From 0 to 100 properties in 14 months…My personal experience

27 Replies

From 0 to 100 properties in 14 months…My personal experience

It may sound strange, or fake. But is not. My main objective here is sharing my personal experience with RE in the city of Detroit MI (and my first experience in Real Estate at all), basically to encourage those that are starting and just get surrounded with NOers and also to remember the big investors that the bullish spirit can never die.

Everything started January 2017 when reading a book that changed my life “Rich Dad, Poor Dad” (Robert’s Kiyosaki best seller that doesn’t need introduction), not essentially for the content that is pretty repetitive but for the hidden message of building wealth for passive income purposes. Later in August I decided to buy “The Book on Rental Property Investing” from Brandon Turner. I decide to start in RE in a distressed market. Why? Because I come from investment banking industry and I have done pretty well always with distressed assets (oil and gas in Texas, agribusiness in Latin America), so why not distressed Real Estate? Why not rentals? And even more challenging…why not Detroit MI (yes…I know…you are shaking your head Lol…keep reading, this one is a happy ending story).

January 2018 decided to book flight tickets to Detroit, one hotel night and a rented car. 500 miles in two days, more than 20 neighborhoods visited and one clear impression: “if I want to succeed here I will have to invest in”:

  • Travelling often to the City (I live out of country with a connecting flight and almost 18 hs. To make it to Detroit)
  • Developing a local Team (MOST IMPORTANT) to be my boots on the ground
  • Hire inspection companies and try to be in every property I want to buy
  • Have a GREAT real estate attorney (in charge of double checking all property related paperwork, Deeds, etc). Title houses don’t work for you, they want to execute transactions to get paid.
  • Deal flow (MLS, off market, direct owner, Facebook, Instagram)
  • CASH. I have done all my transactions cash, this has helped a lot. I know is not the common rule but is one of the factors that allowed to grow the rental portfolio that fast.

July 2018: closed my first property, those feelings that you will never forget. A nice 3/1 bungalow in a C class neighborhood in Detroit. Last week closed property #100.

My strategy: focus on 3/1 SFH with cosmetic repairs needed in up and coming neighborhoods, avoid structural damaged properties, NO fire damaged properties, No blights in the block, not vandalized houses in the block, screen tenants.

What I learnt from a challenging market like Detroit? (remember I have invested in class C and D neighborhoods).

  • Cash is king (applies for every market LOL)
  • Develop a local team you can trust on
  • Always put “final water reading” as a condition to close in the Purchase Agreement (I have avoided $10,000 past water bills “surprises” doing this)
  • Hire a good real estate attorney. Yes I know that title houses are responsible for doing it properly and you have the title insurance. If you are out of country its worth every penny when a real estate attorney puts on an email “I have checked all paperwork, you are good to sign the P.A. and wire funds”
  • Always put the inspection contingency in your PA (feel comfortable with the period, I put 7 days).
  • Send a certified inspector to the property
  • Try to walkthrough every property you put an offer on. Make your videos, make your notes, write down your numbers to an Excel and try to understand if it makes sense to put an offer.
  • Be picky with the level of tenants you want (you have invested a lot of money in the property and they have to take care).
  • Tenants pay utilities (including water)
  • Have your internal Maintenance Guy (when you reach volume like this is worth having this instead of calling maintenance every time something happens).

My results so far:

  • Occupancy rate: 98% (two properties have been recently vacated)
  • Evictions: 1
  • Avg. Rent: stabilized portfolio at $825/month/property
  • NET ROI / year: 12.6%
  • Portfolio Capital Gain: 14% in one year.

The part that nobody says is that in this last year I have invested more than $18,000 in flight tickets, $13,540 in accommodation, $12,800 in car rentals, over $50,000 in legal fees, $1,500,000 in rehabs and hundreds of hours far away from family, nights sleeping on a plane, jet lag, airports rescheduling. Is it worth? Every single penny. So you better close your laptop or lock your phone and start making decisions that will change your life.

Impressive.  Congrats!  

Just curious, how much allotted capital did you start out with?

Originally posted by @John Koster :

Impressive.  Congrats!  

Just curious, how much allotted capital did you start out with?

John thanks for your message, I don't know if I am understanding your question. Initial capital was around $600,000.

 

Originally posted by @Leo Furest :

From 0 to 100 properties in 14 months…My personal experience

It may sound strange, or fake. But is not. My main objective here is sharing my personal experience with RE in the city of Detroit MI (and my first experience in Real Estate at all), basically to encourage those that are starting and just get surrounded with NOers and also to remember the big investors that the bullish spirit can never die.

Everything started January 2017 when reading a book that changed my life “Rich Dad, Poor Dad” (Robert’s Kiyosaki best seller that doesn’t need introduction), not essentially for the content that is pretty repetitive but for the hidden message of building wealth for passive income purposes. Later in August I decided to buy “The Book on Rental Property Investing” from Brandon Turner. I decide to start in RE in a distressed market. Why? Because I come from investment banking industry and I have done pretty well always with distressed assets (oil and gas in Texas, agribusiness in Latin America), so why not distressed Real Estate? Why not rentals? And even more challenging…why not Detroit MI (yes…I know…you are shaking your head Lol…keep reading, this one is a happy ending story).

January 2018 decided to book flight tickets to Detroit, one hotel night and a rented car. 500 miles in two days, more than 20 neighborhoods visited and one clear impression: “if I want to succeed here I will have to invest in”:

  • Travelling often to the City (I live out of country with a connecting flight and almost 18 hs. To make it to Detroit)
  • Developing a local Team (MOST IMPORTANT) to be my boots on the ground
  • Hire inspection companies and try to be in every property I want to buy
  • Have a GREAT real estate attorney (in charge of double checking all property related paperwork, Deeds, etc). Title houses don’t work for you, they want to execute transactions to get paid.
  • Deal flow (MLS, off market, direct owner, Facebook, Instagram)
  • CASH. I have done all my transactions cash, this has helped a lot. I know is not the common rule but is one of the factors that allowed to grow the rental portfolio that fast.

July 2018: closed my first property, those feelings that you will never forget. A nice 3/1 bungalow in a C class neighborhood in Detroit. Last week closed property #100.

My strategy: focus on 3/1 SFH with cosmetic repairs needed in up and coming neighborhoods, avoid structural damaged properties, NO fire damaged properties, No blights in the block, not vandalized houses in the block, screen tenants.

What I learnt from a challenging market like Detroit? (remember I have invested in class C and D neighborhoods).

  • Cash is king (applies for every market LOL)
  • Develop a local team you can trust on
  • Always put “final water reading” as a condition to close in the Purchase Agreement (I have avoided $10,000 past water bills “surprises” doing this)
  • Hire a good real estate attorney. Yes I know that title houses are responsible for doing it properly and you have the title insurance. If you are out of country its worth every penny when a real estate attorney puts on an email “I have checked all paperwork, you are good to sign the P.A. and wire funds”
  • Always put the inspection contingency in your PA (feel comfortable with the period, I put 7 days).
  • Send a certified inspector to the property
  • Try to walkthrough every property you put an offer on. Make your videos, make your notes, write down your numbers to an Excel and try to understand if it makes sense to put an offer.
  • Be picky with the level of tenants you want (you have invested a lot of money in the property and they have to take care).
  • Tenants pay utilities (including water)
  • Have your internal Maintenance Guy (when you reach volume like this is worth having this instead of calling maintenance every time something happens).

My results so far:

  • Occupancy rate: 98% (two properties have been recently vacated)
  • Evictions: 1
  • Avg. Rent: stabilized portfolio at $825/month/property
  • NET ROI / year: 12.6%
  • Portfolio Capital Gain: 14% in one year.

The part that nobody says is that in this last year I have invested more than $18,000 in flight tickets, $13,540 in accommodation, $12,800 in car rentals, over $50,000 in legal fees, $1,500,000 in rehabs and hundreds of hours far away from family, nights sleeping on a plane, jet lag, airports rescheduling. Is it worth? Every single penny. So you better close your laptop or lock your phone and start making decisions that will change your life.

Hey Leo, Congrats! That’s an awesome inspiring story. Thanks for sharing! 

Could you share how you developed the boots on the ground? Through BP? RE meetings? Or did you already have someone local that started the chain of referrals? 

Also, what made you decide to invest in Detroit specifically? 

I’m currently in the process of researching markets to invest and Detroit is on my top 5. 

 

Great Job! I would continue to monitor the portfolio and see how much you can increase rents per year as you will have a balancing act on your hand. As do not want be increasing rents and then have an eviction problem on your hands.  

Hi Constance! Thanks for following my discussion. You made one of the most important questions. In my case I had two options to develop boots on the ground: 1) do the learning curve, waste time and money, probably be scammed incentives or twice and finally learn my lesson or 2) leverage with some seasoned Detroit investor. My decision was 2). I know an investor with more than 200 doors in Detroit, I simply asked him “would you be open to have an arrangement to introduce your local people in Detroit” he said...well I am done I am not going to buy any more properties. We agreed a (very generous) fee and he introduced like 10 individuals, I ended up working with just 2 and developed my team from there. If you ask how much did this cost I would say that no more than doing my own learning curve. Today I have this 40+ people team working together with me and they rock! 

Originally posted by @Constance Kawa-Small :
Originally posted by @Leo Furest:

From 0 to 100 properties in 14 months…My personal experience

It may sound strange, or fake. But is not. My main objective here is sharing my personal experience with RE in the city of Detroit MI (and my first experience in Real Estate at all), basically to encourage those that are starting and just get surrounded with NOers and also to remember the big investors that the bullish spirit can never die.

Everything started January 2017 when reading a book that changed my life “Rich Dad, Poor Dad” (Robert’s Kiyosaki best seller that doesn’t need introduction), not essentially for the content that is pretty repetitive but for the hidden message of building wealth for passive income purposes. Later in August I decided to buy “The Book on Rental Property Investing” from Brandon Turner. I decide to start in RE in a distressed market. Why? Because I come from investment banking industry and I have done pretty well always with distressed assets (oil and gas in Texas, agribusiness in Latin America), so why not distressed Real Estate? Why not rentals? And even more challenging…why not Detroit MI (yes…I know…you are shaking your head Lol…keep reading, this one is a happy ending story).

January 2018 decided to book flight tickets to Detroit, one hotel night and a rented car. 500 miles in two days, more than 20 neighborhoods visited and one clear impression: “if I want to succeed here I will have to invest in”:

  • Travelling often to the City (I live out of country with a connecting flight and almost 18 hs. To make it to Detroit)
  • Developing a local Team (MOST IMPORTANT) to be my boots on the ground
  • Hire inspection companies and try to be in every property I want to buy
  • Have a GREAT real estate attorney (in charge of double checking all property related paperwork, Deeds, etc). Title houses don’t work for you, they want to execute transactions to get paid.
  • Deal flow (MLS, off market, direct owner, Facebook, Instagram)
  • CASH. I have done all my transactions cash, this has helped a lot. I know is not the common rule but is one of the factors that allowed to grow the rental portfolio that fast.

July 2018: closed my first property, those feelings that you will never forget. A nice 3/1 bungalow in a C class neighborhood in Detroit. Last week closed property #100.

My strategy: focus on 3/1 SFH with cosmetic repairs needed in up and coming neighborhoods, avoid structural damaged properties, NO fire damaged properties, No blights in the block, not vandalized houses in the block, screen tenants.

What I learnt from a challenging market like Detroit? (remember I have invested in class C and D neighborhoods).

  • Cash is king (applies for every market LOL)
  • Develop a local team you can trust on
  • Always put “final water reading” as a condition to close in the Purchase Agreement (I have avoided $10,000 past water bills “surprises” doing this)
  • Hire a good real estate attorney. Yes I know that title houses are responsible for doing it properly and you have the title insurance. If you are out of country its worth every penny when a real estate attorney puts on an email “I have checked all paperwork, you are good to sign the P.A. and wire funds”
  • Always put the inspection contingency in your PA (feel comfortable with the period, I put 7 days).
  • Send a certified inspector to the property
  • Try to walkthrough every property you put an offer on. Make your videos, make your notes, write down your numbers to an Excel and try to understand if it makes sense to put an offer.
  • Be picky with the level of tenants you want (you have invested a lot of money in the property and they have to take care).
  • Tenants pay utilities (including water)
  • Have your internal Maintenance Guy (when you reach volume like this is worth having this instead of calling maintenance every time something happens).

My results so far:

  • Occupancy rate: 98% (two properties have been recently vacated)
  • Evictions: 1
  • Avg. Rent: stabilized portfolio at $825/month/property
  • NET ROI / year: 12.6%
  • Portfolio Capital Gain: 14% in one year.

The part that nobody says is that in this last year I have invested more than $18,000 in flight tickets, $13,540 in accommodation, $12,800 in car rentals, over $50,000 in legal fees, $1,500,000 in rehabs and hundreds of hours far away from family, nights sleeping on a plane, jet lag, airports rescheduling. Is it worth? Every single penny. So you better close your laptop or lock your phone and start making decisions that will change your life.

Hey Leo, Congrats! That’s an awesome inspiring story. Thanks for sharing! 

Could you share how you developed the boots on the ground? Through BP? RE meetings? Or did you already have someone local that started the chain of referrals? 

Also, what made you decide to invest in Detroit specifically? 

I’m currently in the process of researching markets to invest and Detroit is on my top 5. 

 

 

Originally posted by @Roni Elias :

Great Job! I would continue to monitor the portfolio and see how much you can increase rents per year as you will have a balancing act on your hand. As do not want be increasing rents and then have an eviction problem on your hands.  

Roni thanks for your suggestion, I totally agree with you. Since the very beginning I knew that there was not a lot of room to increased rents, my target has been stabilising the portfolio at $800/property/month (I have some $1,000's and some $700's). I am pretty satisfied with the NET ROI from the rentals, now my speculation is on the capital gain side. Take care, Leo

 

@Leo Furest

I would do small rent bumps as expenses do go up. Always try to work existing tenants as due to move out costs and the cost of the loss of 1 month.

Originally posted by @Mart Brosas :

@Leo Furest

Very impressive!!! I plan on starting in rentals myself, but locally to avoid those travel expense cost. Post like these just reaffirm me that being successful in RE investing can be achievable.

Thanks!!

Mart go for it! no pain no gain. I can foresee that doing it locally will be way easier than my case! Go ahead and let me know if there is any thing I can help you with 

Originally posted by @Roni Elias :

@Leo Furest

I would do small rent bumps as expenses do go up. Always try to work existing tenants as due to move out costs and the cost of the loss of 1 month.

Roni good point! Is actually more than just the one month vacant. Also consider cosmetic repairs to place a new tenant  

Originally posted by @Ola Dantis :

Fascinating story and many will applaud your bullish predisposition to Detroit. 

Thanks for sharing. 

Ola thanks for your nice words! The decision of going to Detroit was made -among others- because I feel comfortable with distressed assets and markets and have always done it well there. I know is not for everybody, and I 100% respect investors that invest locally in safer markets. Detroit is coming back for real! Take care bro and thanks for commenting. Leo 

 

Originally posted by @Michael P. :

@Leo Furest so you are buying cash 100 properties X 35,000 each is 3,500,000. How did you do it with 600,000?

Hi Michael, after the $600,000 I ran some private tranches for investors. 

Originally posted by @Leo Furest :
Originally posted by @Michael P.:

@Leo Furest so you are buying cash 100 properties X 35,000 each is 3,500,000. How did you do it with 600,000?

Hi Michael, after the $600,000 I ran some private tranches for investors. 

 Sorry what is a private tranches?

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