My first investment property

9 Replies | Detroit, Michigan

Hi everyone! I am currently working on rehabbing my first Investment property to flip. Please let me know what you guys think.

We’re in the final stages! Painting is complete, kitchen cabinets have been installed, plumbing is finished, floors are sanded. Did a walkthrough created a punch list of more things to get completed/touched up. Decided to replace outlets and fixtures ourselves to save a couple hundred dollars. Gotta put the property up on Zillow to start screening tenants.

Thanks to Vinson for painting, plumbing and acting as project planner/general contractor. Thanks to Jeremy and Rob for the advice. Thanks Quentin Sharpe for the floors (they turned out great!).

Here are the details: This home is located in the Nortown neighborhood of Detroit, Michigan. It's a 3 bedroom, 1 bath, 1,194 sq ft. brick home with an un-finished basement and no garage. My original estimated rehab costs was $30,000, which comes out to $25/sq ft. Re-hab includes painting whole house, renovating the kitchen and installing a half bath in the basement. I purchased it at $18,000 with about $3,000 in closing costs. I incorrectly estimated the ARV to be $73,000. Which would have gave me a gross profit of $21,000, with estimated $3,000 in closing costs which leaves $18,000 in net profits. A contractor come out and estimated the initial reno costs to be $36,230. The actual ARV in the area is $45,000. So I decided to cut back on a kitchen gut and installing the half and re-focused on making this home a rental. Cut renovations to $17,000. Rents in the area $800-$850. Expected cash flow is $512. Please provide feedback. Thanks!



operating revenuesactual monthlyyear 1
gross scheduled rental income$800.00$9,600.00
vacancy rate5.00%$40.00$480.00
net rental income$760.00$9,120.00
other income0.00%$0.00$0.00
gross income100.00%$760.00$9,120.00
operating expenses
repairs and maintenance5.00%$40.00$480.00
property management10.00%$80.00$960.00
taxes9.38%$75.00$900.00
insurance6.56%$52.50$630.00
salaries and wages0.00%$0.00$0.00
utilities0.00%$0.00$0.00
professional fees0.00%$0.00$0.00
advertising0.00%$0.00$0.00
other0.00%$0.00$0.00
other0.00%$0.00$0.00
other0.00%$0.00$0.00
total operating expenses30.94%$247.50$2,970.00
net operating expenses69.06%$512.50$6,150.00
Cash flow from operations
total cash available for loan servicing64.06%$512.50$6,150.00
debt service0.00%$0.00$0.00
remaining CF from ops64.06%$512.50$6,150.00
plus principle reduction0.00%$0.00$0.00
total return64.06%$512.50$6,150.00
CF/ Debt service ratio#DIV/0!#DIV/0!#DIV/0!
Net Operating Income1.03%12.30%
Cash ROI1.03%12.30%
Total ROI1.03%12.30%

Hi Jamal, nice work! I like how, even though arv wasn’t where you wanted, you’re still looking at great numbers.

I’ve worked w flagstar bank in the area refinancing properties in that price range so, after closing costs, you could pull out $30k and look to go get another. Ask for Jeanine - she was helpful with me. Good work!

Hey! Congrats. Out of curiosity have you priced in the costs for the city certification and the costs associated with that? I would price in the initial inspection and the lead testing at the very least. 

Hi Jamal,

It may be just be me but I would double the vacancy and repairs & Maintenance percentage just to be safe, it will help you in the long run to do that now. Cash ROI isn't the greatest, but at least you are able to make money on it as opposed to taking a loss by selling. I would also seek to get another opinion about what it could sell for on the market. Talk with an agent for different comps in the area it will be good to develop a relationship with those in your area anyway. Find the agents who are moving a lot deals and ask them. Also, check with the property management company to make sure your rent amount is a good amount or if it needs to go higher or lower.

Originally posted by @Chris Schoonhoven :

Hi Jamal, nice work! I like how, even though arv wasn’t where you wanted, you’re still looking at great numbers.

I’ve worked w flagstar bank in the area refinancing properties in that price range so, after closing costs, you could pull out $30k and look to go get another. Ask for Jeanine - she was helpful with me. Good work!

 Thanks! I'll call them. I've also heard Chemical Bank goes as low as $25,000 and Key Bank goes as low as $20,000. 

Originally posted by @Patricia N. :

Hey! Congrats. Out of curiosity have you priced in the costs for the city certification and the costs associated with that? I would price in the initial inspection and the lead testing at the very least. 

 Hi Patricia! Thanks! I haven't priced in certification and lead inspection. How much do those things costs?

Originally posted by @Benjamin Allen :

Hi Jamal,

It may be just be me but I would double the vacancy and repairs & Maintenance percentage just to be safe, it will help you in the long run to do that now. Cash ROI isn't the greatest, but at least you are able to make money on it as opposed to taking a loss by selling. I would also seek to get another opinion about what it could sell for on the market. Talk with an agent for different comps in the area it will be good to develop a relationship with those in your area anyway. Find the agents who are moving a lot deals and ask them. Also, check with the property management company to make sure your rent amount is a good amount or if it needs to go higher or lower.

 Thanks @Benjamin Allen for the advice! I was unsure about those numbers. 

Originally posted by @Jamal Adams :
Originally posted by @Patricia N.:

Hey! Congrats. Out of curiosity have you priced in the costs for the city certification and the costs associated with that? I would price in the initial inspection and the lead testing at the very least. 

 Hi Patricia! Thanks! I haven't priced in certification and lead inspection. How much do those things costs?

$150 for the initial inspection. $400 (ish) for intial lead inspection that includes clearance depending on who you deal with. Additionally I would assume (from the information provided) you might have to do some remediation. Depending on what they find with the lead it could be a yearly expense.