%/Yr, and your current total rental income is $10,000/Mo, here’s what happens to that income in today’s dollars:

    • In 10: years $8,235 (a 17.65% decrease in buying power)
    • In 20. years: $6,782 (a 32.18% decrease)
    • In 30 years: $5,585 (a 44.15% decrease)

    So even though your rent increases to $12,190 ($10,000 x (1 + 2%)^10) after 10 years, inflation erodes its value to the equivalent of $8,235 today. This is why, no matter how many properties you own in cities where rent growth lags behind inflation, you can’t achieve long-term financial independence.

    Now let’s compare this to Las Vegas. Since 2015, the single-family home segment rents have increased on average by 7%/Yr. Starting with the same $10,000 monthly income, here’s what that looks like in today’s dollars:

    • Year 10: $13,289 (a 33% increase in buying power)
    • Year 20: $17,660 (a 77% increase)
    • Year 30: $23,470 (a 135% increase)

    When rent growth consistently outpaces inflation, your buying power rises over time, allowing you to improve your standard of living.

    Summary

    The city where you invest determines long term income, not properties.

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    4Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Eric Fernwood:

      Hello @Jonathan Weinberger,

      The bigger issue with investing in any city where rents don’t outpace inflation is that you can’t achieve lasting financial independence. To maintain lifelong financial independence, rental income must increase faster than inflation. This does not happen in cities without significant and sustained population growth.

      Take Detroit as an example. Its population growth from 2020 to 2024 was only +0.19% (and those were the Covid migration boom years). Rents fell in Detroit last year by 2.7%. U.S. inflation averaged about 4.55% per year over the past five years.

      Looking at the impact of inflation on current buying power. Suppose rents increase at 2%/Yr over the next 30 years, inflation averages 4%/Yr, and your current total rental income is $10,000/Mo, here’s what happens to that income in today’s dollars:

      • In 10: years $8,235 (a 17.65% decrease in buying power)
      • In 20. years: $6,782 (a 32.18% decrease)
      • In 30 years: $5,585 (a 44.15% decrease)

      So even though your rent increases to $12,190 ($10,000 x (1 + 2%)^10) after 10 years, inflation erodes its value to the equivalent of $8,235 today. This is why, no matter how many properties you own in cities where rent growth lags behind inflation, you can’t achieve long-term financial independence.

      Now let’s compare this to Las Vegas. Since 2015, the single-family home segment rents have increased on average by 7%/Yr. Starting with the same $10,000 monthly income, here’s what that looks like in today’s dollars:

      • Year 10: $13,289 (a 33% increase in buying power)
      • Year 20: $17,660 (a 77% increase)
      • Year 30: $23,470 (a 135% increase)

      When rent growth consistently outpaces inflation, your buying power rises over time, allowing you to improve your standard of living.

      Summary

      The city where you invest determines long term income, not properties.


       insightful. Appreciate the data and links! 

      0Reply
  • Allan C.
    Rental Property Investor · Member since 2018 · 826 posts · 810 votes
    1y
    Vegas is the Detroit of west coast. The appreciation you observed is the result of CA influx. It’s real, but you can’t fundamentally bank on it continuing. There’s so much land and not much economic diversity to support continued appreciation. You’re basically relying on CA migration, and while that may be a strategy, it’s a risky one.
    2Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @Allan C.:
      Vegas is the Detroit of west coast. The appreciation you observed is the result of CA influx. It’s real, but you can’t fundamentally bank on it continuing. There’s so much land and not much economic diversity to support continued appreciation. You’re basically relying on CA migration, and while that may be a strategy, it’s a risky one.

      don't really agree with the comment on so much land.. Vegas is in a bowl and surrounded by federal lands  even if the fed opened up this land to development once U get to the part of the mountain that has a 15% or greater slope development becomes hard to impossible. But maybe the fed will open up lands suitable for development. Until then though land is very rapidly disappearing and is very expensive  Personally I dont see how they companies make money with dirt that is 1mil and acre. 
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      1Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    1y

    All that Section 8 income sounds ok . But the current administration has mentioned limiting the time frame on benefits . I dont know how , if or when it will occur .  But I wouldnt be putting all my eggs in that basket 

    2Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Matthew Paul:

      All that Section 8 income sounds ok . But the current administration has mentioned limiting the time frame on benefits . I dont know how , if or when it will occur .  But I wouldnt be putting all my eggs in that basket 

      Not worried. Gonna kick 15M families to the curb? I don’t think so. You know how civil wars get started? How empires fall? It starts by kicking 15M families to the curb lol
      0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Matthew Paul:

      All that Section 8 income sounds ok . But the current administration has mentioned limiting the time frame on benefits . I dont know how , if or when it will occur .  But I wouldnt be putting all my eggs in that basket 

      Not worried. Gonna kick 15M families to the curb? I don’t think so. You know how civil wars get started? How empires fall? It starts by kicking 15M families to the curb lol
      0Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @Jonathan Weinberger:
      Quote from @Matthew Paul:

      All that Section 8 income sounds ok . But the current administration has mentioned limiting the time frame on benefits . I dont know how , if or when it will occur .  But I wouldnt be putting all my eggs in that basket 

      Not worried. Gonna kick 15M families to the curb? I don’t think so. You know how civil wars get started? How empires fall? It starts by kicking 15M families to the curb lol

      Having been in and around subsidized housing for decades and owning over 200 doors.. The program can definitely change  kick to the curb no.. But tighten up less money sure .. One thing I have learned about life long renters who have been on the programs for a generation or two they will figure out the next angle.. 
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      1Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    1y

    This post is awesome and what people need to hear. I have new investor clients wanting cheap cashflow properties all the time and they look at me crazy when I tell them those those won't actually cashflow net positive after all the issues and instead send them reasonable cap rate nice area properties. We have tons of these "high cap rate" deals around south side Chicago and rougher suburbs also. It's very easy to actually net negative annually after turnover/repair cost on these. Class A/B areas and doing value adds on aquisition to raise the rents/equity is the way to actually profit in 2025 and to be very rich a few years later as they grow. 

    3Reply
  • Jon K.
    Rental Property Investor · Perry Hall, MD · Member since 2016 · 588 posts · 600 votes
    1y

    Hey @Jonathan Weinberger, curious what your average cashflow is after all expenses on your portfolio if you don't mind sharing.

    Edit: Didn't see you post a reply with that answer just a few responses above. Please disregard!

    0Reply
    • Jonathan Weinberger
      OP
      Member since 2023 · 74 posts · 134 votes
      1y
      Quote from @Jon K.:

      Hey @Jonathan Weinberger, curious what your average cashflow is after all expenses on your portfolio if you don't mind sharing.

      Edit: Didn't see you post a reply with that answer just a few responses above. Please disregard!

       All good. Most months a few thousand. As time goes on, rents increase, it will climb. 

      This is due to purchasing with leverage vs - owning the best 10 performing homes. If I did that - it would be $10k/month and probably awesome lol 


      even with 27 doors - I’ll have months where we legit break even. Lucky the 27 doors make up for all the expenses. I’m never out of pocket on the portfolio. (Which is why economy of scale is so important) 

      1Reply
  • R S
    Fort Lauderdale, FL · Member since 2012 · 19 posts · 10 votes
    1y

    Why not sell 2 or 3 that have good equity but low cash flow and use them to pay off some of the other mortgages? If you're after cash flow, that will help: more cash flow, less properties with things that break. 

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    1y

    Story of every investor / developer equity rich and cash poor....definitely the story of my life thus far...

    Big swings of cash in and then more cash out...

    I am working to have a little bit more balance with my investing...the swings arent worth the stress in my opinion...

    I am here in Chicago and love investing here, so if you don't like Detroit, come here!

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    1Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    1y

    I don't mind being cash poor and high in equity. That's actually what I want. Because I don't care what I have right now. I care about what I'm leaving to my children. 

    2Reply
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