Investing in Pontiac Michigan

18 Replies

Hello fellow BP Members!

I have been trying to find an area where property values are still low but the potential for future growth is constantly increasing. This resulted in me finding Pontiac, Mi. This area has seen some truly hard times BUT lately there has been a ton of industry moving there.

Amazon distribution warehouse built on the entire Pontiac Silverdome land

United Wholesale Mortgage headquarters moved in and purchased a lot of surrounding land

M1 Concourse Racetrack and Luxury Car Condos built


Has anyone else looked at Pontiac for a potential area for investment? If so, how has your experience been?


Thank you for any help!

Adam C.

@Adam Cole

My experience has been great. I started buying in 2015 when the homes were selling as low 750 dollars .

The pricing is alot higher now though, but I dont believe it is necessary to jump in and buy homes on the regular market in this area at market value. I've ran into many situations where people are still letting 10k homes go.

I do believe amazon, United shore and the other various companies have helped with the upswing of the market values but I dont believe it was un predictable prior to those companies being added. I think it was predictable a few years ago when they eliminated the woman's shelter from pontiac which was the nest for decades of crime. The wave of crime generated from here was pretty vibrant through the city.

Pontiac has a majority of Class C tenants, just like Detroit.

Pontiac, in our experience though, has better city services and is less tenant-friendly than Detroit.

So, Pontiac is a pretty good place to invest - if you understand Class C markets.

Originally posted by @Drew Sygit :

Pontiac has a majority of Class C tenants, just like Detroit.

Pontiac, in our experience though, has better city services and is less tenant-friendly than Detroit.

So, Pontiac is a pretty good place to invest - if you understand Class C markets.

Appreciate your response Drew, that is the one thing I am hesitant about. My current rentals are all in Flint, but I am dealing with students at Kettering as opposed to actual residents.

Have you run into any major issues renting to Class C tenants? Or any issues collecting rent? I am curious as to what strategies you might utilize to avoid no payment tenants.


 Starting out, capital is scarce for me so I am trying to accumulate lower cost homes before moving on to bigger and brighter things.
 

Originally posted by @Darius Kellar :

@Adam Cole

My experience has been great. I started buying in 2015 when the homes were selling as low 750 dollars .

The pricing is alot higher now though, but I dont believe it is necessary to jump in and buy homes on the regular market in this area at market value. I've ran into many situations where people are still letting 10k homes go.

I do believe amazon, United shore and the other various companies have helped with the upswing of the market values but I dont believe it was un predictable prior to those companies being added. I think it was predictable a few years ago when they eliminated the woman's shelter from pontiac which was the nest for decades of crime. The wave of crime generated from here was pretty vibrant through the city.

 Hi Darius! Thank you for your reply. 

Have you encountered problems with collecting rent or having tenants damage your properties?

I know that a majority of this can be avoided with background checks and thorough screenings but I am curious about how you handle that situation if/when it comes up

Thanks again!

Adam

@Adam Cole  Great questions and no I have never encountered tenants damaging anything in the properties. However, nothing is full proof but I have a very logical screening process that does not include a standard background check. To be very brief I have a 2 part process, an application at the open house and secondly some key items that will qualify the tenant via email. During the open house prospect tenants will fill out the brief application that I have. I rely on the open house because it gives me face to face experience with the possible tenants that I am dealing with and some basic idea of there economic status, ect. For example having a reliable car to drive to work and basic communication skills which is more important than anything in my opinion.

If and when damages occur I am prepared for the worse scenarios. I would consider the most expensive things being full house fires or furnaces. For example the insurance covers fire damage and I keep an inventory of furnaces at my house if I ever need to repair or replace a stolen furnace. The problem that has occurred is that I don’t have enough homes for all the applications I receive 😊.

@Adam Cole Class C tenants live paycheck-to-paycheck, so any emergency or unexpected expense means late rent.

They're also harder on properties and do little maintenance themselves.

The attraction of Class C properties is the higher cashflow.

As @Darius Kellar has shared, the best way to succeed in Class C is to have a great screening process.

You might want to read our series about “How to Screen Applicants like a Pro”:

https://www.biggerpockets.com/member-blogs/3094/93296-how-to-screen-applicants-like-a-pro-part-1-verifying-credit-reports

We do not accept late rent. Part of our screening process is that the tenant has a minimum of 1 month emergency funds outside of the deposit. This can be either an open line of credit equal to 1 month of rent or proof actual available cash in their account.

We make it very clear if a tenant is 1 day late they can expect to receive a 7 day pay or quit notice. And 2 notices will void the contract.

I don’t understand why landlords allow tenants to pay rent late if there is such high demand for sourcing tenants in rental homes.

@Adam Cole we got 3 deals in Pontiac this year out of a recent marketing campaign, we received a lot of interest from buyers, as a matter of fact, they were all gone within 24hours (but I guess it's mostly because of the current lack of inventory). 

The feedback I got from the buyers; a lot of similitude with the Detroit Market, mostly class C areas in the same price range but the tenant pool take better care of the houses (fewer maintenance expenses) and the city governance is a little bit easier to deal with than Detroit.

We are definitely planning on increasing our marketing efforts in Pontiac. 

@Adam Cole Like others mentioned; Pontiac is Class C market.  It is still important to get rental certificates and keep the property up to code. This ensures that you are a good landlord in the eyes of law; when there is a rough patch with tenants.

Had a handful of properties as a JV partner in Pontiac before both for rentals and flips.

Originally posted by @Darius Kellar :

@Adam Cole Great questions and no I have never encountered tenants damaging anything in the properties. However, nothing is full proof but I have a very logical screening process that does not include a standard background check. To be very brief I have a 2 part process, an application at the open house and secondly some key items that will qualify the tenant via email. During the open house prospect tenants will fill out the brief application that I have. I rely on the open house because it gives me face to face experience with the possible tenants that I am dealing with and some basic idea of there economic status, ect. For example having a reliable car to drive to work and basic communication skills which is more important than anything in my opinion.

If and when damages occur I am prepared for the worse scenarios. I would consider the most expensive things being full house fires or furnaces. For example the insurance covers fire damage and I keep an inventory of furnaces at my house if I ever need to repair or replace a stolen furnace. The problem that has occurred is that I don’t have enough homes for all the applications I receive 😊.

That's truly a great problem to have! Thank you for giving me that information, it helps me rationalize it a bit better and get a grasp on what I am going to be getting into!

As investors in Michigan, do you have a lender that you like to work with? I know that some of the projects can be purchased with cash but at a point using a lender becomes inevitable.


Thanks again :)

Adam
 

Originally posted by @Drew Sygit :

@Adam Cole Class C tenants live paycheck-to-paycheck, so any emergency or unexpected expense means late rent.

They're also harder on properties and do little maintenance themselves.

The attraction of Class C properties is the higher cashflow.

As @Darius Kellar has shared, the best way to succeed in Class C is to have a great screening process.

You might want to read our series about “How to Screen Applicants like a Pro”:

https://www.biggerpockets.com/member-blogs/3094/93296-how-to-screen-applicants-like-a-pro-part-1-verifying-credit-reports

 I am going to give that a read for sure! I figured that the screening process is the biggest factor in having confidence that your tenants won't hang you out to dry. Thank you for sharing that :)

Do you have any lenders that you have had great experiences working with in the area? My goal is to accumulate faster than I can produce capital on my own. So in addition to raising capital, I am planning to begin developing some lender relationships!

Thank you again for any help/advice

Adam

@Adam Cole look for community banks or credit unions in the areas you are looking to invest. They are not only invested in the community, but making it better. If they can help you invest in residential properties that make the community more liveable. Not being from the area I am not sure which lenders would be preferred.

Originally posted by @Drew Brown :

@Adam Cole look for community banks or credit unions in the areas you are looking to invest. They are not only invested in the community, but making it better. If they can help you invest in residential properties that make the community more liveable. Not being from the area I am not sure which lenders would be preferred.

That's some great advice and was my next plan! Thank you for your input :)

Adam

 

Originally posted by @Adam Cole :
Originally posted by @Drew Sygit:

@Adam Cole Class C tenants live paycheck-to-paycheck, so any emergency or unexpected expense means late rent.

They're also harder on properties and do little maintenance themselves.

The attraction of Class C properties is the higher cashflow.

As @Darius Kellar has shared, the best way to succeed in Class C is to have a great screening process.

You might want to read our series about “How to Screen Applicants like a Pro”:

https://www.biggerpockets.com/member-blogs/3094/93296-how-to-screen-applicants-like-a-pro-part-1-verifying-credit-reports

 I am going to give that a read for sure! I figured that the screening process is the biggest factor in having confidence that your tenants won't hang you out to dry. Thank you for sharing that :)

Do you have any lenders that you have had great experiences working with in the area? My goal is to accumulate faster than I can produce capital on my own. So in addition to raising capital, I am planning to begin developing some lender relationships!

Thank you again for any help/advice

Adam

Prime Lending has been the best lender I have experienced. Honestly there rates are higher than many other lenders but I don't care about paying the extra interest because of how fast of a response and process they have. In this market it pays to be fast.