Is there any Detroit investor out there?

Question

I'm a investor planning to move from Utah to Michigan and looking to invest in some real estate how the market in Detroit areas

Drew Sygit · Answer

@Ru Ployngam

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

Travis Biziorek · Answer

Five years ago I moved to metro Detroit from the SF bay area.

Everyone told us not to buy in Detroit proper.

"STAY IN THE SUBURBS", they said.

The thing is, the masses are almost always wrong. I started investigating Detroit. In 2018 we drove some nearby neighborhoods not quite in Detroit proper. I specifically remember our son in the back seat as we headed down to Allen Park and Redford. Ultimately, in 2018 we decided we needed more capital before pulling the trigger. We really didn't but we didn't know any better. I wish we'd gotten started then.

But about a year later in 2019 we got a HELOC on our primary (appraised for $550k) and took out a loan against my 401(k). We bought our first rental property in Detroit in April 2019 for $40k. The tenant was paying $750/mo but not REALLY paying. We got two months out of them before we had to evict. Then we put $15k into cosmetics and rented it for $950. Today the home is worth $120k and rented for $1,200/mo. PITA is about $250/mo :-)

We now have 10 doors in Detroit proper (NOT the suburbs) and they have been extremely good to us. Most of these houses we were able to BRRRR. The ones that didn't quite make it have already paid out their capital. We could refinance everything today and pull out about $200k in equity. And I intend to soon.

Let me know if I can be helpful and good luck!

Joe Hammel · Answer

@Ru Ployngam

Metro Detroit

(my rental portfolio is here)

Purchase: $80k-$130k

Rent: $1200-$1500

ROI: Double Digit

Cash flow: couple hundred/month

Appreciation: Double digit (for past 10 years, will gladly send data)

Location: C, B-  (suburbs and certain markets)

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare and Auto industries.

The bad reputation comes from OOS investors wanting $20k D market properties.

Investors can retire (FIRE) in a few years with these.

We love them.

Is there any Detroit investor out there?

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