All Forum Posts by: Christian Hutchinson

What area of Detroit?

Sure you can't get more?

If you are getting $1800/mo on $137K (in all cash) this deal is a real cash suck...You cant find a lender, or some cheaper contractors? its wintertime guys are hungry for work.

Texas is the perfect storm of all the things wrong in terms of long-term planning in this Country.  Its been highly profitable for Texas but this is what I seen working in various parts and being there TDY.

Texas:

Low cost State
Low tax State
Export driven economy historically (extraction and agriculture industries)

When the economy started changing in the 1970s Texas got out in front of it. Very savvy political leadership.

The secured and pumped up the Military Bases

Enticed Defense Contractors with cheap land and low taxes

Cut education/public sector wages

Allowed in cheap undocumented workers from Latin America.  This is not a political statement its an economic statement.  They allowed in cheap labor to fuel expansion to get better returns on capital. Then those same bodies were counted via Census for federal monies to be distributed. Lastly, their representation in Congress increased by means of a undocumented people in their districts but the number of "voters" distributing the economic pie did not increase drastically.

Then with the creation of DHS, Customs and Border Patrol became one of the largest federal agencies. All centered essentially in Texas.  So Texas two largest industries can not be moved: They are Defense and Border Protection. It produces jobs/economic activity that are recession proof, and are the FIRST things to be paid.

With this great backing of the Feds, Texas can provide a low-cost, low-tax State level environment.  Texas has lots of Fortune 500 companies located there from its legacy early-20th Century business-activity (extraction and agriculture).  But more than 1/2 of all the other companies in Texas relocated there.  Meaning the brand, business, customers, talent were cultivated in another location, and was relocated to Texas for purely tax/cost purposes.  This is no different than companies relocating to the Ireland or the Bahamas, etc.

Meaning, Texas is not a place of innovation where people come up with new ideas or building a better mousetrap.  They go there after using one region's resource as a cost-savings measure.

Sure there is lots of "growth" in Texas the people moving there are not the highly educated chasing six figure knowledge/creative based economy jobs. Its people chasing work that will eventually be automated. Its Customer Service Jobs, or local govt jobs.  I know lots of people from my church who went to Texas, they  have HS education or uncompleted college education, maybe do skill-trades work.  On the flip-side people I grew up with in an affluent community they have relocated to CA, NYC, Boston, B-more/DC, Philly, Chicago, ATL, Charlotte, Seattle, Toronto, Austin(yes its Texas, but it has homegrown companies in Dell and Whole Foods). Those people are relocating back to Michigan because they have skills to live anywhere, and do anything. The people relocating to Texas, they come back for visits see things are "better" but they realize a job/quality of life at their income levels are tough to do in Michigan.

Ross Perot (my Dad worked for EDS for 30 years) made his money providing payment system services for Govt based payment systems.

Texas is made of Federal Money from Defense and National Security, Public Utility Conglomerates (low-margin business so low-taxes matter).  That provides a cost-structure for mature developed companies to locate.

I would look into Warren, MI.  Because its Macomb County the taxes are lower, and the rents slightly higher.  Also, I bet you could get something thats all brick.

I have a buddy dumping his 3b/1ba he fully renovated (windows and roof too) 2 years ago because of a family emergency for 75K he pulls in $1000/mo. Tenant base will be a little tougher, but South Warren and Dearborn Heights are fairly close quality wise. Not saying to buy it but just trying to show the numers available.

Also, I think if you search harder in Taylor there may be a better deal.  I feel as if the money your spending on TK to provide their value-add could be saved if you just flew here and looked at 20 places over 3-4 days.

@Mustafa Ahmad

Depending on when the person purchased and the size of the home lots of RE in East Dearborn like east of Schaeffer or even Miller.  Or some of those areas off Warren or Tireman those numbers are completely doable.

As you said because of the demographics, banks are not exactly loaning out money in those areas and frankly tons of deals are made between families, or Land contracts.  The appraisals just are not there.

Homes are difficult for the locals to purchase because of how the income is made, its unverifiable.  Its money wrapped up in business ventures that often are heavily cash businesses.  I deal with this often with my Roseville Rental or MH Rental I will get an applicant (Hairdressers, barbers, nail techs, etc) that I KNOW makes enough money, but based off of documents like 1040s and 1099s its nearly impossible to back into the numbers they are really doing without "fudging", opening yourself up to risk, and frankly there are plenty of people with verifiable income.

I was trying to rent a place to a guy with a landscaping business, he made enough money, he is a fairly reputable landscaping company in Macomb County. But he doing about 20K a month in cash for snowplowing, landscaping. He had only about 6K a month in checks and invoices.

I am meeting with 2 separate private investors this week. We are looking to step up into Apartment Buildings versus the SFH and 1-4 Unit properties we are doing.

The property in question is between 1.1-1.4M.  We barely have the money for DP and liquidity post closing. So I was wondering would a private investor be interested in this type of deal.

We put in 20% DP, the investor pays the other 80%.  They effectively becomes the lien-holder. They also get a 10% equity in the property.  Which essentially becomes a buy down over 10 years.  So the loan is 4.5% and the buydown is 1% for a 5.5% interest payment.  We pay this down until we reach 30%.  That is about 9.5 years which coincides with when we would need to refi anyway with a traditional bank/lender.

They would make $500K on the deal over the course of about 10 years. We place a provision that if we default they could essentially "evict" us.  Meaning we lose our DP and equity.  Then of course they could retain their own property management and basically keep all the profits for themselves.

Is something like this possible or is this too complex? Or most investors want more distance from a deal for various reasons because of liability.

I had a disaster flip this year.

Left me with lots of CC debt.

My primary home is FHA with mortgage insurance.

My current LTV is 65%, with about $85K in equity.

I was offered a Home equity loan at 4.6% for 10 years. I was looking at it as I pay off my credit card debt, keeping my LTV 75-78% then in 6 months refi my mortgage and getting the best rate and while dropping my mortgage insurance which is about $200/mo.

Is this possible or do HE Loans need more aging in order to pay off? Or would a lender hesitate writing a mortgage on something like this?

I am in Michigan, am I required to hold a RE License in order to manage and lease the building?

I am doing research, and to be a Property Manager it appears so (to manage other people RE properties).

But to do my own it appears ambiguous. Anyone have any ideas?

@Eric Neal no problem, Detroit and Metro Detroit is awesome, but making a decision from 10,000 feet would be unwise esp in the City itself.  If you get down the road of to offers being extended, driving through these various neighborhoods/cities. Also, the suburbs are not far from Downtown, so don't count out Royal Oak, Troy, SCS, Warren. Because of the freeways they are closer to Downtown than many parts of Detroit.

Do you have school aged children?

Your car insurance will be double in Detroit versus outside of it. So for a 2007 paid for vehicle PLPD will run $120/mo you would pay about that price for full coverage outside the City however. Full coverage in the city will be about $250/mo per vehicle.

My Wife, myself, and 2 sons (under 3 years old) live in Brush Park. We have rentals in Detroit, and outside the City.

There are so many ways to play this it just depends on your tolerance for risks, your work location, and desired moves.
We both work in Downtown and Midtown so I ride my bike to work (my son rides with me to his school at GM HQ), and my wife walks (we have 4 cars but we register and insure them at house in Grosse Pointe Farms).

Option one:

If it was me I would buy a Duplex in the North End which is the Woodward Corridor.  Some places there are nice size need some rehab though.  I can think of two places where you could get 2 units at about 4000 Sq Ft, and they would be side by side so no one lives above you.  You could probably finance it using the special mortgage program for Owner-Occupied homes. Daycare will run you $255-$275/week per kid no matter if you live in the City or Suburbs at any reputable Daycare, so the school factor isn't in play until your child is 5. I would do the work, and live in that property until your child hits school age. So basically house hack for 2-4 years. Then I would simply buy the home you wish in the neighborhood and school district you desire.  If your spouse is working even say a $40K a year job, 120-$150K household income gets you into numerous exclusive neighborhoods in Metro Detroit with little to no problem.

Option two:

Buy in the neighborhood you wish OUTSIDE the City and target areas to invest in Detroit or the surrounding suburbs. I like to invest Downtown because the type of tenant you can draw, the property taxes are lower, and its more stable because the land has been devalued for 20+ years. If I could spend $60K in Bagely or $100K in the "7.2" or just outside of it I spend it in the "7.2" because your return on investment, demand for housing, and rents are just so much higher.

Option three:

Rent for a year in a neighborhood/city you are interested in then set your plan in motion.

My break down of the neighborhoods you listed (I'm not a realtor I just been in Metro Detroit my whole life):

University District - If its actually the University District and not what people are trying to say is University District and its not, buying here locks you in long-term. Between the cost of the home, the footprint you get it will be hard to replace.  Also, it will be difficult to sell to someone else because of the high taxes, insurance, and the pure mess Detroit Schools are. If you buy here realize you have committed your child to Private School Education basically until HS where they can then test into Cass Tech, Renaissance, or King where they will get a quality education. But it would step down possibly depending on what private school they were attending.

Pembrooke - I would never live there, and I would hesitate investing there. Its not a bad neighborhood, but your tenant pool will be very small, and the quality will be questionable. On top of that high taxes, high insurance, and low rent.

North Rosedale Park - I wouldn't live there except to take advantage of a special mortgage program, could be a decent rental depending on how much your into for.

Old Redford - I wouldn't live here or invest here see Pembrooke.

Greenfield - I wouldn't live or or invest here.  Unless its like 3-4 bedroom homes going for $20K-30K and I would still probably pass.

Ferndale - Solid returns, will be a nice renta,l prices are getting so high you can't flip it to a rental. Great for a young family through elementary school, I wouldn't have my kids in the district after that however.

Boston-Edison West - Similar to University District.

Grosse Pointe Park - Great schools, services, and parks.  Be careful paying too much for some of the properties, lots of properties sit on the market for a long-time in the Park.  Because lots of people buy homes in Pointes and never move, most of the homes are very well maintained infrastructure wise (roofs, HVAC, windows, plumbing) but often times haven't been updated cosmetically in 20-40 years. GPP best deals are the large duplexes and triplexes. Like a 9 bed 6 bath 7000 sq ft, duplex that lasted 4 days last year that sold for $625K.  The 4b/3ba unit would rent for $2200-$2500

East English Village - Cheap option to live in Detroit, will be a great rental once you move, tons of Private Schools in the Pointes, and SCS If you decided to stay there. The Hood is literally right on top of you though. Get as close to Mack as possible. I wouldn't live there.

Morningside - Same as EEV, I wouldn't live there.

Rosa Parks - That's not a neighborhood its a street. But based on what I think you mean, its an interesting idea. It would highly depend on the property and the street for investment or living.

Jefferson Chalmers - This was a neighborhood I was saying no way just 6 months ago for investment.  I spent a few days the last 2 months looking at several properties, and I would definitely invest, and I would live there if it was the right street(s).

That is not the University District... Thats Fitzgerald maybe Bagley.