All Forum Posts by: Antonio DeFlorio

Short version. April purchased a 3 year old home. Foreclosure the previous owner gutted on his way out. Will be finished in 2-3 weeks. All done through personal cash. Should appraise for $125kish. Rural northern Michigan area. 4/2 detached 2 car 2300sqft 2.5 acres. 

Considering keeping it for myself. We like area. Few banks I have called will not mortgage it within 1 year of purchase for anything more than my original purchase price ($43k). Quoting Fannie/Freddie/Dodd regulations. Comical since place wasn't a house; no mechanical, no kitchen, even cut out wall outlets. I want to mortgage it for 80% LTV to get my money back.

Anyone know of a lender who would touch it?

Meant to tag you in the post @Josh Walker

Some background...

I lived 20ish miles north of Detroit until I was 32. Left 2 years ago for work, and am moving back to the northern part of state next month. Dad retired with 35ish years at GM, father-in-law still works for Ford. Big 3 is an intricate part of the history. When the recession hit, Michigan, hardest Detroit, was already hurting. The recession hit much sooner than the rest of the country. The Big 3 and others hit financial crisis and were retracting there footprint in the city. This killed the middle class. Most everyone in a 30 mile radius worked for the Big 3 or a top tier supplier (Continental, Uniroyal, Borg Warner, Webasto, Lear, etc). Poverty and crime was high, people who could afford it left Detroit. Auto was the driving industry that supported Detroit. 

Over the last several years casinos have went up, Ford Field (Lions) and Comerica Park (Tigers) were erected and people who loved the city began brainstorming how to revive it.

More recently, Little Ceaser's Arena (new home of Pistons and Red Wings) construction started and is due to open Sept this year. A riverfront project is underway to develop the city along the water. Two big names investing in Detroit area of time city icon Mike Ilitch (owns Little Ceaser's and the Red Wings among other things) and Dan Gilbert (Quicken Loans). Ilitch passed away this year, but his son seems to be running the empire and is focused on Detroit. Google those names and you will get some background on them. 

Everyone is hoping for a Detroit turnaround, especially with the big money investors. It seems to be attracting buy and holds in hopes there is a turnaround to capitalize on. At a tax sale in fall 2014, one conglomerate bought over 6,000 properties as a "blight bundle". 

I personally worked all around the cities right outside Detroit; Warren, Roseville, bad side of Southfield, bad side of Sterling Heights, etc.  My employer had no locations actually in Detroit, but hundreds of my employees came from there. These areas were economically hurt as well. My concern is the investment in Detroit would need to create high paying jobs in the city and those earners to live in the city for change to come at a granular level and be sustained. The attractions in Detroit (casinos, stadiums, Fox Theater, Bell Isle, etc) pull the middle class from the suburbs for a few hours, but they go back to suburbia afterwards because they will never live/raise a family near downtown. But these are the people that will buy houses or be long time renters. 

There are nice areas around Detroit; Macomb, parts of Sterling Heights, Farmington Hills, Birmingham, Royal Oak, West Bloomfield, and plenty more I just can't think of right now. These areas are more stable, but you would have to put effort into finding below market deals. Not the $5000 houses you read about online. 

Another area similiar to Detroit in as the auto industry sustained it and then left is Pontiac. GM had several factories there that closed. A friend has been doing rentals in Pontiac for years. Picks them up for 10-20k, rehab enough to rent. Class D neighborhoods, but it works for him. He use to live there, but hated it. Moved to a Florida, but still invests in Pontiac with local partners. 

Hope this helps. Let me know if you have any questions. 

@Josh Walker

Did you have the other thread asking for some background info on Detroit? I'm from Michigan, been in MD for 2 years, and moving back to MI next month. If it was you, link to your original thread and I can give you some general information about the area; big picture development, cities around it, etc.

I ask the realtor selling the property his opinion on ARV. I also ask him to pull comps for me. Last, I look at what is currently in the market and make sure I can give the same, or better product, at a slightly lower price.

To reiterate what @Matthew Olszak said, scrutinize the banks addendum if they accept your offer. I just closed one and they put many of the title fees on the buyer (me). They required title insurance, and then required me to pay for it. Lol. Even though my original offer stated they pay all title fees, their addendum will trump that. In my case it was a bidding war, so I had to accept or it went to next in line. Just be aware. 

May not pertain exactly to your situation, but typically a 401K from a previous employer requires an all or nothing approach. If you cash out, you take it all and the tax implications. You can typically convert it to an IRA. An IRA allows you to take disbursements as needed, not all or nothing. The 10% early withdrawal penalty is paid at years end when you file. I know of some IRAs that allow you to choose how much, if any, state and fed taxes you want withheld from the disbursement. Also, you have a 60 day period, once every 12 months, to withdraw from your IRA and then roll it over into another IRA tax and penalty free. This would allow you to borrow from yourself for 60 days, tax/penalty free once every six months if you needed to fund a short term project.

For the record, I am not an accountant. This if from my own due diligence and verified with who holds my accounts. YMMV.

Having trouble getting contractors in Northern Michigan. Specifically for the Mio area. It's rural, so here are some surrounding cities and counties:

Cities: Fairview, Lewiston, West Branch, Grayling.

Counties: Oscoda, Roscommon, Ogemaw, Otsego, Alpena.

Need electrician, HVAC and GC. Seems there is literally 1 or 2 for each (rural area). Challenge to get multiple bids and a "sooner than later" start time.

Thanks for any help.

It may be a stroke of luck, but I just picked up all new cabinets for a property that were half off at HD. The specific wood finish was discontinued. What was over $4k in a current color cost me just under $2k in cherry. 

Just wanted to step in and say congratulations to @Account Closed. If your numbers are correct, you should be able to move your deal. As long as you are acting with integrity, don't let the negativity phase you.