My Thoughts On Podcast 331. Detroit Rentals With Ashley Hamilton!
I am from the Detroit metro area but I invest in Pontiac. The reason why I invest in Pontiac over Detroit and Flint is because the rent margins are simply not high enough for what you are paying for and putting time in. As well as the equity upside.
On the podcast Ashley describes what the appraised value of her 10 properties were, which was 469K total. She stated her all in cost were roughly "20K" per property. So even though she purchased many of the single family's at roughly 2500+- dollars or practically nothing. She still had to use her time and money to repair everything. Not including each unit was roughly worth 40K in the end which is not much.
This is a good example of how the value of the property can be a big determinant of how your rental business will scale in the future. Especially for people who are relying on equity value to grow. When I bought my second rental property is when I realized that, so I started aiming for properties that had alot of equity upside, which worked out very well. I think that Ashley did well in the short term because she was able to generate some cash flow. But I feel that she should have focused more on bigger markets with more equity upside alot earlier like maybe at her 3rd property instead of her 10th.
In my opinion this is just not worth it unless her focus was to remain as a small investor, which I don't think so because she mentioned about scaling up to 30+ rentals. My advice to Ashley would be to spread your horizon and look into bigger markets other than areas like 8 Mile Detroit. Atleast Downtown Detroit where the rent margins and equity upside is high or even has potential to be high.
Imagine if 1 of her rentals had 100K in equity vs 40K. That would be a better situation. If not than explain how ?