Don't buy real estate in Detroit...

[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) 

[Drew Sygit]

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.