Detroit Cracks Down On City Landlords

Detroit Cracks Down On City Landlords

Real Estate Consultant · Brighton, MI · Member since 2013 · 607 posts · 251 votes

The city of Detroit has declared that tenants need no longer pay rent unless the landlord complies with the city's new stringent inspection & registration regulations. They have identified their enemy and declared them landlords. 

Among the regulations are yearly lead paint inspections are required. I don't know how accurate this is but the word is that inspections include gutters, roofing, chipped or peeling paint, cracked or damaged sidewalk and steps, are among the inspection requirements.

The Buildings, Safety Engineering & Environmental Department has begun a Residential Rental Compliance & Enforcement program. According to the city's new ordinance, all landlords have three months to register their properties with the city and six months to comply with the new stricter code. Then enforcement program is adding new zip codes on a monthly basis.

Properties registered with the city will be listed on a public search website where anyone can look up a property to see if it is listed as "in compliance" or not. After January 2, 2020, landlords will not be permitted to legally collect rent if you have not obtained a certificate of inspection. Rents will be held in an escrow account until you have been issued a certificate of compliance. After 90 days, the rent is to be returned to the tenants and then again every 60 days. On the city's brochure, there's no indication as how these escrow accounts will be set up and who will monitor and control them. 

Landlords who are more than 12 months behind in property taxes will be unable to obtain a certificate. 

On the one hand, I recognize this as an attempt by the city to force landlords to come up to date with their property taxes. On the other, I heard the inspection requirements are considered over the top and difficult to pass without a big expense. Rarely, does anyone pass the first time.

On the other side of the equation, city landlords are weighing the often high cost of compliance every year (or two) added to property taxes (many of whom are on payment plans with the city) and lack of income that would otherwise help offset the costs. I haven't heard if those who are on payment plans will still be considered as "non-compliant" as they do still technically owe the city. 

Property values in Detroit remain extremely low with the exception of new townhomes and luxury apartments in the heart of the city which, contrary to political promises, have not extended very far from the city center. 

Now that tenants are encouraged to refrain from paying rent, there is a growing exodus of landlords as a result. Given the low market values, it seems the solution many landlords have chosen is to offer land contracts for the properties or abandon them altogether.

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Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
6y

@Annette Hibbler thanks for sharing this. Boy am I glad I sold my 20 or so Detroit SFRs back in 2012. Wayne County as well as the city of Detroit is horribly run and very tough to do business in.

$4,000/year property taxes on a $5,000 house which rents for $500. Costs $10,000 to rehab it once your tenant who only paid 3 months rent needs to be evicted and trashed the place. Now one month’s rent just for a lead inspection. I was no slumlord but these houses are 100 years old. Surely there’s lead paint somewhere.

These are the economics for the roughest areas (south of 8mile, north of downtown). I’m sure nicer areas such as Southfield which rents for $1,200+ have much better returns overall.

But I am glad I stopped the OOS thing. I started investing locally in Oakland in 2014 and turned $12,000 into a $11M Multifamily empire.

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  • Member since 2019 · 248 posts · 248 votes
    6y

    This has been in effect for quite some time now - the city was going zip code by zip code.  There are signs up on major streets near some of my properties trying to educate the tenants on these new guidelines.  This is a pure money grab by the city and nearly impossible to comply with.  Lead inspections range from $500-$800 PER UNIT.  if you have a 4 unit that is $2,000 minimum every other year JUST for the lead inspection - let alone all the other crazy issues the inspectors seem to make up as they go along.

    The Solution - Evict with a 30 day Notice to Quit.  No Landlord with any experience should be using a 7 day outside of Gilbert's man made bubble.  30 day Notice - you just want to recover possession, the judges CANNOT refuse you and will give the tenants 10 days to vacate. If you ask to recover back rent in your eviction this issue will come up.  Lets face it, you're not going to recover any back rent from deadbeat tenants in Detroit, you're just not.

    On a side note - the city released stats a few months ago about compliance in the first few zip codes they tried to enforce - the number was 11% compliance.

    Properties are cheap and easy to find but profits are not.  Until the city comes up with a REASONABLE solution to the inspection issue most will choose to thumb their noses at the requirement.

  • Dylan TanakaPro Member
    Real Estate Agent · Detroit, MI · Member since 2008 · 455 posts · 178 votes
    6y

    In Detroit you have to be diligent and vigilant as a landlord.  Huge profits are to be had but only if you double cross your T's and triple dot your I's.  

    One example is most rehabbers have house sitters.  

    You have to be honest with yourself and ask in the mirror if you're the type of person who can do business with those challenges.

  • Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes
    6y

    Contractors are gonna make a killing.

    If a contractor was to specialize in compliance contracting, the sky would be the limit. Sounds like a good business idea on my end of things if I was in that area of the country.

  • Member since 2019 · 248 posts · 248 votes
    6y
    Originally posted by @Account Closed:
    Originally posted by @Paul S.:

    This has been in effect for quite some time now - the city was going zip code by zip code.  There are signs up on major streets near some of my properties trying to educate the tenants on these new guidelines.  This is a pure money grab by the city and nearly impossible to comply with.  Lead inspections range from $500-$800 PER UNIT.  if you have a 4 unit that is $2,000 minimum every other year JUST for the lead inspection - let alone all the other crazy issues the inspectors seem to make up as they go along.

    The Solution - Evict with a 30 day Notice to Quit.  No Landlord with any experience should be using a 7 day outside of Gilbert's man made bubble.  30 day Notice - you just want to recover possession, the judges CANNOT refuse you and will give the tenants 10 days to vacate. If you ask to recover back rent in your eviction this issue will come up.  Lets face it, you're not going to recover any back rent from deadbeat tenants in Detroit, you're just not.

    On a side note - the city released stats a few months ago about compliance in the first few zip codes they tried to enforce - the number was 11% compliance.

    Properties are cheap and easy to find but profits are not.  Until the city comes up with a REASONABLE solution to the inspection issue most will choose to thumb their noses at the requirement.

    So you think you should be allowed to rent units to tenants with lead based hazards because remediation will screw up your profits?

     No David - I think these requirements from the city are some of the worst in the nation for Landlords... until they become reasonable I will not comply.

  • Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    6y

    @Annette Hibbler

    Hi Annette,

    According to the Untied States Department of Commerce, if someone lives in a "Lower Socioeconomic Area" their children will often desire to eat lead paint chips. (1:24 in the video)

    The government calls this desire "Pica", and says the children become "Brain Damaged" from doing this.

    Now I have been to Detroit, and I've been to Brighton, and Detroit is obviously much lower on the Socioeconomic Scale than Brighton. So according to the US Government, that's where children will Often Desire to eat lead paint chips, and based on that logic the Lead Laws of Detroit make sense.

    And based on that same logic, if that exact same house was in Brighton, and the exact same child moved into it, he/she would not have the "Desire to Eat Lead Paint Chips". (It's hard to argue with the Government, try it with the IRS).

    The video is from 1972 (which is old) but many structures in Detroit have not had much (if any) rehab done to them since 1967 when the military tanks rolled in to restore order (which never seemed to really happen 100%). Many structures seem to kind of "Frozen in Time from then". So (this particular) Lead Problem in Detroit was not addressed/fixed. Leaving those who "Desire" to eat paint chips at a danger of having "Brain Damage".

    Now having been to Detroit, the fear of LEAD I had was not coming from any Paint Chips, it was coming from Bullets from Criminals (which seems to be the REAL Lead Problem) of Detroit and many other areas. But even so, (according to the US Govt. because the structure is in a Lower Socioeconomic area, that will cause children who live there to Desire to eat Lead Paint and give them Brain Damage, but living in Brighton doesn't cause this same Desire).

    Why the US Department of Commerce is concerned about this (and not the US Dept. of Health and Human Services) seems to be a mystery, but that's the US Government sometimes.

    https://www.youtube.com/watch?v=-zZAp5VsXQ4

    Just my 2 Cents.

  • Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
    6y

    @Annette Hibbler thanks for sharing this. Boy am I glad I sold my 20 or so Detroit SFRs back in 2012. Wayne County as well as the city of Detroit is horribly run and very tough to do business in.

    $4,000/year property taxes on a $5,000 house which rents for $500. Costs $10,000 to rehab it once your tenant who only paid 3 months rent needs to be evicted and trashed the place. Now one month’s rent just for a lead inspection. I was no slumlord but these houses are 100 years old. Surely there’s lead paint somewhere.

    These are the economics for the roughest areas (south of 8mile, north of downtown). I’m sure nicer areas such as Southfield which rents for $1,200+ have much better returns overall.

    But I am glad I stopped the OOS thing. I started investing locally in Oakland in 2014 and turned $12,000 into a $11M Multifamily empire.

  • Real Estate Agent · Scottsdale, AZ · Member since 2019 · 448 posts · 320 votes
    6y
    Originally posted by @Annette Hibbler:

    The city of Detroit has declared that tenants need no longer pay rent unless the landlord complies with the city's new stringent inspection & registration regulations. They have identified their enemy and declared them landlords. 

    Among the regulations are yearly lead paint inspections are required. I don't know how accurate this is but the word is that inspections include gutters, roofing, chipped or peeling paint, cracked or damaged sidewalk and steps, are among the inspection requirements.

    The Buildings, Safety Engineering & Environmental Department has begun a Residential Rental Compliance & Enforcement program. According to the city's new ordinance, all landlords have three months to register their properties with the city and six months to comply with the new stricter code. Then enforcement program is adding new zip codes on a monthly basis.

    Properties registered with the city will be listed on a public search website where anyone can look up a property to see if it is listed as "in compliance" or not. After January 2, 2020, landlords will not be permitted to legally collect rent if you have not obtained a certificate of inspection. Rents will be held in an escrow account until you have been issued a certificate of compliance. After 90 days, the rent is to be returned to the tenants and then again every 60 days. On the city's brochure, there's no indication as how these escrow accounts will be set up and who will monitor and control them. 

    Landlords who are more than 12 months behind in property taxes will be unable to obtain a certificate. 

    On the one hand, I recognize this as an attempt by the city to force landlords to come up to date with their property taxes. On the other, I heard the inspection requirements are considered over the top and difficult to pass without a big expense. Rarely, does anyone pass the first time.

    On the other side of the equation, city landlords are weighing the often high cost of compliance every year (or two) added to property taxes (many of whom are on payment plans with the city) and lack of income that would otherwise help offset the costs. I haven't heard if those who are on payment plans will still be considered as "non-compliant" as they do still technically owe the city. 

    Property values in Detroit remain extremely low with the exception of new townhomes and luxury apartments in the heart of the city which, contrary to political promises, have not extended very far from the city center. 

    Now that tenants are encouraged to refrain from paying rent, there is a growing exodus of landlords as a result. Given the low market values, it seems the solution many landlords have chosen is to offer land contracts for the properties or abandon them altogether.

     So tenants don't get to not pay rent, they would instead pay their rent to a third party that would hold it in escrow?  

  • Grosse ile, MI · Member since 2014 · 117 posts · 46 votes
    6y

    @Saj Shah

    Nice strategy

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Bill Kramer:

    Contractors are gonna make a killing.

    If a contractor was to specialize in compliance contracting, the sky would be the limit. Sounds like a good business idea on my end of things if I was in that area of the country.

    I was thinking the exact same thing.. it was not the gold miners who got rich in the Gold Rush's it was the people selling the pots and pans and other tac ..  Cleveland has the POS system which can be pretty tough.. many wont buy in the areas were the POS s are .. 

    Tenants once they figure this out are going to game this for all they can get no doubt.

  • Real Estate Agent · Scottsdale, AZ · Member since 2019 · 448 posts · 320 votes
    6y

    Hmmmmm.  Well, being certified for lead removal the past 5 years hasn't helped me that much in Chicago so not tracking how a contractor would "make a killing" in Detroit doing it.  I must be missing something?  

  • Investor · FL · Member since 2017 · 266 posts · 220 votes
    6y

    @Annette Hibbler

    Lead inspections 395.00

    Free compliance repair bid included in price.

    Detailed photo report for out of state investors.

    Miami dade implemented “certificate of use inspections on foreclosed properties back in 2011. Huge county moneygrab. I was doing them for 1200 along my reo repair jobs. . 400 fees from city, 150 for inspector, rest profit ,. I was doing about 10 a week. Some guys came in doing them for 895.00. They took over. I know they were doing about 50 a week. Volume is key.

    Noone bothered to compete with their price until it was too late.

  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y
    Originally posted by @Paul S.:

    This has been in effect for quite some time now - the city was going zip code by zip code.  There are signs up on major streets near some of my properties trying to educate the tenants on these new guidelines.  This is a pure money grab by the city and nearly impossible to comply with.  Lead inspections range from $500-$800 PER UNIT.  if you have a 4 unit that is $2,000 minimum every other year JUST for the lead inspection - let alone all the other crazy issues the inspectors seem to make up as they go along.

    The Solution - Evict with a 30 day Notice to Quit.  No Landlord with any experience should be using a 7 day outside of Gilbert's man made bubble.  30 day Notice - you just want to recover possession, the judges CANNOT refuse you and will give the tenants 10 days to vacate. If you ask to recover back rent in your eviction this issue will come up.  Lets face it, you're not going to recover any back rent from deadbeat tenants in Detroit, you're just not.

    On a side note - the city released stats a few months ago about compliance in the first few zip codes they tried to enforce - the number was 11% compliance.

    Properties are cheap and easy to find but profits are not.  Until the city comes up with a REASONABLE solution to the inspection issue most will choose to thumb their noses at the requirement.

    Why would your lead inspections be that high? Thats as much as 4x the cost of a DC one, and we live in area that has to be 3-4x more expensive.

  • Detroit, MI · Member since 2018 · 148 posts · 38 votes
    6y

    @Annette Hibbler is this just Detroit or all of Wayne county?

  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    6y

    I tell all my tenants when we sign the lease that I have not inspected the building for lead  and don’t plan to so It probably has lead in it somewhere so If they see lead paint chips ,don’t eat em’ !...also don’t let your youngsters eat parts of my house . If you Get the munchies then go buy a bag of Doritos or something ,I force them to  sign a lead based disclosure attachment .

    Sadly Like most major metropolitan cities Detroit is ran by corrupt insane liberals that cause the problem ,then offer to sell you the solution . They are voted in every election cycle by the majority of deadbeat “ gimme free crap” townspeople who voted the same way every year since the dawn of time because they think somehow a politician will make their life easier and improve social conditions .. and every year they are disappointed 

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Dennis M.:

    I tell all my tenants when we sign the lease that I have not inspected the building for lead  and don’t plan to so It probably has lead in it somewhere so If they see lead paint chips ,don’t eat em’ !...also don’t let your youngsters eat parts of my house . If you Get the munchies then go buy a bag of Doritos or something ,I force them to  sign a lead based disclosure attachment .

    Sadly Like most major metropolitan cities Detroit is ran by corrupt insane liberals that cause the problem ,then offer to sell you the solution . They are voted in every election cycle by the majority of deadbeat “ gimme free crap” townspeople who voted the same way every year since the dawn of time because they think somehow a politician will make their life easier and improve social conditions .. and every year they are disappointed 

     Throw some sriracha on them and they are rather yummy.

  • Contractor · Marietta, GA · Member since 2019 · 7 posts · 3 votes
    6y

    @James Wise

    Corrupt, insane liberals is completely redundant. Lol

  • Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes
    6y

    @Steven Lowe

    Marketing and networking. For me its mostly networking and letting it be known I specialize in dealing with hoarders/bad tenants.

    Call up sherwin William's and ask for a referral for a contractor and see who the rep suggests...its a "who you know" industry

    I prefer investors with flips/vacant homes so I do my best to get the word out on that aspect.

  • Haubstadt, IN · Member since 2017 · 17 posts · 15 votes
    6y

    @David Abbate I agree with lead testing ONCE. But why every other year?? Do they think im repainting it with lead paint?

  • Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
    6y

    @David Abbate. The tenants are the ones that are going to pay for this. They will either pay higher rent to correct nonsensical problems or land lords will let house’s go back to the bank or be torn down, again resulting in higher rent due to a created housing shortage. You cannot legislate or force land lords to take a loss on an investment. It won’t work RR

  • Member since 2019 · 248 posts · 248 votes
    6y
    Originally posted by @Ralph R.:

    @David Abbate. The tenants are the ones that are going to pay for this. They will either pay higher rent to correct nonsensical problems or land lords will let house’s go back to the bank or be torn down, again resulting in higher rent due to a created housing shortage. You cannot legislate or force land lords to take a loss on an investment. It won’t work RR

     Exactly

  • Rental Property Investor · New York City, NY · Member since 2019 · 17 posts · 10 votes
    6y

    @Scott Mac

    🤣🤣🙃🙃 Love it. Your post made my morning. Thanks!

  • Rental Property Investor · Detroit, MI · Member since 2019 · 5 posts · 1 vote
    6y

    @Dennis M.

    I thought this thread was about lead /rental inspections and here we’re throwing digs at a city we don’t even live in. What an insightful waste of time your response was. Glad to see bigger pockets forum has trash conservative trolls just like every corner of the internet.

    For those that said there will be no money here to make, cool, disappear. Don't let the door hit you on the way out. For those that want to actually find respectful tenants , fix up houses, reassess your taxes (nobody should be paying $4000/year on even a ARV pf $25K) and work with the city, there's plenty money to be made and good landlords are something this city could use.

  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    6y

    @Kyle Kentala

    I guess I missed where it said in the rules that I must live in that particular city to post my experiences with lead in a rental property and how major cities are poorly ran ? My opinion has just as much validity as yours Kyle . Maybe some of that Detroit smog has gone to your brain because no one is forcing you to read my post or waste your time

  • Rental Property Investor · Detroit, MI · Member since 2019 · 5 posts · 1 vote
    6y

    @Dennis M. Your lead paint disclosure which is not going to work under these regulations and then your follow up thinly veiled racist remarks is exactly why I said what I said.

  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    6y

    @Kyle Kentala

    Thank you for clearing up my “ racist remarks “ which of coarse I never typed lol but hey it’s your story so go ahead and make false accusations ! Seems to me Your husband is doing a very poor job of training you

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