All Forum Posts by: Christian Hutchinson

 How is it biased that if you can score a property in Downtown or Midtown you will rent to roommates with a household income of 85k to 125k who are accountants or medical residents and the property costs less than 150k for a triplex that a unit rents for $1500, versus renting out a 4 bedroom home in Sterling Heights to a Husband and Wife with two kids that make 90K where the husband works for a roofing company the wife is a bartender, and the property cost 120k rents for 1600/mo.

Those are real numbers out the portfolio. Im not advocating buying a place on State Fair and Dequindre or Joy rd and Evergreen. What people do in Detroit it they buy a house for 5000 or they contact a turnkey operator that sells them a house for 40 to 70k with shotty work and guaranteed returns aka Section 8 then wonder why the house in in a warzone, and tenants destroy their house. Like my dad taught me if it sounds quick and easy its probably not true. I had someone offer me 30 houses for 250k in Flint last year. Are there some good ones in there probably but most likely its someone trying ro unload their trash on someone else.

In Midtown and Downtown in 2010-2014, 12 or so companies in Midtown and Downtown provided a rental incentive of $2000 for a year or up to $20K for downpayment or rehab money that was forgivable with each year for prorated for 7 years, for only a certain section of town. So that lead an initial charge, then Quicken Loans moved their operations from Livonia to Downtown. Then Aident a seatbelt/car seat supplier moved their HQ Downtown from Wisconsin. GM moved about 5000 technology people Downtown, after bringing 14K inhouse from contracting houses/consultants. Blue Cross Consolidated from Detroit, Southfield, Farmington Hills to Downtown. Microsoft moved its Southfield Office with about 300 employees Downtown starting early 2018. 5/3 Bank moved from Southfield to Downtown. Basically a Billionaire, and 3 or 4 companies got tired of hearing people turndown jobs saying "I'm moving to a Chicago, because its better". So they have been buying the old buildings and updating them to state of the art infrastructure, like smart elevators, gigabyte internet, data centers and co-locations. Downtown major players are Quicken Loans, Blue Cross, GM, DTE, Ally they basically have pumped up their campuses/work spaces.

In Midtown, Wayne State decided in the late 90s to start building student housing. There was another round of building in 2005. Then another round in 2013. With that build out WSU Police asked DPD to become the first responders to 911 around 2006. So response times decreased, visibility increased greatly. So Midtown essentially has its own Police Department(Downtown has a private armed security force paid for by Downtown Building Owners). Midtown is being dominated by WSU, Detroit Medical Center, Cardinal Health, Henry Ford Hospital, and the Illitch's(Little Caesars, Red Wings, Tigers, and now Pistons).

In each of these cases providing workers/residents mean spin-off business have appeared(gyms, coffee shops, bars) or established businesses have made major upgrades(some liquor stores don't have bulletproof glass in midtown, or the bowling alley adding a cafe and event space.

All development is subsidized by tax breaks/credits in all cities. There is much of that.  A recent law passed allows developments to capture property tax increases for 10 years or so if the price tag is over $30M. Amazon just opened a warehouse in Livonia with millions in giveaways for taxes.

The Illitch's finally built their new hockey arena, then they convinced the Pistons to leave Auburn Hills to downtown, the practice facility and all 500 employees for basketball operations. The stadium has been built similar to the Barclays or Verizon Center with retail and restaurants available even on none-game days because they are street-level.

All these big money players betting on the city, means small timers started grabbing homes built 130 years ago for pennies(I've paid $22/sq and $31/sq for mine) locate in a hot area get the house clean and updated and make your cash back. Also, a sizable number of boomers are selling their McMansions in the suburbs, downsizing to condos, lofts, or renovating the big old mansions. 5 years ago a 6000 sq ft mansion in Indian Village or Boston-Edison was $60-$150K (look at the absurd price now), yes they needed $200-$500K to get it back up to date but people sold their homes to do it with the cash they earned. I know a few older people that did that, they had season tickets to the Red Wings and Tigers, they use to drive down from Troy, Northville, Rochester, etc, but they retired, kids are grown, and they just wander around Downtown/Midtown and go to games everyday.

Whole Foods, located in Midtown Detroit in 2014, so everyone knows what that means in terms of incomes for the area. So now there is a branding of the "7.2" its the area of Downtown and Greater Downtown where the development is taking place. Its not a tax zone, its simply a branding. There is also "Live 6" which is development of 6 Mile neighborhoods in conjunction with U of D, Marygrove College and pretty much all of Detroit's still strong Middle Class neighborhoods of Bagley, Sherwood Forest, Palmer Woods/Park, Green Acres, University District. This is much more of a small player deal but the price of entry is greater, but it tops out much lower than the "7.2" and its heavily geared towards families with kids. Lots of private schools are in that part of town, but the pricing is less than the suburbs. The school systems in South Oakland County are not much better than Detroit, when you consider tuition at several Catholic Schools in NW Detroit are only 7-12k/year. Younger families such as mine you have to pay for early childhood education in Detroit, or in Bloomfield Hills its the same.

Several national daycare providers opened up in the office buildings, the waiting list are 6 months. My son's daycare is in GM HQ. Several of my neighbors same thing. Rainbow is completing a 3 story facility at the end of my street ready for opening early 2018. its $275/week/kid, and they do not allow State Vouchers(meaning no families getting childcare assistance).  All the daycares charge that in the "7.2" and they are turning people away.  While we waited for a slot I drove my son to the same company daycare in the suburbs $50/week cheaper and they had multiple slots open at any given time, Prob 1/3 of the families at this place were waiting on a Downtown daycare slot to become available.

I would suggest to anyone to target a Detroit property in near Downtown/Midtown. I challenge what major American City can you purchase a SFH, or a MFH for under $200K within 2 Miles of Downtown/CBD. As a bonus that is less than 2 miles from the riverfront, oh and isn't subject to earthquakes, hurricanes, random fires, and has a access to the largest freshwater supply system in the WORLD.

@Jeff G. There is money to be made in Detroit right now. I have a deal I'm working right now.  Its a big older home in the Woodward Corridor IN Detroit.  It will be $250K to get it rental ready, I'll cut the property into 4 units, so I have 4 units between 1500-2000 sq ft. I'll pull between $4100-5300/mo out of the property without effort, with about a $800/mo overhead, lets call it a $1000/mo. So far I feel Detroit is only profitable if you play 30K home deal in the established neighborhoods and hold on tight for the ride, or find a multi-family, or find a bigger home and cut it into a MFH.

Basically anything from Davidson going south, between Rosa Parks and Chene can be profitable if the numbers can work, and the depending the rehab needed on the property. Full disclosure there are complete throw-away blocks in that area, but you can find a deal if you look pretty easily.

Midtown, Virginia Park, North End, West Village, East English Village, Woodbridge, MAYBE Islandview, Corktown, Bagley, are all very profitable and the values are increasing like crazy every month. Everywhere else its Section 8, other Govt Alphabet Programs, or they are high end homes that are not profitable for renting reasons.

In terms of outside Detroit its Roseville, Warren south of 12 Mile, SCS is some parts, Madison Heights, Hazel Park north of 9 Mile, Eastpointe, Oak Park, Redford.  In all those areas your typical renter will be a household that makes $30-$65K a year with 1-2 earners with 0-2 kids.

@Richard Dunlop its hurts me talking about losing $300K in such a public forum, but it happened. I could have invested in the Townhomes for $45-$65K in 2009, those homes are selling OVER $300K at this point, and command over $2000/mo in rent. It doesn't end there in late 2014 or early 2015, someone called my about a 8000 sq foot home on Van Dyke right off Jefferson. What is now West Village.  They wanted $190K for the house, they basically ran out of money, and it needed another $20K-$60K to finish.  Well it would have been nine - one bedroom units in what is now being called West Village. Let me first say I would have had to empty my pockets, my parents, and my inlaws to do the deal, plus raise the the $50K.  Which myself and MIL were intrigued by the location and property, but we had another project, and just didn't see where the area was going.  She was open to it, but myself and my wife did the numbers and saw 1 Bedrooms were going for $400-$575/mo.  We knew obviously the numbers look good, but we were terrified of working with that clientele, plus doubted if we could even get the units rented...Yea we missed on that too, 1 beds are going for $700-900, and those same buildings are going for well over $400K now, and need WAY more work then the place this guy was literally begging us to take.

Does that mean its easy in Detroit? No, but I can not stress how important it is to take a couple hours and just walk or ride a bike through the neighborhood your investing in. The street level feel, will tell you whats going on beneath these numbers. You see if the people in the neighborhood are maintaining the homes, or are they just patch work units that are someone else's ATM. I bought a home at auction for $600 last year in Islandview I ride my bike every few weeks through the neighborhood. 3 blocks over from my house, it feels ready for investment on my street, its not ready. The people on street would too destructive to anyone attempting to fix a home, while the bums on the street 3 blocks over would watch your tools for you while you ran to the store if you bought them a couple of Lucys and a 22, and run off any walking up on your house, and probably call you to let you know.

 I'm seriously questioning when was the last time(48 months) you invested your own money in Michigan. Southfield, Troy, AA?

So please tell me how do you make money on a 3 Bedroom House in Troy, MI with 5K a year property taxes that cost 275K-350K that rents for maybe $2200/mo-2700/mo?

Southfield??? you have to be kidding me, have you been to Southfield below 696 lately?

Ann Arbor??? Again how do you rent or make money on a $200K+ house?, a SFH at that.

I smell a whole lot of BS.  Unless your talking about Troy, or AA for new construction yes you can make money, but it cost way more than $50K because a lot in Troy runs $90K

I have a duplex in Richmond Hill, ON, and I want to know where can I list it similiar to zillow, trulia, hotpads etc. here in the USA

Go to the Detroit suburbs, Macomb County: Warren, Roseville, maybe south oakland county like Oak Park, Hazel Park, Madison Heights.

These are not "A" areas remotely, probably C+/B-.  Working class families with incomes of 35k-60K, rents will run 900-1200/mo.

I found a lot with a SFH home on it, but its been zoned for a Multi-Family.

How could I execute a purchase, tear-down, build.

I want to purchase the house for say $150K cash

tear-down the property

build a new duplex(MF)

refi into a VA Loan.

FYI my goal is to use my VA Loan at whatever stage of the process to best minimize my cash outlays.

The tear down in Question is in Troy, MI in the Athens High School boundaries

Mexicantown, could work.  The issue lots of realtors are hoping to hook someone like yourself. Rents wont get too much above $800/mo.

I just looked at a property today, and I could tell the seller(also the agent was spooked) we had notebooks for notes, my contractor had a team of people photographing. He wanted to cancel cause it was raining. I wanted to see it even more, tells me how the windows, gutters, roof, and foundation is doing.

Personally, I'm working the North End/Woodward Corridor and the Villages. You can score stuff 30-75K.  the closer to 75K better shape of the property. A 30K house needs 40K of work.

Also only do multi-family in Detroit, its the only way for numbers to work.

@Joseph M.

The thing was there was a ton of cheap properties. For $1 or $10K. Thats a sexy headline, it shows doom and gloom. Where the REAL steals were in the near Downtown neighborhoods or the "exclusive" areas with 4000-8000 sq ft homes, limestone, turn of the century woodwork, etc that just couldn't be done at any reasonable price today.

Those homes were in bad need of updates (galvanized pipes,  knob and tube, radiators, 100 year old windows, etc). Structurally were excellent however. These homes sold for $30K-$50K intially, the prices were accelerating. We literally bought one of the last 3 or 4 homes in Midtown Detroit that was like this, and livable. We were about 18 months late to the party or else we score something in the 70s. Then luck kicked in and 4 billionaires decided to start developing Downtown Detroit and adjacent neighborhoods.

See now the word is out and people like yourself are looking in the neighborhoods locals bet on or had a soft spot for 4-6 years ago. The prices are just not doable for investors now, so we head to "adjacent" neighborhoods.  I have a deal I'm working now, that a local would jump on, because they see the trends, but even someone outside the City would hesitate, and out of Staters no way, but as a rental it brings in huge cash, but the appreciation is very speculative(rehab will get dollar for dollar at best in year 1 and 2).

The Canada property was at a discount listed $860K purchased at $750K, plus its across from my wife's parents house, so we can decide to move to Canada at very low cost in the next 5 years.

The OP and people like him who live in not just "Hot" markets but international markets, SF, Miami, DC, NYC, etc. the world is different.  There is a constant demand for real estate. It's hard for metrics, and the mindset to see/understand what goes on in markets where values for land is typically not much valuable than structure it sits on; even the highest priced areas of Metro Detroit $200/sq is considered high end, $300/sq ft is even rarer. Considering new construction here runs about $100/sq ft, the margins just are not there to apply that business model.  

We were just involved in our first rental purchase in the suburbs of Toronto last month, it was a duplex that was $750K CAD.  The rents are $2800/mo CAD, the break even is $2250 CAD. Toronto is an international market in many ways too. We did it because 20-30% value increases every year for 3+ years. It was essentially a turnkey property, 

Flipside we have two triplexes in Detroit's Midtown Area.  One purchased for $130K with $50K in improvements so far that yields $3800/mo with a break even $1500/mo.  We estimate it will take another $100-125K to get the property in great condition. The other triplex we purchased at $49,500 we are $16K into renovations its yields $2250/mo with a break even of $700/mo, we estimate another $30K will get the house in great condition(windows, account for $15K of that).

The $130K property purchased in 2013 now values at $500K

The $49.5K property purchased in 2016 now values at $82K

These are all great comparables because of the cost of acquiring these properties in terms of cash to close are relatively close.

In reality, the Toronto renters there quality is A-/B+ or on a scale of 0-100 prob an 88 (both families where the earners work in Engineering or Technology)

The Detroit renters their quality ranges from 75-95 where the income earners are Trust Fund Babies(I consider the lowest grade), Medical Resident, Consultant at a Big 4 Accountant Firm, A Law Library Librarian, Marketing Professional, and Electrician.

The high cashflow rentals fuel the ability to purchase the rentals in more "desirable" areas. The ultimate issue is though appreciation is nice, you don't get paid until you liquidate the asset.

Its easy to bet on appreciation when its viewed assets will never drop in value (hence 2007-2009). But, for Detroit rentals the cash generation alone justifies the investment, but the Toronto investment is only justified if the property is sold after 3 or more years with double digit increases each year. Plus the margins are thin, so one repair buts you in the red a year or two.