Detroit. Detroit. Detroit
Member since 2021 · 13 posts · 10 votes
Detroit. Detroit. Detroit
Most Popular Reply
Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesHonestly, property in the city comes with a whole different level of complication due to government bureaucracy, government incompetence, and government corruption. There are plenty of Detroit suburbs that offer similar value with less headaches. Relative to other cities, Detroit is quite small compared to the entire Metro, due to a 1950s law that halted its expansion. So, look beyond the city borders.
Not trying to be a downer, just a realist. I'd encourage you to look at Oak Park, Redford, Dearborn Heights, Allen Park, Melvindale, Warren to name a few.
43 Replies
- 5yGreg ScottPro MemberRental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
Honestly, property in the city comes with a whole different level of complication due to government bureaucracy, government incompetence, and government corruption. There are plenty of Detroit suburbs that offer similar value with less headaches. Relative to other cities, Detroit is quite small compared to the entire Metro, due to a 1950s law that halted its expansion. So, look beyond the city borders.
Not trying to be a downer, just a realist. I'd encourage you to look at Oak Park, Redford, Dearborn Heights, Allen Park, Melvindale, Warren to name a few.
Welcome to the market! What are you looking to do? Are you looking to buy and hold or flip? I’ve personally purchased close to 40 properties that I buy and hold in Detroit. We have about 20 investors nationwide that we work with on buying income producing property in the city of Detroit.
- 5yBjorn AhlbladPro MemberInvestor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
I like this one! https://matrix.realcomponline....Detroit was the center of the universe at that time!! Number nine in that listing. Worth a scroll!
- Investor · Boca Raton FL · Member since 2017 · 255 posts · 188 votes5y
@Kimberly Johnson Southeast Michigan is our home market, feel free to reach out I'll be happy to answer any questions you may have.
Ps: Unless you're looking for turnkey, the deals are not on the MLS in Detroit.
I agree with @Greg Scott depending on your risk tolerance, I would consider investing in the suburbs instead of the city. - Rental Property Investor · Long Beach, CA · Member since 2020 · 31 posts · 5 votes5y
@Kimberly Johnson I’m also interested in MI, but I need to build a solid team there first before moving forward with investing there. Can anybody send me referrals for vendors? Thanks.
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Let's look at one of these: 1968 Gladstone
Property is in Virginia Park, an overall rising neighborhood in Detroit.The particular block it's on, has several vacant properties which will negatively affect appreciation and rental rates for the time being. Since the area is on the upswing, the block should see improvement in the near future.
The property exterior appears to be in relatively good condition. Property needs new windows and obviously extensive interior rehab.
We've done similar rehabs for $35k+.
Logical Property Management4.9465 Reviews - Member since 2021 · 13 posts · 10 votes5y
Well... I wrote a very long post and it got lost some how. smh Thank you all for your responses.
@Greg Scott Your opinion is valued no matter if it's a downer. LOL I am here to learn. I noticed the Detroit Land Banks are listed on some of the MLS homes. It worried me a little. Being so new I wasn't sure if that was good or bad. I have looked at the areas you listed but I felt they were too far from the city which didn't fit with my goal of being a part of rebuilding Detroit. Do you think it's beneficial to be close to the Herman Keiffer Complex development? I assumed homes in that area would increase in value over time.
@Bjorn Ahlblad THanks for the thumbs up. I will check out the #9th property
@Lamar Lee My goal is to use the BRRR method with duplexes. I want to do long term rentals on one side and Airbnb on the other. This is why I'd like to be in a "nicer" area near downtown. I've also considered the Riverfront condos for Airbnb. I've also looked at the Jefferson Chalmers area since it's so close to Royal Oak and right by the water.
@Yoann Dorat The MLS homes are not all turnkey. I want properties that I can BRRRR with by adding some value. You're the second vote for the suburbs. So, I am listening! lol What are the risks that I should worry about?
One last question to everyone - Do I need an LLC w/ articles of organization, etc, to BRRRR my first property? I watched a BP podcast that said there were some cons and it can be a hinderance to one's momentum. Instead I can get good insurance and a good attorney if needed. I have a prospective hard money lender who is insisting that I have one.
- Flipper/Rehabber · Jersey City, NJ · Member since 2016 · 158 posts · 86 votes5y
@Kimberly Johnson If you want to acquire the property using HML you will definitely need to purchase it under a LLC and yes they will ask for articles of formation and possibly the operating agreement.
Forming an LLC should not take a lot of time. Operating agreement templates are available on google, I created one myself recently and it worked fine with the HML
- Member since 2021 · 13 posts · 10 votes5y
@Drew Sygit Thanks for that at a glance assessment. My method of looking at the neighborhood values never included the number of vacancies for appreciation and rental rates. But investing in the home won't allow me to do a cash refi based on the market. So, I don't think it's a good deal for me starting out.
- Member since 2021 · 13 posts · 10 votes5y
@Kunal Mishra Thanks. I actually did the template yesterday and plan to submit it today. Does it matter if I have a partner or if I am the sole member? Do I really need the virtual address, phone number website, and email address? I used my personal information on the operating agreement forms.
- Flipper/Rehabber · Jersey City, NJ · Member since 2016 · 158 posts · 86 votes5y
@Kimberly Johnson You can be the sole owner. You don't need professional email and a separate address for your LLC. You can run your LLC from your home address.
- Rental Property Investor · Detroit, MI · Member since 2016 · 42 posts · 31 votes5y
Hi Kimberly. I started investing in Detroit back in 2016 when I was living in Los Angeles. I actually packed my bags and moved here in 2019 to be closer to my investments. Greg Scott is right... life as an investor is much simpler in the suburbs. That said, if you're willing to put in the time and the effort, there are jewels to be found in Detroit... but it's not for the feint of heart. I've bought several homes from the DLBA. Things have changed a lot since my initial purchases. They are not as accommodating as they once were... especially in areas the city has targeted for development. I focus primarily on the lower east side along the Jefferson Corridor. You mentioned Jefferson Chalmers being close to Royal Oak. I think you meant the Grosse Pointe neighborhoods, as Royal Oak is well north of the city. There's lots of residential and even commercial development in Jefferson Chalmers but please be mindful of the flooding that occurs there every year. You might also consider Islandview (the part that's west of Grand Blvd.) and East Village (which is distinguished from "East English Village" in far east Detroit and "English Village" which is a condo development in Islandview), as there are still deals to be found in both of them. Good luck in your journey.
Originally posted by @Kimberly Johnson:
Hey! I am new on BP. I've been watching the YT channel forever. Just watched Ashley show and it was great. I just finished a real estate couse with a group in IL. I am not horribly interested in using the IL team of lawyers, accountants, hard money lenders, etc., but would rather buy in MI. I've been getting MLS alerts for multi family homes under 100k in certain areas of Detroit. I'm checking the comps and what I think the ARV could be. I could really use a Detroit expert to help me not overpay. I have a good amount of capital to start but may need some additional help with financing. I am all ears to anyone in the area. Thanks! This home really peaks my interest. https://matrix.realcomponline....
If you don't have boots on the ground here you will lose the little $ you have. The property you are interested in is a 100k rehab from OOS - ARV will be 75k. You do the math. The rehab cost is probably closer to 150k after 2-3 contractors/locals rip you off in the process.
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
@Kimberly Johnson not sure you want to waste your time setting up an LLC - if you're going to be you're own registered agent and use your home address!
How does an LLC Logically Protect a Landlord?
A lot of landlords are advised to put their properties in the name of an LLC for asset protection.
While this is basically true, the reality isn’t what most landlords think.
If a legal issue occurs with your property resulting in a lawsuit, there's a high likelihood the plaintiff's attorney will be successful in "piercing the corporate veil" of your LLC and being able to sue you directly.
Why? Because most landlords don't follow all the legal requirements to maintain their LLC as a separate entity.
So, what else can a landlord do to protect their personal assets from a business lawsuit?
Well, what types of lawsuits is a landlord most likely to face?
Lawsuit from tenants for personal injury!
How many tenants have the funds to pay a retainer fee to an attorney to handle the lawsuit?
Not many! Most will find a personal injury attorney that will take their case on contingency – meaning the attorney will charge very little, if anything, upfront, but take a third or more of whatever they collect.
And here is the secret of using an LLC to protect your personal assets – by "hiding" them!
You see, there’s nothing worse for an attorney taking on a contingency case, fronting all the legal expenses and investing their time to win a case and obtain a court judgment – then NOT be able to collect on the judgment.
So, astute attorneys will research the available assets and insurance before accepting a case on contingency. If they can’t find either, why would they waste any resources on the case?
If all they can find is the property in the LLC, it may not be worth the additional hassle of trying to force a sale of the property to collect on their judgment.
So, they'll research who owns the LLC and what assets that individual has.
If you act as the agent for your LLC and use your personal address – guess what You've just made it super easy for them to find you and now they can research your other assets and probably sue you!
So, if you're going to go through the effort of setting up an LLC, be sure to take the extra steps to find an attorney, CPA or other professional willing to act as the agent for your LLC and allow you to use their address. Most will charge an reasonable annual fee, but think of it as insurance.
Logical Property Management4.9465 Reviews - Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes5y
Here I'm feeling nice today, and I'm gonna give a newbie from out of state an easy win.
https://www.realtor.com/reales...
I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.
People who are local know the play...but like all investments proceed at your own risk.
- Member since 2021 · 13 posts · 10 votes5y
@Christian Hutchinson. I've lived in MI all my life but I am not so familiar with Detroit and learning more about real estate investing every day. Like @Drew Sygit and @Paul S. mentioned, I would have to do the math to know if it would be worth an attempt at a BRRR. My guess is it needs more than paint. The ARV is pretty low based on the local properties.
- Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes5y
Originally posted by @Kimberly Johnson:
@Christian Hutchinson. I've lived in MI all my life but I am not so familiar with Detroit and learning more about real estate investing every day. Like @Drew Sygit and @Paul S. mentioned, I would have to do the math to know if it would be worth an attempt at a BRRR. My guess is it needs more than paint. The ARV is pretty low based on the local properties.
You are worried about the wrong thing, when you are playing at the end of the market you are...
You want to minimize risk (theft), and generate cash. If they want $50K offer $40K, spend $12-15K get the property together. 2 bed rents for $800/mo thats $1600 for two units on a cake walk. Which means you are putting $1100/mo in your pocket every month. Thats $13K a year in your pocket. Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.
The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.
Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about
The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.
You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting. Esp on your first go around. This platform is littered with people who believed they could do this textbook play. it can be done, but extend your horizon to two years for the cashout. This region doesn't appreciate like that historically.
Originally posted by @Christian Hutchinson:
Originally posted by @Kimberly Johnson:
@Christian Hutchinson. I've lived in MI all my life but I am not so familiar with Detroit and learning more about real estate investing every day. Like @Drew Sygit and @Paul S. mentioned, I would have to do the math to know if it would be worth an attempt at a BRRR. My guess is it needs more than paint. The ARV is pretty low based on the local properties.
You are worried about the wrong thing, when you are playing at the end of the market you are...
You want to minimize risk (theft), and generate cash. If they want $50K offer $40K, spend $12-15K get the property together. 2 bed rents for $800/mo thats $1600 for two units on a cake walk. Which means you are putting $1100/mo in your pocket every month. Thats $13K a year in your pocket. Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.
The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.
Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about
The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.
You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting. Esp on your first go around. This platform is littered with people who believed they could do this textbook play. it can be done, but extend your horizon to two years for the cashout. This region doesn't appreciate like that historically.
OK, Let me unpack this... I like the game plan but this is for a seasoned hands on Investor. Buying cheap and renovating the MINIMUM to get these pigs rented is the way to go! Start creating cash flow ASAP and worry about appreciation later (if ever).
No offense Christian but this is my opinion. The 48205 property listed is a loser - worst area of the city, $725 max for a 2 bed there and worth probably 20k if you are desperate to pick something up. We can add numbers all day but a hands off OOS investor is going to lose in Detroit. Lets say $725mo X 2 is $1450mo gross is $17,400yr. Water $1200 - taxes $2000 - Insurance $2000 - PM Fee $1,740 leaves you $10,460.
Lets tackle PM first: Most OOS investors (or hands off locals) think a PM is just the 10% - WRONG! They do not care about your 10% - they care what they can soak you in repairs! Leaky sink, loose toilet, poor water pressure, cracked windows, broken doors... these things all happen amongst others on a regular basis - this will eat up your profits. Lets say you average a LOW $200mo in repairs - now you've made $8,000yr
Evictions: This is Detroit... there is a reason we have the highest eviction rates in the country! We have the worst tenant base in the country LOL. Bob decides not to pay in June. Let's say your PM is on the job and files a 30 day on the 10th.(if any of you are smart you'll NEVER do a 7 day). July 11th comes around and PM's lawyer is able to file with 36th district.(this is a pre-covid example). July 25th is court, tenant gets 10 days to vacate. August 4th you are waiting for your writ - judge decides to let it sit on his/her desk for a week you get the writ on August 15th and call your bailiff. August 17th comes around and Bob gets his dumpster relocation. Then the turn of the unit starts. Lets break down the costs:
PM to serve 30 day - $50
Lawyer to handle the eviction $300
Bailiff to evict - $600
Dumpster for eviction $325
Loss rent June,July, August - $2175
Total - $3,450
If Bob walks off with your stove, Refrigerator, Furnace and Hot water heater as he goes you can add another $2500 (I never supply appliances btw)
PM has to turn the place now - Paint, minor repairs you're probably looking at $2,000
If Bob didn't steal all your stuff you've made $2500 on this property now for the year - if he did you are even. If you have debt service you have lost.
Detroit is a HIGH risk HIGH reward city. I'm not saying this scenario is going to happen EVERY year, but the numbers show it is more likely than not. THIS is the reason properties are so cheap here. If Bob stays for 2 years and pays on time you will do well... but the chances are slim. And lets not even get into the scenario of Jim upstairs saying if Bob ain't paying I'm not paying.
- Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes5y
Originally posted by @Paul S.:
Originally posted by @Christian Hutchinson:
Originally posted by @Kimberly Johnson:
@Christian Hutchinson. I've lived in MI all my life but I am not so familiar with Detroit and learning more about real estate investing every day. Like @Drew Sygit and @Paul S. mentioned, I would have to do the math to know if it would be worth an attempt at a BRRR. My guess is it needs more than paint. The ARV is pretty low based on the local properties.
You are worried about the wrong thing, when you are playing at the end of the market you are...
You want to minimize risk (theft), and generate cash. If they want $50K offer $40K, spend $12-15K get the property together. 2 bed rents for $800/mo thats $1600 for two units on a cake walk. Which means you are putting $1100/mo in your pocket every month. Thats $13K a year in your pocket. Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.
The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.
Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about
The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.
You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting. Esp on your first go around. This platform is littered with people who believed they could do this textbook play. it can be done, but extend your horizon to two years for the cashout. This region doesn't appreciate like that historically.
OK, Let me unpack this... I like the game plan but this is for a seasoned hands on Investor. Buying cheap and renovating the MINIMUM to get these pigs rented is the way to go! Start creating cash flow ASAP and worry about appreciation later (if ever).
No offense Christian but this is my opinion. The 48205 property listed is a loser - worst area of the city, $725 max for a 2 bed there and worth probably 20k if you are desperate to pick something up. We can add numbers all day but a hands off OOS investor is going to lose in Detroit. Lets say $725mo X 2 is $1450mo gross is $17,400yr. Water $1200 - taxes $2000 - Insurance $2000 - PM Fee $1,740 leaves you $10,460.
Lets tackle PM first: Most OOS investors (or hands off locals) think a PM is just the 10% - WRONG! They do not care about your 10% - they care what they can soak you in repairs! Leaky sink, loose toilet, poor water pressure, cracked windows, broken doors... these things all happen amongst others on a regular basis - this will eat up your profits. Lets say you average a LOW $200mo in repairs - now you've made $8,000yr
Evictions: This is Detroit... there is a reason we have the highest eviction rates in the country! We have the worst tenant base in the country LOL. Bob decides not to pay in June. Let's say your PM is on the job and files a 30 day on the 10th.(if any of you are smart you'll NEVER do a 7 day). July 11th comes around and PM's lawyer is able to file with 36th district.(this is a pre-covid example). July 25th is court, tenant gets 10 days to vacate. August 4th you are waiting for your writ - judge decides to let it sit on his/her desk for a week you get the writ on August 15th and call your bailiff. August 17th comes around and Bob gets his dumpster relocation. Then the turn of the unit starts. Lets break down the costs:
PM to serve 30 day - $50
Lawyer to handle the eviction $300
Bailiff to evict - $600
Dumpster for eviction $325
Loss rent June,July, August - $2175
Total - $3,450
If Bob walks off with your stove, Refrigerator, Furnace and Hot water heater as he goes you can add another $2500 (I never supply appliances btw)
PM has to turn the place now - Paint, minor repairs you're probably looking at $2,000
If Bob didn't steal all your stuff you've made $2500 on this property now for the year - if he did you are even. If you have debt service you have lost.
Detroit is a HIGH risk HIGH reward city. I'm not saying this scenario is going to happen EVERY year, but the numbers show it is more likely than not. THIS is the reason properties are so cheap here. If Bob stays for 2 years and pays on time you will do well... but the chances are slim. And lets not even get into the scenario of Jim upstairs saying if Bob ain't paying I'm not paying.
@Paul S
"I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.
People who are local know the play...but like all investments proceed at your own risk."
I can appreciate your analysis. Hence why I said what I said. I have things I do to a property, that raises the tenant pool a little bit. Lighting, and security systems(Cameras which I can remote monitor). I'm local and self-manage. Yes, the risk tolerance is higher being local. Its all high-risks. But I view it I'll be ever present at a property. I mean Detroit tenants are bold, but I've haven't had the 'steal on camera' bold happen. If a tenant decides to cut the security wires (thats inside of steel tubes) cut the dusk to dawn lighting wires (inside steel tubes) so that way they can walk off with appliances, and I have their name, cellphone number, driver's license, SSN, and place of employment. They are a determined criminal. Frankly, someone with that mindset would fail the screening.
If someone does all that to get the appliances they better hope they leave no evidence and they beat the cloud backup, because they literally would be caught. lets be honest most criminals are extremely lazy. I do my setups that makes them have to try. Oh and they have to do all that with another tenant in the property. So that means the tenant has to side with person stealing their washer and dryer.
Originally posted by @Christian Hutchinson:
Originally posted by @Paul S.:
Originally posted by @Christian Hutchinson:
Originally posted by @Kimberly Johnson:
@Christian Hutchinson. I've lived in MI all my life but I am not so familiar with Detroit and learning more about real estate investing every day. Like @Drew Sygit and @Paul S. mentioned, I would have to do the math to know if it would be worth an attempt at a BRRR. My guess is it needs more than paint. The ARV is pretty low based on the local properties.
You are worried about the wrong thing, when you are playing at the end of the market you are...
You want to minimize risk (theft), and generate cash. If they want $50K offer $40K, spend $12-15K get the property together. 2 bed rents for $800/mo thats $1600 for two units on a cake walk. Which means you are putting $1100/mo in your pocket every month. Thats $13K a year in your pocket. Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.
The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.
Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about
The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.
You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting. Esp on your first go around. This platform is littered with people who believed they could do this textbook play. it can be done, but extend your horizon to two years for the cashout. This region doesn't appreciate like that historically.
OK, Let me unpack this... I like the game plan but this is for a seasoned hands on Investor. Buying cheap and renovating the MINIMUM to get these pigs rented is the way to go! Start creating cash flow ASAP and worry about appreciation later (if ever).
No offense Christian but this is my opinion. The 48205 property listed is a loser - worst area of the city, $725 max for a 2 bed there and worth probably 20k if you are desperate to pick something up. We can add numbers all day but a hands off OOS investor is going to lose in Detroit. Lets say $725mo X 2 is $1450mo gross is $17,400yr. Water $1200 - taxes $2000 - Insurance $2000 - PM Fee $1,740 leaves you $10,460.
Lets tackle PM first: Most OOS investors (or hands off locals) think a PM is just the 10% - WRONG! They do not care about your 10% - they care what they can soak you in repairs! Leaky sink, loose toilet, poor water pressure, cracked windows, broken doors... these things all happen amongst others on a regular basis - this will eat up your profits. Lets say you average a LOW $200mo in repairs - now you've made $8,000yr
Evictions: This is Detroit... there is a reason we have the highest eviction rates in the country! We have the worst tenant base in the country LOL. Bob decides not to pay in June. Let's say your PM is on the job and files a 30 day on the 10th.(if any of you are smart you'll NEVER do a 7 day). July 11th comes around and PM's lawyer is able to file with 36th district.(this is a pre-covid example). July 25th is court, tenant gets 10 days to vacate. August 4th you are waiting for your writ - judge decides to let it sit on his/her desk for a week you get the writ on August 15th and call your bailiff. August 17th comes around and Bob gets his dumpster relocation. Then the turn of the unit starts. Lets break down the costs:
PM to serve 30 day - $50
Lawyer to handle the eviction $300
Bailiff to evict - $600
Dumpster for eviction $325
Loss rent June,July, August - $2175
Total - $3,450
If Bob walks off with your stove, Refrigerator, Furnace and Hot water heater as he goes you can add another $2500 (I never supply appliances btw)
PM has to turn the place now - Paint, minor repairs you're probably looking at $2,000
If Bob didn't steal all your stuff you've made $2500 on this property now for the year - if he did you are even. If you have debt service you have lost.
Detroit is a HIGH risk HIGH reward city. I'm not saying this scenario is going to happen EVERY year, but the numbers show it is more likely than not. THIS is the reason properties are so cheap here. If Bob stays for 2 years and pays on time you will do well... but the chances are slim. And lets not even get into the scenario of Jim upstairs saying if Bob ain't paying I'm not paying.
@Paul S
"I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.
People who are local know the play...but like all investments proceed at your own risk."
I can appreciate your analysis. Hence why I said what I said. I have things I do to a property, that raises the tenant pool a little bit. Lighting, and security systems(Cameras which I can remote monitor). I'm local and self-manage. Yes, the risk tolerance is higher being local. Its all high-risks. But I view it I'll be ever present at a property. I mean Detroit tenants are bold, but I've haven't had the 'steal on camera' bold happen. If a tenant decides to cut the security wires (thats inside of steel tubes) cut the dusk to dawn lighting wires (inside steel tubes) so that way they can walk off with appliances, and I have their name, cellphone number, driver's license, SSN, and place of employment. They are a determined criminal. Frankly, someone with that mindset would fail the screening.
If someone does all that to get the appliances they better hope they leave no evidence and they beat the cloud backup, because they literally would be caught. lets be honest most criminals are extremely lazy. I do my setups that makes them have to try. Oh and they have to do all that with another tenant in the property. So that means the tenant has to side with person stealing their washer and dryer.
I admire your security measures but we have to be realistic. When Bob steals your stuff and you call DPD and they stop by after an armed robbery, car jacking and 2 domestic violence calls before lunch they are going to chuckle and leave when you say Bob stole my new Amana range LOL. And lets address the tenant vetting - I know the city is tightening up as far as unit availability because landlords are getting more strict on qualifications.... but how many decent tenants are you getting to live in 48205?
- Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes5y
I think, they will be pretty responsive. I had a shooting happen a few doors down from a property in 2016. I had the whole incident on camera. License plates, who came and went from the house, etc. I called the precinct and told them I had the whole incident on camera. I just sent them footage, and arrest were made.
DPD can be unhelpful. But if I have video footage, and the person's name who did it. They will fill out a report.
Also, on tenant prospects if you show you are securing the building/area and you will be present. Tenants behave differently. Plus you aren't filling out an apartment building, its 2 units not 10.
- Member since 2021 · 13 posts · 10 votes5y
Wow! The wisdom you've shared is priceless. Thank you both so much the real scenarios and crunching the numbers. I NOW have a new longer term perspective on the BRRR method. Cashflow for the first year or so is realistic, but it sounds like the location and quality of renter is super important to "lower" the risk of being sued, cost of evictions, and having my appliances stolen!!! I may look at the suburbs of Detroit, as suggested by someone earlier in this convo. This means I may pay a little more for the property but the area may mean higher cashflow. Another take away is to do minimum updates to make the property liveable. Does anyone add a "clause" in their lease related to the first $100/200 of repairs being the responsibility of the tenant? Has it worked/not worked? Also, I considered condos downtown for Airbnb. I just hate not owning the land and structure and of course paying HOAs. Are either of you doing short term rentals? @Paul S. @Christian Hutchinson
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Yes we add that clause for tenant to pay first $150 of any and all repairs. You have to enforce it carefully though and it is only legally applicable in Michigan for a minimum 12 month lease.
Regarding @Paul S. @Christian Hutchinson - they are both right for what they do. Not aware of a PMC that will consistently guard a property like Christian does, which is Paul's point.
You can invest in Detroit, just have to select better areas and be careful on applicant screening.
Regarding the suburbs, look for our Ring Cities blog post here on BP and also fFollow our "Deep Dive" series we're doing about Metro Detroit cities and City of Detroit Neighborhoods: https://www.biggerpockets.com/...
Logical Property Management4.9465 Reviews - Member since 2021 · 13 posts · 10 votes5y
Wow! The wisdom you've shared is priceless. Thank you both so much the real scenarios and crunching the numbers. I NOW have a new longer term perspective on the BRRR method. Cashflow for the first year or so is realistic, but it sounds like the location and quality of renter is super important to "lower" the risk of being sued, cost of evictions, and having my appliances stolen!!! I may look at the suburbs of Detroit, as suggested by someone earlier in this convo. This means I may pay a little more for the property but the area may mean higher cashflow. Another take away is to do minimum updates to make the property liveable. Does anyone add a "clause" in their lease related to the first $100/200 of repairs being the responsibility of the tenant? Has it worked/not worked? Also, I considered condos downtown for Airbnb. I just hate not owning the land and structure and of course paying HOAs. Are either of you doing short term rentals? @Paul S. @Christian Hutchinson
- Rental Property Investor · Detroit, MI · Member since 2016 · 42 posts · 31 votes5y
The exchange between Paul and Christian is absolutely spot on. Both are very knowledgeable and correct in their analysis of that property. You can have a terrible experience or a great one as a landlord in Detroit. It all depends on your circumstances. I've been the victim of theft multiple times at my properties in Islandview, which is a decent neighborhood. Like Christian said, as soon as I installed cameras and floodlights, it came to a halt. But like Paul said... and with all due respect to Christian, whose word is near gospel on BP, in my opinion... I wouldn't even visit 48205, let alone own there. That doesn't mean there are no opportunities there... but you better live in the neighborhood or have grown up there to take advantage of them.
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