All Forum Posts by: Christian Hutchinson

I talk to some people with connections down at City Hall. AirBnB is officially not allowed for numerous reasons. Ranging from old school politics to some real concern about crime (I won't get into it here, but Im surprised AirBnB has not dealt with this blowback).

The policy is its not authorized. Detroit Building and Engineering Department basically has been told to not enforce. It will be enforced if there are complaints against the property for blight, unpaid taxes/water bills, or criminal issues. So essential as long as you run above board the City will let you be. Similiar to the new rental property ordinances. They are cracking down in the neighborhoods before the areas directly Downtown/Midtown etc. 

All stock market fluctuations prove is:

Have a diversified portfolio in the market (Stocks, Bonds, Treasuries)

Have a diversified portfolio in investments (businesses, P2P lending, savings accounts, gold)

Have a diversified portfolio in Real Estate (land, MF, SFH, commercial, urban, rural, multiple markets if possible)

I think you misunderstood what I was saying. Maybe its the market I'm in. I know some people with 8 figure net worths and easily $5m-$25M liquid at anytime. You always go into an investment looking for the long haul. Because rents and values are just exponentially better historically in Y10 versus Y3. But to enter into any investment and not have an exit strategy is unwise. I've had some very rich and knowledgeable people tell me that. Wealthy people try to mitigate risk at all times. So yes they will invest in a NNN lease with a National Drugstore Chain at 5-6% return with their $2M for 20 years with 10 year escalator. But most people don't get starts with 7 or 8 figures to invest. Your average person starts out with $20-$200K. They need some trial and error, hit some doubles, singles, maybe strike out a few times. Then they build up enough of a portfolio that they make that "keeper" purchase. Or they are like some people during the most recent recession got a steal of a lifetime (I know someone who bought a home valued at $700K now for $165K in 2009, he rents the home for $3000/mo too)

Typically in about 7 years you get a feel for what condition the house is in, what has to be replaced, where the neighborhood is going in terms of values and rents.  Also, by that point you should have made your 2x-3x money back and then some in terms of cash into the investment.

 I can spot a beginner from a mile away on these boards.  when they start talking technical terms, and all this stuff measured out to the penny on a purchase less than $200K wondering if its a good deal or not.
I understand the calculations are there for a reason.  But when they are using Cap Rates, replacement calcs for a property they are projecting to hold 30 years.  I just laugh.

All season investors buy SF and 1-4 unit properties with a 3-7 year plan, and get out strategy, at different points. Another dead giveaway of the newbie's that have listened to podcast and read tons of blogs, are they view property and tenants as someone separate.  Property is the product and tenants are consumers. Your buying the property for a certain consumer in  particular market.

Its very risky, banks don't lend in Detroit.  To get a good rate is even harder.  I have a property in the North End.  I have discussed in other threads. Many times banks say they will lend, they will get a good appraisal, have good cashflow, and they will see houses 2 blocks away that are significantly devalued, a house across the street sold at tax sale 6 months ago, etc.  They will not do the deal because of risk.

IF you can get financing or have a reliable lender go for it.  But I would operate under the premises that whatever you put in will be parked for about 2 years. At that point the rental performance will be more concrete, its a proven market (and you in it). 

@Shaun C.

All those Electrical Inspectors in that part of town no matter the city are absurd. Its like the expect you to wire up everything like its the state of the art, new construction home. Not just maintain the 1970 hack-job some long gone builder did, and gave some inspector $200 and permit to hunt on his plot up in Cheboygan.

With $16K left if you currently are working a FT job, I would get a 2-4 Unit.  Live in a unit, rent out the rest.  Eliminate your housing cost, pocket some money, and pay off your loan faster.  Prices are a little high right now, but maybe buy a fixer, thats you can get slightly devalued. Put it like this, if you park $10K into the asset, and its cashflowing nice, who cares if there is a correction. You are trying to get in the game.  Obviously don't overpay, but everyday your money isn't growing its losing value.  So have it in the stock market, RE, business venture, etc.

Once you have a few properties and a couple hundred thousand then start trying to mitigate risk.  Right now all you owe is Uncle Sam $16K.  If you get hit by a bus tomorrow he is out the money.  Might as well invest what you have.

I have a tenant in a property that 16 years ago he was caught trafficking cocaine and heroin.  He was NOT young.  But he was in his 30s still trying to make a fast buck, and got caught. Well 13 years later he shows up to rent a property.

I asked for his case file and it was a straight trafficking deal.  He wasn't a violent criminal who was caught trafficking. He had steady employment for 6 years and hadn't had a parking ticket since.  I viewed it as people deserve to have their life back.  I was nervous.  But he has been an excellent tenant, stable, helpful.  So maybe its because he knows his options are limited.  But generally once its been more than 5 years and the person has been employed, it shows they are really not engaged in that lifestyle any longer. I actually like the guy.

If he is working, not getting into additional trouble.  I wouldn't even worry.

Geez, I would struggle qualifying for that property...I check evictions, income, and job history, I also take a peak at collection accounts see if its a habit.  I also, look at their car payment size. I have had 1 non-payment in 5 years, and 5 late payments spread over dozen+ rentals.

Credit scores are super tricky because your can have a piss poor credit score, but never missed a payment or having missed a payment in years.  I have a 630-675 credit score because lots business debt is carried as personal debt.

Me personally, I would be more concerned the applicant had income of at least $3500/mo, and has had it for at least a year and they have $5-$8K in savings in the bank.

I always ask:

What brings you to the area?

Can you supply income verification?

Are you willing to submit to a credit/background check? No Sex offense, felonies, or fraud-type crimes allowed.

Its open ended gets them talking...I am screening then, so I listening for DQ statements.