Developer 路 Atlanta and Detroit 路 Member since 2018 路 601 posts 路 821 votes
Hi All
Just thought I would share one of my recent deals.
Been playing in the Atlanta market since 2011, its been very kind, an amazing ride as the market has continued to soar. In fact very low inventory, surprise surprise...... its been tough of late.
My investment strategy has been buy and hold for cash flow and appreciation and the occasional flip and developing property.
Thanks to property I gave up my day job in 2007 and have just been continuing dabbling in property markets
I am now playing in the Detroit market, some will poo poo this, and I understand why.
But..... "fortune favours the bold"" as they say
I believe if you know what you are doing and have the right people on the ground, buy distressed, below market value properties you are on a winner. I know perhaps easier said than done, but I guess its persistence until you get it right.
One of my recent property purchases was in Aviation Sub, nice tree lined street.
This property is approximately 1400 sq foot.
Purchase Price - $36,000
Rehab - $5000 (rent ready)
Rehab (rent ready) $975 per month
I am currently loading up. will be closing on a foreclosure in the next week or so. Will also post the numbers
I've invested in a lot of the cheaper properties in Detroit over the years, and the low end properties that rent for $700-$900 are really tough to get the numbers you see on a spreadsheet. There is constant maintenance, tenants falling behind in rent, tenant turnover, inspections from the city, etc. All of that kills your ROI. Maybe I am not using the right property manager, I don't know, but we have used multiple property managers in the past and it was all the same thing. Lots of problems all the time. Cash flow is not predictable with lower end properties. Just my two cents from experience. Would love to talk to the property manager you are using @Marisa R.
Nate, are you investing from out of state? Your experience doesn't match mine, although I've only been at it here in Detroit for about 5 months.
I'm managing my own properties and extremely picky about what I buy. I probably walk through a dozen homes for ever one that I end up purchasing. Tenant selection is crucial, even for inherited tenants. I only have one headache tenant out of 5 and I still manage to get rent from them mid-month.
This is my first post so please forgive the long story. I just like many am looking to invest in the great city of Detroit. I am an out of towner in CA and spent this past weekend visiting the city and you can FEEL the revival in some neighborhoods.
If I may I'd like to share my experience thanks to the post of @marisa long running blog. Literally hoped on the next flight to see Detroit for myself.
During my short 3 day stint I was able to talk to crews on the grounds working on projects in the Boston Edison Area, randomly have a friendly new owner walk me through his gutted Atkinson historical home while picking his brain for about an hour. This proved to be vital information as things to consider with older historical projects is bringing things up to code which includes heating, electrical, plumbing, mold issues and if you are in the historical area things such as Windows have to be approved by the district. Remember these homes are nearly a century old and require major rehab. The owner explained that he had purchased the property through the DT land bank for about $20k and had already doubled his rehab budget to $160k as he was a former contractor and was DIYing most of the house from the ground up. I was floored but when he explained that the asking price of the homes on the block were asking $380-420K, I could see the potential and motivation there. He couldnt stress enough that it is vital to either have a crew with a TRUSTED project manager or move to DT and consider the tasks to be pretty hands on especially for first timers. Again this coming from a 30 year veteran contractor. It was a fun experience and took a few photos of the journey.
I was also able to check out a SFR in the up and coming area of Fitzgerald/ Bagley. For my fellow BP, I would consider this area as it is between to major colleges and some of the homes are just darn beautiful with the heavy price tag as others. However, it is still Detroit, and during my visit to this particular below market SFR I visited it came as my surprise that it had broken into several times by squatters. From what I was told by the realtor is the homeowner is an out of country investor, has never lived there and has never seen the property first hand. My initial impression was that the rehab appeared to be about 70% complete and they either ran out of money or gave up on the project entirely. But NO the interior work had been done by the squatters as they had lived there so long that they put "sweat equity" into the place to make it there own, even doing the lawn. However upon inspection you could see the back door had been KICKED in, the screens/windows popped out, and all appliances were missing even the TOILETS. However, I tell you the place was really nice but personally, it put me into a state of shell shock with respects to vandalism, squatters and the legal process entailed with all of this. I heard things of such, but it is different when you see the remnants.
I was also able to link up with a pasi realtor and see about 4 properties in the Fitzgerald/Bagley (highly recommended), a duplex in the neighborhood of Russel Woods (lots of blight and not much activity) along with a couple of duplexes in the Petosky-Ostego area (lots of blight and not much activity neither, rather depressing). The great thing is we were able to have the owner actually walk us through all of the areas of his homes and see that he had several that he would be interested in selling.We spent most of the day going through the "ins and outs" of his properties and tenant stories. I was excited about acquiring the properties but kept my emotions in check. Also, things to consider is that these properties are in neighborhoods that I would not necessarily consider up and coming, nor personally live in, but have been modestly updated and already have %100 tenant occupancy with marginal cash flow. But again, I had to keep my emotions in check and today have ordered a third-party home inspection on the properties as it is common for investors to go all in, BEFORE taking a step back, researching and conducting as much due diligence as possible before executing a purchase agreement.
My takeaway with Detroit is yes there is a glass half full level of optimism and you really NEED to visit Detroit for an extended amount of time and really understand the culture here and network with as many people as possible and don't be afraid to literally invite yourself to a conversation with someone on their porch as you will be surprised what you will learn.
PS- A repeat tip that was told to the 8 or so people that I chatted with this weekend is check out the Detroit Land Bank for cheap lots and make sure you do your title search for any liens, back taxes or unpaid water bills.
Thank you again @marisa and the fellow BP community. Im excited to jumping in feet first and learning as much as possible.. I will be BACK in the Detroit if anyone will be around to network and get to know.
Developer 路 Atlanta and Detroit 路 Member since 2018 路 601 posts 路 821 votes
6y
I would also like to add another option is if you can secure a property where it is already tenanted with a good payment history and numbers stack up go for it. Of course its without saying dont buy in war zones
Very informative information from all BiggerPockets members馃憦馃従 gaining so much knowledge thanks to all that have made it and helping pull others along the way.
Flip and Buy/Hold Investor 路 Rochester Hills, MI 路 Member since 2013 路 245 posts 路 105 votes
6y
Great to see some positive threads on the Detroit area. Nice data by @Marisa R. I would like to agree with the comments by @Nate Heaps, the lower end properties are hard to match in real life vs what you get on paper. I have found that moving up into the better neighborhoods/price points get a better area/tenant/rent/outlook. Yes, many neighborhoods have appreciated beyond being easily investible (think Corktown) but there are a lot of others that have real potential. You need to know where to look and be ready to pounce when good properties come up. The best only last a handful of days.
Also, many investors are getting fined by the city for not having their rental or vacant property registered and licensed. This is something Detroit did not enforce for a long time but they are rolling out enforcement by zip code. Even locals seem to not know. Make sure you keep up on it and build it into your budget.