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
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.
Real Estate Agent · Detroit, MI · Member since 2016 · 82 posts · 52 votes
9y
@Account Closed our inventory is almost all in Detroit proper. A few in the nicest areas, most are on fair to good blocks, but a substantial portion are in the worst areas.
The idea of a $7000 buy generating over $7000 in rents in less than a year is extremely rare. I am an insider, local, and connected, and I look at $15-30k for a rental, depending on size, style, and area, and expect real returns on long term holds of 10%-15%, with some at 20% plus. Short term flips we consistently average much, much higher.
We have turned a 32 unit at Dexter and Davidson from 50% to full and performing in nine months. That was my building.
A 7 unit flop house at McNichols and John R we were able to get solid 80%+ rental income for over a year till the investor flipped.
We take properties in the areas no one else will manage. This is not an easy game to play, but I have been doing this market for 12 years now, and it is all I do.
Low income, high return, risky income property in the city of Detroit. Mitigated risk and positive alpha by providing safe, clean, functional housing, treating the tenants with respect, and producing results.
@Account Closed our inventory is almost all in Detroit proper. A few in the nicest areas, most are on fair to good blocks, but a substantial portion are in the worst areas.
The idea of a $7000 buy generating over $7000 in rents in less than a year is extremely rare. I am an insider, local, and connected, and I look at $15-30k for a rental, depending on size, style, and area, and expect real returns on long term holds of 10%-15%, with some at 20% plus. Short term flips we consistently average much, much higher.
We have turned a 32 unit at Dexter and Davidson from 50% to full and performing in nine months. That was my building.
A 7 unit flop house at McNichols and John R we were able to get solid 80%+ rental income for over a year till the investor flipped.
We take properties in the areas no one else will manage. This is not an easy game to play, but I have been doing this market for 12 years now, and it is all I do.
Low income, high return, risky income property in the city of Detroit. Mitigated risk and positive alpha by providing safe, clean, functional housing, treating the tenants with respect, and producing results.
Great to hear you doing well. I wish all investors in the D would do what you are doing. There is no money in these $5-10k houses.
If you are buying $15k-30k, then you are buying the best ones in city.
I don't know much about the Detroit market, but I am aware of Kansas City, MO. Couple things I would consider that I haven't heard mentioned too much are your expenses. You're collecting $550/mo in rent. You will want to budget for expenses like maintenance, vacancy, CapEx, taxes/insurance, and management should you decide to do it. Depending on the age of the home, weather it's a B, C, or D SFR, you could find that $550/mo. being more like $100.
I am too from Canada too and have been investing in U.S. real estate for many years. Do you mind me asking what kind of area is the house in Detroit is. A,B,C ?
Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
9y
Inner city renters have a totally different mindset than most....the best of them will pay you if you are boots-on-the-ground, they keep their income coming in & they have some sort of incentive to pay. It's their nature to hustle. It's the same in most any inner city/ghetto area. Most won't have a bank account so will want to pay rent in cash or money orders. A good tenant in these areas is one who will pay for a bit without trashing the place....but what do you expect from a $5k house? If it were easy and profitable, the other pro's writing here would be all over it.
Give them an incentive to pay....like 5% discount on rent each month if paid online before the 1st with a 10% credit towards a downpayment for every 6 months that they pay on time. A ton of these renters are professional, lifelong renters because that's all they know....but many dream of homeownership. You can give them a credit towards something you can buy & flip to them when the time is right. On a small scale, being creative won't only make you feel good about what you are doing, it can pay huge dividends but it isn't scalable. I have over 20 years of renting in inner city neighborhoods and most of the experiences weren't good for me or my wallet. For those wanting to learn, why not map out all of your income & expenses for this particular property.
Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
9y
@Brent Maxwell - Brent has obviously found a niche that he's good at and most don't want to trouble with. A good chunk of your inner city property managers are unlicensed and work the streets. You an make money that way....managing 200 units...even if some of those units are in apartment buildings...is still a huge headache.
Investor · White Lake, MI · Member since 2014 · 38 posts · 4 votes
9y
I'm familiar with that area. My grandparents used to live a couple blocks from there on State Fair. Mostly brick homes, everything was super well cared for, beautiful elm tree lined streets (unfortunately most succumbed to dutch elm disease) a very lovely working class neighborhood back in the day.
I still feel if you stay north of 7 mile especially around State Fair & Outer Drive you can attract decent tenants. But as has been mentioned do stay on top of them. Check that the water bill is being paid. Send 7 day notices out on the 2nd if rent (or water) isn't paid. Knock on the door ask if everything is all-right. Get inside periodically to "presumably" test the smoke alarms.
Investor · Detroit, MI · Member since 2016 · 39 posts · 11 votes
9y
Thank you everyone for your feedback. Ill besure to be on top of everything and be on my toes. Hopefully all works out and I find a good tenant (which I think IV already done)
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.
Saj, thanks for your comment. Would you think that focusing on a better grader properties would be workable idea?
I want to buy and hold/rent in Detroit, areas closes to Downtown, Midtown, Jefferson corridor, Woodward corridor.
Also how does the tax works/calculates on land? I saw some land listings.