$128,000 profit without flipping....

https://www.zillow.com/homedetails/18065-Warringto...

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Jay Hinrichs

Hi Jay

Yes I get your point. There is a mix I think hence the higher values. ???

Here are some comps of similar properties within close proximity.

This one on the same Street sold for $236,000 another at $192,500

Mike H.

Rental Property Investor · Atlanta, GA · Member since 2017 · 127 posts · 75 votes

7y

I guess it could be worth 200k if an owner occupy was willing to pay 200. But Jay is right. To an investor it's not likely to be with 200.

Nick C.

Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes

7y

Sounds like you got a good deal! And you already know the problem - finding another at that price. That's real estate in a nut shell right now.

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Mike H.

I guess there are a number of options here, accessing the equity, not necessarily selling today, as bank valuation has come in at $200,000.

The plan would be to hold this one as its a rising market.

Anthony Smith

Agent/Investor · Detroit, MI · Member since 2016 · 66 posts · 46 votes

7y

what's the square footage on those comps you pulled from the MLS. the only thing I see that even gets close to 100k In that area is almost double the sqft of the property your selling. I am interested but I sell a lot of property in this area and I am just not seeing how to break 100k on this one especially south of Santa Clara St. You can go on any website and see the difference In price between north or south of Santa Clara st.

Brian Garrett

Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes

7y

What you are describing is what's referred to as BRRRR here on the forums.

You bought it, rehabbed it, rented it out and will access the equity via cash-out refinance.

This is a common and popular investment strategy so congrats on finding a deal that fit the parameters!

7 Reply

Anthony Smith

Agent/Investor · Detroit, MI · Member since 2016 · 66 posts · 46 votes

7y

Yeah all those comps you pulled from the MLS are more than double the square footage. This house is only 1300 sqft and does the tenant pay a portion because I have hundreds of section 8 tenants and I have never seen a voucher amount given for $1500 (1250 rent and 250 utilities) for a 3 bed 1 bath especially in Detroit. What bank did this evaluation????

8 Reply

Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

7y

Originally posted by @Marisa R.:

@Mike H.

I guess there are a number of options here, accessing the equity, not necessarily selling today, as bank valuation has come in at $200,000.

The plan would be to hold this one as its a rising market.

Is your market rising?? Most others have slowed significantly. Seattle dropped recently.

Leo Poon

Rental Property Investor · Queens, NY · Member since 2018 · 99 posts · 70 votes

7y

@Marisa R. Congratulation on another deal Marisa. I am not familiar with the Detroit market, but I have a few questions regarding the neighborhood and other possible deals in the area.
As you can see, the property looks like it is in some rough neighborhood with shots fired.

There are a lot of properties below 100k in the same area as your property, and some of them are even lower than 75k. Would you think those meet the same criteria as your 75k SFR? Because you said the problem "is trying to find another at this price....", so I assume you have plenty of deals here. If you don't think those properties meet your investing criteria. May I ask what differences you see in these properties than the 75k SFR you bought last year considering they are in the same neighborhood?

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Marisa Rowe. Something tells me this property isn’t actually worth 200k

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Jack B.

Dont know much about Seattle ??

Yes, the market is rising in certain pockets of Detroit. As you can imagine its a different price point, many investors from out of State and foreign buyers now jumping in.

Its all about cash flow for many investors.... for me..... its about both. Lets talk in 12 months and I will be happy to review this thread and also property values in this neighborhood

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

7y

I have to echo what Jay and others have said. With rent at only $1250 either this is a very bad hold investment or it is not worth 200K . One or the other must be the case. Something is fishy.

Maybe it's the bank/assessors mistake. You may want to pull that money out of there while the bank is still feeling generous. At this point in time you have not yet made any money.

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Thomas S.

OK, So how do you explain the sales comps I posted? Surely they are not all mistakes.

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Leo Poon

Hi Leo

Thanks for sharing this information.

I guess as investors we need to compare apples with apples, are the properties you mentioned cheaper because they need more extensive rehab? on a micro level, location not necessarily as desirable ?Are these warranty deeds or quit deeds? Do they have back taxes etc.

As you can see there are many moving parts here.

As far as crime rates goes, yes I understand the stats, but I also understand that there are many neighborhoods in Detroit that are gentrifying and its matter of finding the gems in the rough and firing the trigger..... pardon the pun

I did this in Atlanta, I purchased in neighborhoods that were considered rough and undesirable at the time for around $35,000 today this SFH are worth $185,000 each and renting at on average $1400 pm. still hold these for income

I am not going to argue with the bank and their valuation, if they value it at $200,000 there must be evidence of sales, as they are looking at recent sales comps including sq ft, land component etc.

I am a simple person, I target markets that are rising, and look at value. If it makes sense then I am in.

I cant predict the future, however I would love to review this thread in 6 months time to see what has happened and where the values/sales sit including the rental returns.

I am Not here to convince anyone to jump into this market, I am just sharing my experience and I think its great to have a constructive conversation, worts and all.

Derek V.

New to Real Estate · SE Michigan · Member since 2016 · 3 posts · 3 votes

7y

@Marisa Rowe I can't speak for the others, but I believe they are saying that the comps you posted are for houses with much more square feet, therefore worth more. I love that you are investing in Detroit and agree it is a growing market.

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Derek V.

Thanks Derek, appreciate this... and thanks for your kind words.

As they say..... there are many ways to skin a cat.......

What the bank has determined as its true value for me it what matters, I am not selling.

Accessing the equity is a good option, it has allowed me to move on and buy more properties.

The idea is to continue growing a portfolio of properties with strong cash flow.

I am focusing on increasing capital at the same time.

Andrew Flora

Rental Property Investor · North Vernon, IN · Member since 2018 · 136 posts · 192 votes

7y

I think you all are missing the point here. She isn't trying to sell the house so whether it's worth $5 or $5 million it doesn't matter. The bank appraisal came in at $200k so when she does a cash out refi this will be a major success with the brrrr method and will fund her next few deals and will provide good cashflow. If it's not for sale the market value doesn't currently matter.

8 Reply

Leo Poon

Rental Property Investor · Queens, NY · Member since 2018 · 99 posts · 70 votes

7y

@Marisa R. It is great to see the deals worked for you. Do you manage the properties in Detroit yourself or you have property management company? In terms of comparing apples to apples, these 2 properties I found on Zillow are like 4 blocks from your SFR. $78,000 at 18416 Monica St Detroit, MI 48221 and $67,000 at 18487 Monica St Detroit, MI 48221. They are both in decent shape, just some cosmetic upgrade will do. Do you think these 2 properties can be your next deals?

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Andrew Flora

Thank you Andrew, for a minute I thought I was going insane..... LOL

That is exactly right, the value is irrelevant at this point in time as I am not selling and I can refinance at $200K end value.

For the purpose of establishing whether this market is rising, I would like to flag this thread and review values.

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Brian Garrett

Hi Brian

OK, I did read something about the BRRRR....

Thanks

Mary M.

Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes

7y

Forgive my newbie question - but if the rent is 1450 how would this cover all expenses and a say 150k mortgage? Wouldnt the property barely cash flow?

What I guess I dont understand about some of these methods discussed on BP is how do folks make any real money? If they buy, renovate then refinance pulling their DP back out - how can the property cash flow? Seems like a lot of work for possibly a very small income. And if folks are holding for appreciation it seems there would need to be substantial appreciation for it to be worthwhile? What am I missing?

OP

Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes

7y

@Mary M.

Hey Mary

This property will pretty much break even in terms of cash flow, perhaps $1000 in front pa, peanuts really.

What are you missing?? The BIG PICTURE....

The fact that I made money from buying well, the bank valued it at $200K that is $125K equity that I can use to grow capital and cash flow. That is $125K that I did not have prior to purchasing this property.

Not all deals are equal, I am buying a mixture of cash cows and properties for appreciation.

Its also the power of leverage, for example I have 11 properties now in Detroit. Some are highly cash flowing and I have posted a few on BP if you are interested to viewing.

The strategy is about growing a portfolio of properties in a rising market, sell down in 3 years time and take some profits off the table.

Dejan Popovic

Investor · Waterloo, IA · Member since 2017 · 8 posts · 15 votes

7y

Marisa, your title is misleading you will not generate any profit until you actually sell. Equity is great, but at 1250 rent I wouldn't take more then 100k

Lashon Ene

Upper Marlboro, MD · Member since 2017 · 12 posts · 4 votes

7y

Great job @Marisa R.! Glad the property was valued at 200k. It seems many people focus on the negatives instead of the positives . I just bought my first property and hope to be on that same boat.