bought a house in Detroit BLIND

Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes

Just wanted to get an overall take on where im at so far. Heres the details. Bought a house on the eastside of Detroit on Tacoma and Hayes for $5200, 3 bed 1 bath, single car garage . Put about 4000-5000 in it to get it rent ready and here I am. I have a pretty solid tenant moving in January 1st for $550 a month. (No PM). So what im asking is what do you guys think so far? Im about 10k in about to get a renter in but am not %100 what to do after this. Should I buy more property on the street/area or just sit and wait to see how things pan out?? Also im from Canada living in California so im always flying around but at the moment im just guarding this house in Detroit till the 1st

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Brent Maxwell

Real Estate Agent · Detroit, MI · Member since 2016 · 82 posts · 52 votes

We have over 200 rentals under management and have 95% occupancy and 90% performance consistently. Detroit requires a local pro to manage investments effectively. It cannot be done from out of market without local boots on the ground that are committed to making your investment work for you.

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Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
Also does anyone know of the area?? Zip code 48205
0 Reply
Diane G.
CA · Member since 2016 · 1k+ posts · 1k+ votes
9y
I just googled the demographics for that zipcode... less than 2% population actually have a bachelor degree....I would stay away...
0 Reply
Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
A little hard to stay away when I already bought the place
7 Reply
Stefen Lee
Lender · Cleveland, OH · Member since 2016 · 33 posts · 23 votes
9y
Don't let people scare you from what you wrote you and on target from a financial point. Now I would start looking around your property see what agent name do you see listing those properties and take them out for coffee. Set up local team so you can move around. A local agent with local experience in that area will help with management. Also however did your renovation can serve as your maintenance person as your portfolio gets larger. I do sub 20k rentals all the time in the Midwest. Good luck
4 Reply
Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
9y
Sit and wait and see how things pan out. I started with 1 house in Detroit and went to 19 units fast. All were Eastside, about 5k/house. After a few months I found it difficult to collect. After 3 years of paying the ridiculous property taxes and high maintenance cost, coupled with collection problems, I sold everything in 2013. You should see if this tenant pays you on time every month for the first 6 months. Also keep records of how much you spent on maintenance because I know for a fact your property is at least 80 years old. If, after 6 months of dealing with this tenant and house, you want more of it, buy more close to this one. Every street in the D is different. Good luck to you.
4 Reply
Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
Thanks you guys. The property was built in 1951 and yes i will be using my contractor as my maintenance guy
0 Reply
Diane G.
CA · Member since 2016 · 1k+ posts · 1k+ votes
9y
@Account Closed
Saj - you probably still made some profit in 2013 coming out?
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Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
Do any of you guys know if I have my rent set to low?? And if I do get another house should I just use saved cash or maybe leverage this house some how?
1 Reply
Daniel Cuevas
Van Nuys, CA · Member since 2016 · 89 posts · 23 votes
9y
@Brandon Cook A property management company will definitely have that information ready for you, Ive been looking for some kind of resource to narrow down on rents myself with no luck.
in regards to purchasing a second home, I think it depends on the deal. If you have a deal that you just NEED to get and the only way is to leverage I say move forward, but if its feasible for you to just save then keep the equity.
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Account Closed
Lender · Member since 2015 · 68 posts · 11 votes
9y
@Brandon Cook I agree with @Account Closed but since an area do not have a bachelors degree does not mean they don't deserve decent housing and does not mean they are not consistent on paying rent. My partner has a renter who has no degree and pays early and is in Detroit. I also have a rental in Detroit and my renter hasn't missed a payment. You have to dig and dig some more but wait it out and see how its going.
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Account Closed
Lender · Member since 2015 · 68 posts · 11 votes
9y
@Brandon Cook hard to leverage this house its so cheap hard to refinance a house that's worth less than $50k. My rent my tenant pay is closer to $700 but my area of Detroit could be a little nicer, less crime, etc. Not sure where exactly on the Eastside your at but could be higher depends.
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Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
@Jamiel strickland my house is on the eastside on Tacoma St and Hayes. Seems like a nice blue collar area. Plan on renting this place out for 550
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Jon W.
Flip and Buy/Hold Investor · Rochester Hills, MI · Member since 2013 · 245 posts · 105 votes
9y
@Brandon Cook As people have mentioned, the area does not really mean anything nor will it help you evaluate your property. In that part of Detroit you need to go street and block by block. In general, the only time I would use an "area" as a guideline is if you are talking about the nicer neighborhoods like Bagley, Boston Edison, Corktown, Woodbridge, mexicantown, etc. Even then you need to be aware of the street and block. Good luck with your rental. I always like to see more investors taking part and getting involved.
1 Reply
Mike HurneyPro Member
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
9y
@Brandon Cook PM is the killer, do a good job on it and you'll prosper!
1 Reply
Steve B.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
9y
What makes your tenant "solid"?
0 Reply
Jay Brown
Southfield, MI · Member since 2016 · 39 posts · 8 votes
9y
Originally posted by @Brandon Cook:

Also does anyone know of the area?? Zip code 48205
If the deal is right go for it but in my experience through my family's properties in the 48205, we have had multiple break ins. The 48205 is one of the highest crime rate zips in detroit. Other than the Eastland mall I don't see many benefits to the area.
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Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
The only reason I say my tenant is solid is because of the prospects. 1 kid and both parents work, income is pretty decent for detroit. I hear what your saying about the break-ins but I have stayed in this house for about a month a the area is pretty quite. Maybe because im so close to Harper woods
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Karen O.
NYC, NY · Member since 2016 · 617 posts · 456 votes
9y
For about $10k, you're looking To collecting $6.6k per year in rent.
If no major or ongoing repairs, you'll make your investment back in a few years.
I think getting the tenant right is the most important thing. Stay alert. You'll know if this is right for you.
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Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
9y
Originally posted by @Brandon Cook:

The only reason I say my tenant is solid is because of the prospects. 1 kid and both parents work, income is pretty decent for detroit. I hear what your saying about the break-ins but I have stayed in this house for about a month a the area is pretty quite. Maybe because im so close to Harper woods
I know it sounds horrible, but very, very few tenants in Detroit are "solid". I had many rentals there for years - the first few months they pay, then they find something wrong with the place or something breaks - they demand it fixed and stop paying rent right away. (Not something like heat - more like, a broken window screen). This was my experience with 95% of my rentals. Not one person paid on time for a year - not one.
Maybe it was bad luck but we screened and screened. These tenants know the law better than you and I. The "professional tenant" is alive and well in Detroit.
3 Reply
Brent Maxwell
Real Estate Agent · Detroit, MI · Member since 2016 · 82 posts · 52 votes
9y
We have over 200 rentals under management and have 95% occupancy and 90% performance consistently. Detroit requires a local pro to manage investments effectively. It cannot be done from out of market without local boots on the ground that are committed to making your investment work for you.
5 Reply
Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
9y
Originally posted by @Brent Maxwell:

We have over 200 rentals under management and have 95% occupancy and 90% performance consistently. Detroit requires a local pro to manage investments effectively. It cannot be done from out of market without local boots on the ground that are committed to making your investment work for you.
Awesome. How many of these 200 are in the city of Detroit, purchased for under $7k and rented for under $600? If your performance rate is 90% on these types of rentals, I know a few property owners who'd like to do business with you.
Renters in downtown, cool areas like Corktown, and established suburbs like Southfield, Gross Pointe, Royal Oak, Warren - yes there are solid tenants there paying $800-1000+ and can be trusted. But if you're doing this good in the hood, then awesome - I'm glad to hear that.
1 Reply
Brandon Cook
OP
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
I'd also like to know where these 200 property's are located
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed agreed I would have to pull the Missouri card on 90% full and paying in inner city Detroit.
I lent there in my HML days 2002 to 2005 before things really got bad.. and it was tough then.
on top of the standard theft and tenants that don't pay.
they also don't pay their utl bills and you end up with monster water bills attached to your property.
I rehabbed the only 2 OREO's I had there ( and thank god it was only two) put 20k into each made them nice as I could put tenants in both were destroyed in less than 6 months.. never met nastier tenants in my life.. I let them go for tax's lost 100k on those.. wrote it off as I made some good money when things were working there so it was OK to lose a little money like the 100k. but not going to play that ghetto game again.. its just throwing money away.
Now we work in the burbs currently doing some retail flipping and that is working fine...
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Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
9y
Originally posted by @Jay Hinrichs:

@Account Closed agreed I would have to pull the Missouri card on 90% full and paying in inner city Detroit.
I lent there in my HML days 2002 to 2005 before things really got bad.. and it was tough then.
on top of the standard theft and tenants that don't pay.
they also don't pay their utl bills and you end up with monster water bills attached to your property.
I rehabbed the only 2 OREO's I had there ( and thank god it was only two) put 20k into each made them nice as I could put tenants in both were destroyed in less than 6 months.. never met nastier tenants in my life.. I let them go for tax's lost 100k on those.. wrote it off as I made some good money when things were working there so it was OK to lose a little money like the 100k. but not going to play that ghetto game again.. its just throwing money away.
Now we work in the burbs currently doing some retail flipping and that is working fine...
Totally agree -
The water/utility problem is one of the biggest. The tenant stops paying water, and after 1 year it gets added to your property taxes. That's true even if the bill is in their name. Yup - rediculous.
Another major problem with Detroit is the Wayne County property taxes. Tell me how to make money there with a $5k house that has $3k in yearly taxes with a tenant who may pay $500/month. Half of your revenue goes to paying the property taxes. That's if they pay. The other half goes to the maintenance since these are old buildings that are not taken care of.
It is so much smarter to buy $20-30k homes in Southfield that rent for $1200 that yield you a much better, "solid" tenant. (This was the price in 2010, no idea what they are now)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed well folks like us that were raised in CA and are used to our normal prices being 500k for a house when you look at a house for 5k.. it just becomes play money at that point.. but that's also a nice vacation to Maui.. and you get a flower lei when you land ...
In inner city anywhere 5k homes are simply not appropriate for anyone but those that live there live it and breath it everyday.. I have made my living the last 15 years helping the locals build monster portfolios of these type of homes.. ( well a little nicer actually).. but I have seen so many out of area investors just get killed.. ( myself included).. so I know of what I speak.. it happened to me personally.
I had the same mind set.. Heck I can be all in a home in Detroit for 15k rents for 700.. I will buy a hundred of them and make 70k a month.. Ya right !!! seemed like a good idea until you experience it.
and down the tubes you go..
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