Would you buy before moving back to Michigan or wait?

Question

I’m looking for some advice on my first investment property.

I’m currently stationed overseas but will be moving back to Michigan in the next few months. I’m planning to invest in the Downriver area, mainly looking at single-family or multifamily properties with some renovation/value-add potential.

I’ve already started talking with an agent and looking at properties remotely.

My question is:

Would you wait until you’re physically back in Michigan before buying your first property, or would you buy now if the right deal came along?

My thought is that if a property hits the market and the numbers make sense, I don’t want to pass on a good deal just because I’m not physically there yet. On the other hand, this would be my first investment property, and I’ll be able to be much more hands-on once I’m back.

For those who have been in a similar situation:

• Would you buy remotely for your first deal?
• What would you need in place before doing so?
• How much would you rely on your agent/contractor/inspector?
• Is there any major downside to waiting a few months if I’m not finding a deal that really stands out?

Would you buy remotely for your first deal?

What would you need in place before doing so?

How much would you rely on your agent/contractor/inspector?

Is there any major downside to waiting a few months if I’m not finding a deal that really stands out?

I’m more interested in hearing from people who have actually done this than trying to time the market.

Thanks!

Dustin Tucker · Answer

Are you a veteran? Do you qualify for a VA loan? If so, you can buy a duplex, triplex, or quadplex with your VA loan.

The FHA and the VA both offer purchase and rehab loans, so you don't have to buy a turnkey property. You can actually buy a property that needs to be fixed up and use the loan to do the repairs.

I would definitely wait to buy your first property instead of buying a property sight unseen. Real estate is not like the stock market. If you get in and it's a bad deal, it's very hard to get out. If you buy a bad stock, you can still turn around and sell it in the market. That's my main reason for waiting until you get back.

Caleb Brown · Answer

I'd lean on waiting. Yes you can buy remotely but if you will be back in a few months its worth waiting. You can still research and review deals. Also speak to contacts to full build your team. Maybe if there's a screaming deal you can offer but a few months is not long.

Jimmy Lieu · Answer

Welcome, Emanuel, and thanks for your service. Since you asked what to have in place before buying remotely, here are a few specifics that haven't come up yet.

Closing from overseas: ask the title company early how they handle it. Many do mail-away or remote online notarization, but some need a power of attorney or a notary at a base or consulate, which can add a week or two. Build that into your contract timeline.

Value-add from a distance: have your contractor walk the property on video before you remove contingencies, and get a written scope with line-item pricing. Rehab surprises are where remote first deals tend to go over budget.

Lastly, if the seller is open to it, a longer closing window of 45 to 60 days can let the purchase line up with your return.

Feel free to connect and I'll do my best to point you in the right direction.

Ashish Acharya · Answer

Emanuel, I would not automatically wait until you are physically back in Michigan if the right property comes along, but I would make sure the local team is strong enough that you are not making decisions remotely that you would normally make in person.

For a first investment, I’d want a reliable agent, inspector, contractor, property manager, and someone who can physically walk the property with you on video if needed. I’d also want a conservative rehab estimate and enough reserves to handle surprises after closing.

Since you are looking at renovation and value add opportunities, I’d underwrite the property based on what happens if the rehab costs more than expected or the property takes longer to stabilize. If the deal only works under the best case scenario, I would wait.

There is also a tax side worth considering before you buy. If this will become a rental, I’d make sure the acquisition costs, improvements, repairs, and other property expenses are properly documented from day one. Depending on the size and type of the property and improvements, depreciation and potentially cost segregation can become part of the return analysis.

I’d rather see you wait for a deal that works with conservative assumptions than buy simply because you are worried about missing an opportunity.

Feel free to DM me, I’d be happy to send over a few resources that may be helpful.

Emanuel Cuevas · Answer

I do qualify for the VA loan, and I think that’s definitely a good option. For my first investment, though, I’m leaning toward a single-family property so I can learn the market, get comfortable managing a rental, and adjust my strategy before scaling up. Thank you I appreciate the advice.

Drew Sygit · Answer

Your best financing will be for an owner-occupied property - lenders require you to occupy within 60 days of the purchase.

So, when will you be back in Michigan?

Here's some other copy & paste advice:

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If I was starting out again with what I know now, I'd look to acquire a 2-4 unit property with an FHA 3.5% low-down payment mortgage.

I’d also look into using an FHA 203k renovation loan, allowing me to buy something ugly, thus unqualified for a standard mortgage, which would weed out a lot of competition and push the price lower.

To maximize my cashflow and gain landlording experience, I’d do STR and MTR in the other units, as well as the other bedrooms in my unit.

Since most cities won’t allow basement rental units, I’d consider finishing the basement, just well enough for me to live down there (cities don’t care if owner chooses to live in basement), so I could rent out ALL the units/rooms.

﻿I’d save all my cash and look to refi the property in 1-2 years out of the FHA mortgage, so I could use it again if necessary. Depending on how close I was to having 20% equity in the property and being able to avoid PMI, I’d consider using some of my cash to pay down the mortgage when I refinanced. Otherwise, I’d save my cash for the next acquisition.

I’d also be posting on every social media platform and telling everyone I knew that I was looking for more real estate deals. I’d aim for low downpayment land contracts and lease options.

﻿After refinancing out of the FHA mortgage, I’d evaluate if I wanted to repeat the 2-4 unit FHA 203(k) process again or if I had the 20% down to target 5+ units.

﻿While still living in the property, AFTER the refi out of the FHA mortgage, I'd also explore securing a HELOC to tap my equity for emergencies.

Can’t find a rental property that cashflows?

Many newbies analyze deal incorrectly 😣

You’re probably thinking you have to offer asking price – not true!

To determine what to offer on a rental property:

﻿Determine reasonable market rent, NOT the highest!

· Deduct NEW property taxes (research change after you buy!)

· Deduct home insurance costs

· Deduct maintenance percentage, typically 10%

· Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)

· Deduct whatever dollar/percentage of cashflow you want

Now, what you have left over is the amount for debt service.

Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.

Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative Offer Price.

If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.

Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.

As long as the ARV checks out, this is your Offer Price.

It is probably significantly below the asking price. Who cares? If you pay more, you won't meet your metrics and will probably have negative cashflow and/or equity.

So, now you need to try to figure out why the seller is selling and how motivated they are:
- How long has the property been listed?
- How many price drops have there been?
- How beat-up does the property look?
- For MFR, how many vacancies and for how long?
- Etc.

Keep in mind the bigger the gap between your Offer Price and the listed price, the less likely your offer will be accepted.

You may have to make 10, 20 or even 100 offers to get one accepted at the price that meets your numbers.

This is what all investors did BEFORE the Great Real Estate Crash of 2008-2010 spoiled newbies.

Arman Ahmed · Answer

I wouldn’t wait just because you’re overseas. If the right deal comes up and you have a solid agent, inspector, contractor, and PM on the ground, you can absolutely buy remotely. I’d just be extra picky on that first one and make sure the numbers still work after every expense. If Michigan feels too competitive, I’d also keep neighboring Midwest markets on your radar since there are still lower entry-price opportunities worth comparing.

Would you buy before moving back to Michigan or wait?

Would you buy before moving back to Michigan or wait?

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