Investing in Detroit

[Kevin Lee]

I am in the work with a Real Estate agent of buying a quadplex or 2 duplex in the metro Detroit area. Most of the building have some work needed on them so I am looking at a turnkey instead. 

Would you recommend the Detroit area to be a good investment right now as I live close to it? Or would you recommend an out of state investment for now as my first rental? I will be hiring and management company either way. 

[Drew Sygit]

@Kevin Lee

While investing via Turnkey Rentals sounds easy, you should understand that you will be paying full retail, often even more, for the properties.

Why? The Turnkey provider is looking to maximize their profits!

Also, there are numerous challenges dealing with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(

You should also check out this BP thread about the topic:

https://www.biggerpockets.com/forums/88/topics/976647-turnkey-company-suggestion?highlight_post=5648876&page=1#p5648876

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[Joe Hammel]

I love Metro Detroit. My entire portfolio is here and cash flows extremely well. Truly feel like there isn't a better market out there for price/rent ratio in solid locations.

[Daniel Klevit]

Quote from @Travis Biziorek:

Quote from @Kevin Lee:

I am in the work with a Real Estate agent of buying a quadplex or 2 duplex in the metro Detroit area. Most of the building have some work needed on them so I am looking at a turnkey instead. 

Would you recommend the Detroit area to be a good investment right now as I live close to it? Or would you recommend an out of state investment for now as my first rental? I will be hiring and management company either way. 

 Kevin, if you live in or near Detroit, it's a no-brainer to invest here IMO.

I started buying rentals in the city about 3 years ago and it's been the best financial decision I've ever made. We have 10 doors now and the cash flow is fantastic but you need to take time to understand the market, identify strong deals, and avoid the crappy wholesalers trying to sell you garbage.

Happy to answer any questions you might have.

 hey! thanks for sharing! with your 10 doors, do you mind sharing what the average cash flow is on those properties? if you’re buying 130K homes, i’d imagine 250-500?

[Travis Biziorek]

Quote from @Daniel Klevit:

Quote from @Travis Biziorek:

Quote from @Kevin Lee:

I am in the work with a Real Estate agent of buying a quadplex or 2 duplex in the metro Detroit area. Most of the building have some work needed on them so I am looking at a turnkey instead. 

Would you recommend the Detroit area to be a good investment right now as I live close to it? Or would you recommend an out of state investment for now as my first rental? I will be hiring and management company either way. 

 Kevin, if you live in or near Detroit, it's a no-brainer to invest here IMO.

I started buying rentals in the city about 3 years ago and it's been the best financial decision I've ever made. We have 10 doors now and the cash flow is fantastic but you need to take time to understand the market, identify strong deals, and avoid the crappy wholesalers trying to sell you garbage.

Happy to answer any questions you might have.

 hey! thanks for sharing! with your 10 doors, do you mind sharing what the average cash flow is on those properties? if you’re buying 130K homes, i’d imagine 250-500?

Sure. I actually have 12-doors right now. Total gross rents are a bit over $16,000/mo with a little over half of that being net cash flow after ALL expenses (yes, I include capex, repairs, vacancy too).

So I suppose the average per door is near $700 in monthly net cash flow. You won't get these numbers today, but it will likely happen over time as rents go up.

I have never bought a $130k house in Detroit and still wouldn't today. SFH's should run you $70-$80k all in and duplexes can be done for $95k-$130k but again, you REALLY need to know what you're doing or work with someone who does.

Happy to work with anyone wanting to get started in Detroit, just shoot me a DM.

[John Mason]

https://www.facebook.com/groups/MetroDetroitRealEstateInvest...