[Calc Review] Help me analyze this deal Mount Clemens Michigan

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[Calc Review] Help me analyze this deal Mount Clemens Michigan

Erin Anderegg
Investor · Romeo, MI · Member since 2021 · 22 posts · 12 votes

Hi All,

This is a 3 unit property separately metered. It consists of 3 different buildings for each unit - 3/2, 2/1, and 2/1. Per Rentometer, the market rent total if based on the average is $640/month higher than the rent amount in the attached report. What do you think? How are the variable expenses? I have no information regarding updates to HVAC, electrical,etc. The listing has the date built as 1956- not sure if that's one structure or all of them. From the pictures it looks to be in good shape. I appreciate your thoughts!

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*This link comes directly from our calculators, based on information input by the member who posted.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    4y

    Assuming the +$640 is achievable, this deal is still only yielding a 3.8% CoC return. That is a non-starter for me, unless there is more upside potential on rent from repositioning the property.

    Seems like duplexes, triplexes and quads are very popular on BP but they have some significant downsides vs single family and apartments.  The main problem is finding comps and I doubt there are many comps for a property like this in Mt Clemens or its surrounding areas.  Even if you are lucky enough to find comps today, you may not be so lucky at some later point.  I know people that that have properties like this and they have trouble getting cash-out refis or even selling.  They have to find a window where there are enough comps for the appraisal to support the valuation.

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  • Erin Anderegg
    OP
    Investor · Romeo, MI · Member since 2021 · 22 posts · 12 votes
    4y

    Thank you, Greg, for that insight. I have been wondering about appraisals and comps for 3-4 units because there seems to be so few in this area. What you said makes a lot of sense. It sounds like the best way to get through that would be to purchase it all cash, but the CoC return would be even lower.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    4y

    Mt Clemens is a finicky market. We manage several properties there and they are mostly Class C.

    Example: we've managed a SFR property on South St for 9 years and only had 2 good tenants out of 6, which was better than the owner's previous PMC though - who they stated was a disaster.

    One of the good tenants were recent college grads. They thought it'd be cool to be able to walk to downtown Mt Clemens, but they only stayed a year once they figured out that "scene" wasn't for them. The other good tenant was Class C, stayed for over 4 years, was often late, but always paid until the couple broke up and the remaining person couldn't afford on their own. They fell ebhind, but moved out before we had to hire bailiffs. The last tenants were 3 young guys who stopped paying during the eviction moratorium, even though they admitted they were working. Their heat got shutoff and they started negatively posting online about us because we wouldn't put their utilities in our name. Had to hire bailiffs to remove them and they trashed the place.

    Several of the other properties we manage there run a bit smoother, but there's always some little problem with tenants living paycheck-to-paycheck:(

    You can make some great cashflow in Mt Clemens, just be sure you understand the potential downsides.

    [email protected]248-209-6824
    Logical Property Management4.9462 Reviews
    WebsiteView Page
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  • Erin Anderegg
    OP
    Investor · Romeo, MI · Member since 2021 · 22 posts · 12 votes
    4y

    Thank you Drew, that story is helpful. In your experience, could those issues be avoided with rigid screening? Or would rigid screening negate too many people where no one would meet the criteria and it would stay vacant? It seems that there is a fine line, and it gets more challenging with lower classes of properties.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    4y

    @Erin Anderegg you got the mail on the head.

    Need to be on same page with your PMC and have them communicate with you about those applicants on the edge.

    [email protected]248-209-6824
    Logical Property Management4.9462 Reviews
    WebsiteView Page
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