Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
Helloooo Bigger Pockets! I hope I am posting my question in the right place. Have done some reading and haven't quite found the answer. I am not sure there is one answer but rather perspectives on this question.
I have found two properties in two different cities we are looking at investing in: Detroit and Jacksonville. The Detroit property costs $55,000 and the Jacksonville $100,000. Both have very similar monthly cashflows.
On the surface it would be obvious that I am spending twice as much for the Jacksonville property to get the same monthly cashflow. So my question is, what other factors would investors want to be strong in order to purchase the more expensive property?
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
What are your "valuation documents?" This is not the appraisal is it?
Anyway if you are buying with a mortgage I would certainly adjust my offer to account for the lower appraisal. And yes, you can offer 88k on a 104k list. The seller may not accept but it's not out of the ordinary and shouldnt be insulting.
Rental Property Investor · Jacksonville, Florida Area · Member since 2016 · 106 posts · 48 votes
9y
Since you are only 30 minutes from Detroit, you have the advantage of being close to your property. This is an advantage. If you buy the Jacksonville property, you will need to make sure that you interview several property managers and choose one that fits your needs the most.
Also, what type of neighborhood are you looking at in Detroit? There are bad areas in every city, and I trust that you've done your research on the location of the Detroit home. Jacksonville has bad areas as well, so the same will be true down here as well.
I am looking to get my second rental home in the Jacksonville area in the future. I do have a few property management names and numbers if you need them. Happy Holidays! - Toby
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Originally posted by @Account Closed:
The main question you need to find the answer is what is the real rental market in each city. The answer will help you make the determination.
Ok, so I have heard that investors may buy one property for every 100 properties they do research on or "look at"... my wife and I are probably up to 98 by now... but I couldn't put my finger on the "real" rental markets are. There are some setbacks for investors out of area!
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Hi @Account Closed, All the best to you as well! And please forgive my rudeness. I am actually Australian and living overseas but my wife is from Detroit. So happy Thanksgiving and happy holidays to you!
We go back to Michigan and Detroit each summer so "we" (my wife) is very knowledgable on areas within the city. I think what you are eluding to is that appreciation could be a factor in buying the more expensive home. But bad tenants eat into that with repair costs that were perhaps avoidable if better screening was in place with better real estate agents. Maybe I am reading too much into it!!!!! Let me know mate.
Have you considered the demographics? Florida is growing substantially. Both cities you are asking about are large cities, but which one is growing with increasing market rents, jobs, etc. I am biased, but Florida IS the place to invest. There are several reasons: many people are retiring and moving here, We have better climate. We don't have a state income tax.
Rental Property Investor · Jacksonville, Florida Area · Member since 2016 · 106 posts · 48 votes
9y
Yes, I would want the best screening (poperty manager) for my property, and I would be concerned about repair costs and tenant turnover.
This could make the Jacksonville deal more attractive. However, you would have the convenience of being close to the home in Detroit, when you visit in the summer.
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
As has been mentioned several times, it is a big benefit that you are (at least part-time) local to the Detroit property and knowledgeable about the areas. They offer similar cash-flow but are they similar neighborhoods/properties? I don't know Detroit but I can say that 100k in Jax should put you in a very solid B neighborhood. Blue collar, safe, attractive houses with decent overall location.
The benefit with Jax is that our job and population growth rates are much higher, and unemployment is a little lower. These are very good trends. However I have always assumed that the Detroit market will come roaring back someday (soon or in a decade or two, not sure) and I'm jealous of those who know the market well and can invest strategically. So I think there is a higher upside in Detroit.
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Hey @Account Closed, I would appreciate the education. The Michigan property is Ferndale 48220 and Jacksonville FL 32246. Let me know how you want to work on this together. Teach a man to fish and feed him for a life time of real rental market research!
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Hey @John Thedford, Those are some definite perks of Florida. We currently live in a very very warm place and want to only see snow on the TV and when snowboarding!
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Originally posted by @Account Closed:
Yes, I would want the best screening (poperty manager) for my property, and I would be concerned about repair costs and tenant turnover.
This could make the Jacksonville deal more attractive. However, you would have the convenience of being close to the home in Detroit, when you visit in the summer.
Best wishes, Toby
G'day Toby and I totally understand you on this one. We are concerned about this as well. If the property doesn't have good tenant applications we may have to let it sit vacant until the right one comes along. Or change the property manager.
Your comment about being close to the property is interesting and I hear both sides of this a lot. Some advocate for buying so that you can drive past it once every couple of months. Some say buy any property in any city that meets your criteria and gives acceptable returns. I suppose we are trying to work this out for us and working out that criteria too.
@Nick Yates What kind of ROIs are you looking at with each property?
Hey Kyle, thanks for asking! All numbers are worked out to the best that I can!
Ferndale Michigan:
Price-to-rent: 17.5%
Cash-on-cash: 30.8%
Gross yield: 17.45%
Monthly cashflow: $353
Jacksonville, FL
Price-to-rent: 13%
Cash-on-cash: 16.9%
Gross yield: 12.9%
Monthly cashflow: $366
What are your thoughts on the numbers? (I am trying to be objective and look at the numbers. My wife sometimes get caught up looking at the photos! It is certainly a balance between the two)
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Thanks for your comments @Maxwell Lee. These were our thoughts but it is good to hear others have similar opinions. There are lots of people saying that Detroit will bounce back and many predict sooner than later.
Let me ask you a follow up question, if I may, seeing as you are a Jacksonville investor. What sort of ROI numbers are investors looking for in properties? I know it comes down to their investment goals. We are looking primarily for cashflow at first but see property appreciation as a close secondary goal. Do the numbers I posted above indicate a property worth considering in Jacksonville? Cheers for any further opinions you have on this.
Investor · Troy, MI · Member since 2012 · 38 posts · 17 votes
9y
Nate,
I look at those numbers on the Ferndale property and wonder if its not in a small part of Ferndale (Royal Oak Township) that is not actually Ferndale, but more like Detroit. What is block number? That will tell me without having to give away the whole address
Investor · Chicago, IL · Member since 2015 · 166 posts · 67 votes
9y
@Ron Walraven I was just going to ask the same exact thing.
@Nick Yates What street? When you get west of Livernois/Ferndale High School, it is not comparable. Or even east of the tracks. If your property is within a few blocks of Woodward, no you're talking.
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Hi @Ron Walraven and @Eric L., yes it is in this area you both are talking about: Mitchelldale Ave. We know that this little area is a part of Ferndale but is straddled between Detroit and Ferndale. Yes I understand what you are saying and have talked about it with the Mrs. It is actually right behind and shares a fence with Ferndale High School on the western side and just one or two more blocks than a few blocks from Woodward.
My wife and I discussed this so I am glad some others are talking about this. It is one of those things that this area being on the cusp of Ferndale might be one of those areas that "comes back" or is rejuvenated with fresh investors. We see it happen with pockets of areas all over the country. This was part of our thinking and calculations.
Ron, by looking at these numbers, this wouldn't be typical of Ferndale?
Thanks Kyle. My initial question on this was about comparing the cashflow between these two properties. The Jacksonville property is twice the price of the Detroit porperty with very similar numbers / returns. But ultimately we would have to invest twice the price to get the same numbers and this is my question to the community. Is this reasonable? What other factors would investors consider in comparing these two properties and numbers?
Investor · Chicago, IL · Member since 2015 · 166 posts · 67 votes
9y
@Nick Yates This is not typical Ferndale. And it's not technically Ferndale. I have apartments in typical Ferndale. While Ferndale and Royal Oak Township (not the same as Royal Oak, either) share the same zip code, they are in no way the same. This property is likely listed as being in Ferndale because of this shared zip code (48220). Nothing about ROT is poised for a comeback... but if it were, it wouldn't be coming back to much. Look at recent peak property values from 2007/2008. Nothing remotely close to Ferndale's peak or what you are seeing there now.
Don't be fooled/hooked by ROT... it's a rookie mistake I've made a few times myself. And now that you know it's not Ferndale, you won't make that mistake again.
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
@Nick Yates Those are not bad numbers for Jax. You can do better ROI for sure, but I'm guessing this is a pretty stable area. I would say about 75% of 32246 is a very strong property/location. Sounds like it's a different class from the Detroit option. Of course I am making a sweeping generalization about a zip, it does depend on the specific address/property itself.
Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
9y
Thanks for taking a look @Maxwell Lee. I appreciate your comments seeing as you are an investor based in Jacksonville. Always great to get input from local feet on the ground. We will use this in conjunction with all our research and also look out for further investment opportunities in the area, hopefully with better ROI. These deals often get snapped up quickly hey! Thanks!