Anybody bought with Urban Detroit Wholesalers?
Real Estate Investor · Vallejo, CA · Member since 2009 · 120 posts · 7 votes
Sorry I didn't know where to post this questions, but since that company UDW (Urban Detroit Wholesalers) caters to investors that want to rehab and rent or flip, I am asking for reviews.
Any good or bad experiences with that company. I know Detroit is dangerous but they claim they invest in good neighborhoods and that opportunities are there.
Jeremy,
I am just curious if you could state your case for long term appreciation in Detroit. (as unbiased as possible)
Is this just the idea that Real Estate tends to go up over time? Or some other solid reason?
In Detroit in particular, I think many of the "normal" rules do not apply.
Please make a fact-based case for how the city of Detroit proper is going to be in a better position in 10 years than it is now. It is a shrinking and rapidly deteriorating situation right now in terms of economy, infrastructure, city services, schools, etc.
To me, this is alot like when a formerly good stock takes a nose dive over a period of a few years. When a stock that was $50 for a long time gets to $20 it seems cheap, when it gets to $10 it seems cheap, when it gets to $5 it seems cheap, when it gets to $3 it seems really cheap and you look back at the $50 and say, boy this thing could really be great if it went back up.
However, the reality is that it is much more likely that the company is doomed and injured beyond recovery and the stock eventually goes to 0. Along the way, there were opportunities for short term stock traders to make profits buying and selling, but all buy and holders get anihillated.
When I first got started in RE (in Detroit BTW), in the back of mind, I am thinking it is a solid investment because (unlike a stock) RE can't go to $0.
However, in this new world, Detroit has proven that real estate can go to $0.
Just curious your thoughts. I personally find Detroit a fascinating case study.
I don't know these guys but I do know Detroit. Out of towners need to be wary of any buy and hold strategy.
Money can be made there but unless you have been there to see it, you really have no idea what is like. I encourage a trip there before you invest money blindly.
You can see for yourself what they truly mean by "good neighborhood".
It is very easy to trick out of towners into thinking a 10,000 house is just too cheap not to buy. In fact, many, many houses in Detroit are actually worth negative amounts. They have more costs involved than they are worth. Even some of those may be able to be rented in the short term but are still worthless or will be money pits in very short order.
There are some guys on here who work the Detroit market. Kevin Kaczmarek or something like that is one.
Yes I realize that, that was informative though.
Is Columbus, Ohio the same story. I talked today to a ppty manager in Columbus, you can easily get a house for 10 or 15k, rented for $500 plus, so I do count on $250/month net after expenses. But of course it's block by block and I ve nver bought such cheap houses before, my fear would be that the town becomes deserted..
Hi Michael,
Thanks for you interest and I appreciate you doing your home work on my company!
Detroit is a city easy to love and to hate. Like most cities there are good areas and bad but with Detroit, the bad areas are rather large and many of them look good.
I focus on an area of North West Detroit where homeowners still live, people still want to rent, and homes are still worth $55,000-$65,000.
The reality is that most of Detroit is unworthy of investment and as the saying goes, location, location, location! The difference is that this is particularly important in Detroit.
I have wholesaled over 200 houses in the city of Detroit since 2007 and most of my buyers are out of state or out of country so I'm familiar with the specific needs of this type of investor.
Do your homework on me! Check out my linkedin profile and view my recommendations.
Detroit is a great place to invest if you are interested in great cash flow, long term appreciation (7-12 years), you buy in the right area, and you have a great team working with you on the ground.
If that is not what you are looking for, then Detroit is not for you.
Also, Eric is spot on if you invest in the wrong area of Detroit. There is a reason a house is only $10,000! If it is too good to be true, it usually is.
Don't hesitate to call or email me if you have any additional questions. Thanks.
Michael,
There is a huge opportunity in Detroit if you Invest wisely. Our Real Estate Investment firm has created a way to make homeownership affordable for Homeowners in Detroit and offer great returns for Investors through Land Contracts.
Bigger Pockets is a great way to connect with people in the Detroit area who can give you real information on specific properties.
If you have any questions ask away and I will do whatever I can to help.
Jeremy,
I am just curious if you could state your case for long term appreciation in Detroit. (as unbiased as possible)
Is this just the idea that Real Estate tends to go up over time? Or some other solid reason?
In Detroit in particular, I think many of the "normal" rules do not apply.
Please make a fact-based case for how the city of Detroit proper is going to be in a better position in 10 years than it is now. It is a shrinking and rapidly deteriorating situation right now in terms of economy, infrastructure, city services, schools, etc.
To me, this is alot like when a formerly good stock takes a nose dive over a period of a few years. When a stock that was $50 for a long time gets to $20 it seems cheap, when it gets to $10 it seems cheap, when it gets to $5 it seems cheap, when it gets to $3 it seems really cheap and you look back at the $50 and say, boy this thing could really be great if it went back up.
However, the reality is that it is much more likely that the company is doomed and injured beyond recovery and the stock eventually goes to 0. Along the way, there were opportunities for short term stock traders to make profits buying and selling, but all buy and holders get anihillated.
When I first got started in RE (in Detroit BTW), in the back of mind, I am thinking it is a solid investment because (unlike a stock) RE can't go to $0.
However, in this new world, Detroit has proven that real estate can go to $0.
Just curious your thoughts. I personally find Detroit a fascinating case study.
I doubt Columbus is in any danger of being deserted.
The risk is not the town being deserted, though there are serious people advocating that very large swaths of Detroit be converted back to farm land.
All it takes is for your block to be deserted and your property value evaporates. That is happening in many sections of Detroit. I expect Jeremy tries to avoid those.
There is and always has been good money in being a slumlord (for lack of a better term).
That 10K house renting for $500 seems like a great deal if you simply look at the numbers. But it most likely is a piece of junk house you are providing to your tenant. It often has lots of "deferred maintenance" that the slumlord can continue to ignore to pull in the cash flow. To bring it up to a respectable standard would probably not be cost effective.
So can you live with yourself providing your tenants with crappy housing? Can you simply ignore the complaining phone calls and police visits and the notices of city violation, etc that are part of the slumlord business. Can you insulate yourself personally from the lawsuits and insurance claims that come from owning bunches of junk rentals?
Some can, some can't.
I am not at all saying all the houses or people in these places are slums or bad or anything like that. But it is generally a poor situation in these places and this is a very slippery slope you are on as an out of town investor looking at the cheapest properties in down and out cities.
You think you can pick the nice houses by looking at pictures on the internet and insulate yourself by hiring property managers to deal with the crap.
Of course, it is possible for that to work out handsomely. But I think alot of people fall into this trap. I am intimately aware of a few who have. The basketball player Antoine Walker for one. Made $100M+ and is basically ruined over bad RE deals that stemmed from being an absentee slumlord.
I would agree with Jeremy that having a solid team on the ground is absolutely essential to not losing your shirt.
Eric
With all due respect, have you ever bought a rental property for 10K, and are you talking from personal experience or from what you hear?
Myself I have not yet bought such cheap property, but I am considering it.
You might be right, but again you might not be. It's easy to dismiss such deals, but down the road, if you don't talk form experience, you might realize that the ones who did take a calculated risk might have been right. Isn't it always like that in finance: "don't follow the crowds, and common, average thinking all the time?".
I talked to a couple of professionals in Columbus, and neither was trying to upsale or tell me that the 10 to 15K properties were great, in great neighborhoods etc..
I even watched lond videos of the neighborhoods, the inside of the house, the electrical system, the water heater, foundation, A/C etc..
I was explained, that Columbus has either low end or high end, not much in between.
Quite a few of availabel properties in the 10k to 15K range are rented for $500, some might be bad, but some are in ok conditions, of course in the low end neigborhoods but not necessarily in bad areas.
The ones I am looking at, landlord does not have to pay utilities.
I am tempted to try for experience.
The way I look at it, I don't want to be a slumlord, I see it like the 50% rule, if rent is $500, I plan on getting about $250 net, and I don't mind spending half the rent on repairs and all,especially that I won't have a mortgage on it.
What do other people think?
I do not rent properties but I have purchased all the way down to $2K in Detroit for flips. I stopped in 07 in Detroit. Just getting too bad for me. Couldn't drive through anymore.
I don't know Columbus. If you don't think I sound like I know what I am talking about with Detroit, definitely ignore me. I don't care. I have no incentive to mislead you in any way.
You may be misunderstanding my advice, though. My main advice was to go and look for yourself rather than depend on what people are telling you. I assure you no video will accurately give you the feeling you will have driving through Detroit neighborhoods.
As I said, there is money to be made in those houses, so feel free to give it a try. I just find it interesting that you are looking at the lowest price point in the hardest hit cities and yet you don't think you will be a slumlord. There is a disconnect there. Who do you think your tenants will be? Nice solid blue collar families?
There are no "low end" areas in Detroit that are "good". Maybe Columbus but I doubt it. Low end is low end for a reason.
Definitely report back and let me know if I was steering you wrong.
Down the road when one of your tenants moves out and takes every appliance, every cabinet and every metal pipe and gutter with him, maybe you'll think of that guy on BP who didn't know what he was talking about.
Michael -
I think Eric's advice is sound -- particularly in hard hit areas like Detroit. If you're thinking of investing long distance, it will behoove you to get on a plane and have a look at the area in person.
I've invested in some real war zones myself and it is not easy. You really need to walk through a neighborhood both in the daytime and night, to get a good idea as to what you're getting into.
I've owned 50% deals which proved to be huge losers because the neighborhoods declined and I couldn't retain decent tenants. There just weren't any willing to rent because the neighboring properties had gotten so bad.
Just be careful out there.
No, I do appreciate all inputs, and you guys have way more experience than I do, so I am taking it all into consideration. Actually I am not so hung up on Detroit. I only have 14k right now and was tempted to buy something cash with it. But I think I might wait and save for a down payment on a duplex arounf 50 or 60k somewhere decent. I am not sure what city to invest in yet. I have a duplex in DFW but it's more expensive there. I am looking at Indianapolis maybe, I ll have to study some more, any suggestions of decent places, or neighborhoods in that price range?
Or a another way to ask my question is, if you guys were in my place with 14 k cash. Already with 4 mortgages which means it's pretty difficult to get additionanal conventional mortgages cos guidelines get tough. What would you do with 14K to get the best return on your money.
If you say keep saving, I might do that but at $300/month savings, it's gonna take a while to reach 20k.
I would hang onto that money for the time being. Any house you can buy for 5-10k is going to require extensive work to either get rent ready or ready for resale. I know a little about Columbus through a wholesaler that I provide transactional funding for. If you are going to invest out of state, that would not be a bad market, but as always, do you research.
My case for Detroit, rather, certain areas of Detroit is outlined in my blog very thoroughly.
I would never recommend anyone buy in war zones where all of the $10,000 or less properties are located. They never work out and they always cost you more money.
There are areas of Detroit in the $30,000-$40,000 range that appraise between $55,000-$65,000 that rent well and sell well on land contracts.
The bottom line is that if it sounds to good to be true, it is. At least in Detroit, stay away from the cheap areas.
Jeremy Burgess
The Detroit Market Expert
I did look briefly into this same topic some time ago, and from what I read online, the properties can still be appraised at higher values than what they're sold for, so you can end up paying more in property taxes than anticipated. I gave up on the idea since I'm not thick skinned enough to invest out-of-state, but just another angle for you to look at.
If you decide to follow through with this, let us know how it pans out. I'm curious too :D .
Angie
Angie,
I have invested out of state 3 times before, and actually my first property was in Austin while I live in the bay area in california. Investing out of state is not a big deal, you just need a few things, first and foremost a few trusted people, like a realtor, or someone who knows the neighborhoods and what's going on, you need a trusted referral for a good property manager, You can do that by making phone calls and talk to people. I believe you can get a feel for people that you trust, you can check referrals.
I have some if you want to invest in DFW or Austin.
Lastly, you do need to fly there before looking at your potential properties. I fly there and in one day, look at 10 properties, you ll know which ones you want and which you don't.
Sorry for the repeats, that was an accident.
I am now thinking of holding on until I have 20k and borrow a little from my 401k to look for seller financed residential or possibly commercial ppties
Michael,
This is a very interesting discussion and you are asking all the right questions. With regard to Jeremy's statements I can attest that he is one of the leaders in Detroit and he runs a top notch business. I am just starting to get into Turnkey rentals in Detroit and Pontiac, and I am using Jeremy's business as a model for what to do and more importantly what not to do. Jeremy is absolutely right...those $10,000 houses are trouble and you want to stay away from them. If you do decide to invest in Detroit, before you do you should come visit for yourself. I'm sure Jeremy could show you the difference between a $10,000 house, and the $30,000 - $50,000 houses that he deals in. It truly is about location, and if you are particular about where you invest, there is a lot of money to be made in Detroit.
Michael,
We do around 300 properties a year in Metro Detroit. I would be happy to answer any questions you might have and would be glad to send you a few biggerpockets.com users as reference.
Trust me when I tell you this. I am not here to sell you anything, but rather give you an unbiased opinion on the Detroit market.
It would be my recommendation with your $20,000 to hold onto it. Do your research, and visit a few companies on the ground and then and only then decide if the Detroit market is for you.
Thats some sound advice Kevin, for any market, not just Detroit.
Hello, I am new to investing. My Detroit experience has not gone smoothly. I bought a house with rehab package for $35,000. It was from a company similar to Urban Detroit Wholesalers. I was led to believe that I would recieve 20 to 30% refund checks from the government for toal rehab work. that never happened so the company sent me a check for $500 to make up for the mistake. I thought I was going to get back $3000. The taxes went up about $1000/ yr after I bought it, totalling $3,500/yr. In February of each year, you can appeal the property tax and have it reduced. The tenants only paid two full months of rent and have been behind a few hundred every month. I bought the property in November 2009, it was rented by March 2010. My sugesstion would be to purchase the house already rehabbed. Jeremy from Urban Detroit Wholesalers has a lot of info to share about Detroit. I am just now getting all the back rent that is due. I know I can not sell the house for what I paid for it. Keep in mind that the person making the quick $ is the one who finds the home in the great location and sells it with the crew in place.. rehab, property manager etc. There is a nice positive cash flow if it is rented, property taxes reduced and paying tenants. Also, spend time looking for property insurance. It is about $100/ month. After 6 months of paying $100/ mo. the property management company told me I could buy it through them for $60/ month. It took a year for me to get the Property Transfer Affidavit. And it took 6 months to get the deed. Detroit is not for anyone who does not have a lot of patience.
Maria
Well Maria, are you now making money every month? May I ask what do you get in rent?
Also, since my first post I have moved on to Indianapolis, I am currently waiting on an offer I made on a seller financing duplex that is for sale at 36k and is already rented at $500 each side, for a total of $1000/month.
My house is in Wayne County, It rents for $850 giving me a positve cah flow of about $400. It was rented originally for $900 and after two months the tenants said it was only worth $800. I told the agent to get at least $850. Things are run very differently in Detroit. The agent didn't even collect his portion since the tenant was not paying full rent. I am almost paid in full now. Nothing in Detroit has come easy. Does anyone else have an investment property in Detroit? What has your experience been?
Mike:
In 1986-1991 Colorado Springs, CO made the news as the "FORECLOSURE CAPITAL OF THE WORLD". At that time I had an opportunity to buy all the homes on one particular street. 13 homes all vacant for $15K each. I looked at the empty street and wondered how I could fill up the ones I bought with renters so talked myself out of doing it. Watching the home sales printed in the Saturday paper by zip code for the city - only 2 years later homes in that area and even on that street were being sold for $110K-$112K. Hindsight is always 20-20. Sure wish I could make that call over! But Life goes on!
I invested $70,000 with urban Detroit Wholesalers almost two years ago, in their reverse mortgage program. The company gave me promissory notes promising to pay this money back after a year. They dishonored those notes. At this point the legal bills for trying to get my money back from these people total $3,600, and I have had to make four trips to Detroit, all in a so far futile effort to salvage this money.
Just as bad as being ruined financially -- I am a small fry investor putting up many generations of family savings -- is the experience of dealing with people like this, by far the worst of my life. Nothing Jeremy has ever told me has turned out to be truthful. He cannot be relied upon to do anything he says he will do. That has been my experience. It has been a 20-month nightmare. I will never trust anyone again, nor believe anything I'm told.
At this point Urban Detroit Wholesalers is just Jeremy and his wife. Last I heard they couldn't afford an office any longer and were working out of their garage. Jeremy's personal appearance has been deteriorating rapidly since I have known him. The last time I saw him I knew that I was screwed the moment I laid eyes on him.
Do business with these people at your great peril. Email me for further details if you'd like.
Gordon Jackson
Let me also add that if you are considering buying a house from Urban Detroit Wholesalers that you check the asking price for similar houses in those markets, or check with an appraiser. The values of rehabbed houses that UDW posts on their website are about six times what you probably could sell the houses for. These houses have value only as rentals, and in that capacity come with innumerable headaches. If you want to get out of them, you will take a major haircut.
If I tried to sell the two houses underpinning my $70,000 investment, I'd be very lucky to get $25,000 for them. Out of that, I'd have to pay closing costs, and the $12,000 or so in taxes on them that Jeremy stuck me with. He said he'd pay the taxes, but, of course, he didn't.