Where to purchase section 8 properties in Deroit, MI?

Question

Hey Y'all, i'm tapping into the section 8 market out of state. and i'm thinking Detroit would be a good market for section 8 (please chime in if you know from experience of other markets that can be a good candidate for section 8 investing)

question now, Where/ which neighbor hoods to purchase section 8 properties in Deroit, MI? how do i assess a house in terms of safety etc?

Also, Detroit Wholesalers , please add me to the list.

Thanks,

Michael Smythe · Answer

@Maryam Mostafa there's a lot of scammers here in Detroit selling OOS investors crappy S8 properties in Class D areas! They don't charge application fees or security deposits, don't do background checks - they take ANY S8 tenant no matter how bad they are:(

You really want Class C and B-minus areas for solid S8 tenants.

Let us know what else we can assist you with.

You really want Class C and B-minus areas for solid S8 tenants.

Let us know what else we can assist you with.

Travis Biziorek · Answer

Hey Maryam, I own 12-doors in Detroit and 3 of them are rented to S8 tenants.

The best areas are C Class neighborhoods. D Class stuff and you'll run into lots of trouble and fall into what I call the "return trap".

In the A and B Class areas the market rents are higher than S8 fair market rents and it won't make sense.

My advice is to be open to S8 but do not use it as your primary/only strategy. It's a tool, and you'll be doing yourself a disservice by thinking it's right for every property.

Finally, S8 tenants are becoming much harder to find. It seems everyone and their mom want to do S8 now. My last property, which should have been very attractive to voucher holders, had 100+ inquiries, 20+ applicants, and... 1 was a S8 voucher holder.

I chose a cash paying tenant and she's amazing!

Travis Biziorek · Answer

Hey Maryam, that is an insanely loaded question with no short, easy answer. Happy to send you some resources about it though if you'd like.

Tim J. · Answer

You can rent to section 8 tenants in any state and any neighborhood.  You don't have to pick Detroit...

I have had great S8 tenants and horrible ones.

I have had great "cash" tenants and horrible ones.

Screen all your tenants thoroughly.

Take action as soon as you can when any issues arise.

Travis Biziorek · Answer

Yikes!

Please don't suggest any new or OOS investors touch Brightmoor today.

Michael Smythe · Answer

@Maryam Mostafa

When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Travis Biziorek · Answer

Really depends. Some definitely do. Some are great.

Michael Smythe · Answer

Account Closed you just joined BP a few days ago, and not sure about your post.

Where are you getting your info that Brightmoor & Cody-Rouge are good Neighborhoods to invest in?

We have Brightmoor as a Class D Neighborhood - although there a few blocks that are Class C, but you have to be local to know them. Not worth an OOS investor gambling on investing in that Neighborhood when there are so many other BETTER Neighborhoods.

Elizabeth Galarza · Answer

Thank you for clarifying the situation, as an out of state investor, it takes time to start learning about a city.

Where to purchase section 8 properties in Deroit, MI?

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