All Forum Posts by: Christian Hutchinson

I apologize for the long response.

This business is built on cash. Your tying up cash and credit for not a lot of cash flow. If you did this same deal and put $300 in your pocket or $400 I would say "Good". Within 4 years you could have your down payment back. You could do another transaction because the business is providing you the cash.  This takes a LONG time to get your money back.

Next issue is with the low cashflows is the low appreciation rates in that area of town. If this was off Adams or closer to Oakland Twp this property would go up in value. It would essentially be a 3 to 5 year flip. You would get $30k to $40k payout at the end.

Because of the location in Rochester your not pulling the real Rochester crowd. Your going to deal with a different clientele for renters.

Next this is a one bed room. The LEAST desirable of apartments. Families/kids are out the question you lose your biggest asset in Rochester Schools, Parks and Rec for the most part. You need someone who makes 40k a year to afford this place. In that area single mid to late 20s or 30s people live in Royal Oak, Clawson, Ferndale, Berkely. The Hall Road shopping area. People that age in Rochester live Downtown Rochester, the Hamptons, or even on the AH side of OU.

Being near Troy Beaumont is nice maybe you hook a Resident. But there are not lots of Residents at Troy Beaumont(maybe with OU MEDICAL School established thats different).

I sold my FIRST condo I bought in 2013 in 2015 I paid $55k sold it for $86k. I left probably $5k on the table. The Cashflows were similar. That was a 2b/1ba in Clinton Twp at Hall Road and Hayes. Making $30k made the transaction easier to swallow at the end.

HOAs are ridiculous to deal lots of times with. Many make you submit your renter information at board meeting to say they are okay. They never say no usually but, your on low margins and waiting 2 weeks for approval might cause a tenant to walk. A PM will follow those rules to reduce liability on their end. If you self managed you just move the tenant in and make the HOA catch you, then fine you, that was your risk you took not a PM.

Like other people have said this is not a great deal. Go to Grosse Pointe Park or SCS get a duplex. You'll be dealing with the same types of tenants, higher margins, less risk, and an easier asset to liquidate. Your using a PM anyway. Roofs are good for 20 years, just watch for that stuff. Condos are notorious for they we need $4k to repave roads or something. Redford is good, Rochester is fine just not that location. You could do a better deal with appreciation upside in South Lyon, Walled Lake, or Brighton, or EVEN better parts of Rochester.  I went on realtor.com and just did a 5 mile radius search for condos in South Lyon under $85K that would be better deals.

Why are you engaging in this transaction? DOW Index Fund would give you 11-13% returns and you would just have to keep breathing to make the money. A 1b/1ba in Whispering Winds sold in 2014 for $65k some sold recently for $71K thats 3% appreciation per year in a RISING market. With your numbers you would be better off placing the down payment in an index fund putting 1800/yr into it, and anticipating 5% returns and you would do BETTER with less headache and uncertainty.

Then just down the street I bought a 4b/2ba house that was 1500 sq ft in Sterling Heights with Utica Schools it was $92K which needed $13k in work. Nothing major Paint, flooring, and a minor plumbing fix. so 105K all in. That was 2014, house will easily sell now for $150K, thats 14% per year appreciation plus it PROFITS $800/mo in cash initially now its $1000/mo

I do NOTHING to maintain this property because its filled with families, who make good money. I bought a shovel and lawn mower and issue it to them at lease signing for $150. People will do it, or tell them to contract someone to do it.

I can't stress enough if you do this deal you will be kicking yourself in 18-24 months.  If you like the neighborhood do a 2 bedroom. Right not you have a sub-par unit, in an undesirable neighborhood within it's market, that doesn't cash-flow, and doesn't appreciate.

FYI-When I say "Ghetto" I mean within its market.  Rochester is not Warren, Detroit, or Inkster, etc.  But within that market this is probably the least desirable neighborhood out there.

that area around Reuther is considered the poorest area of Rochester some homes sometimes are less than 100k. I know new builds are going up in undeveloped areas that way. But the existing housing stock east of John R and South of Holy Family Regional School is notoriously low-end.

Compare the pricing around Reuther MS and then compare around Hamlin Elementary, then look at West MS, Van Hoosen, Then Stony Creek/Hart. Pricing is night and day. Look at what a 4b/2ba 2000 sq ft house runs you in each area.

county issued deeds last friday. I picked mine up for my $600 duplex house with an attached vacant lot...lol, ive spent more money on accidental bar tabs.

 I grew up in that area in The Hamptons(Where the Courthouse is). I lived there from 1992 to 2007ish.

That area of Rochester is considered "the ghetto". All those homes/area around Reuther wont appreciate. The rent wont increase. I had several friends who lived in Village Green on Dequindre, I doubt the rent is any higher, now than it was 20 years ago. 

Compared to our 3bedroom townhouse rented for 1350 in the Hamptons, in 2009, we paid 925 in 1999.

Compare that with the north end of rochester. I know the condos along Adams between Walton and Hamlin are nicer and get better rents. Plus your tenant quality will be better.

I know Rochester, my name is on the wall at a couple schools...well it used to be at least lol.

i get its your first deal, but this isnt worth it.

Condos are terrible $300/mo in taxes, insurance, HOA. This will go up. Those dont look like non-homestead. If its homestead add 30% to your taxes.

Your mortgage payment is probably 400+300 fees. Thats a ton of hassle for 150/month.

I dont even need all the technical calcs to do that...

Is this condo in an appreciating area? Meaning you sell it in 5 years for say 90 to 100k. So you make your money then?

 I have tried to purchase 2 properties using banks since 2013. In each case the bank refused to do the deal. Property in Brush Park in 2013, 5100 sq ft livable property, multiple banks refused to lend on the property, 130k even with 20k down. So we paid cash, put 20k into then rented out 2 units lived in another. Within 8 months multiple and some cases the same banks were offering HELOCs for 300k. But now it was producing over 2000/mo in rent. FYI pre-purchase appraisal was 130k

This year I purchased a livable triplex in the North End (fairly close to E.Grand and Woodward) for 49k. Appraisal was 52k. 4 banks refused said it was over-valued. Said my rents weren't feasible.. I said i could do 1800/mo on 3 units. Well i ended up getting $2k/mo after i put in 15k of work. Within 6 months mutiple banks are offering 100k HELOCs. The Tax Auction saw bidding wars for surrounding homes for 35 to 60k that were in worse shape.

Its funny people say Downtown and Midtown can't be for smaller people 90% of the housing in those areas were people like me, who saw and took risk. Then, bigger fish do major projects but it was feasible because smaller people created the demand.

3 years ago Brush Park was an area banks refused to do business on a simple mortgage 18 months later were providing multi-million dollars financing for new construction for condo, retail, housing development.

Lets cut to the chase...

Home much cash do you have? If you don't have $30k-40K liquid that you can part with and wait 3-4 years to pull your money out don't do it.  I have 3 properties in Detroit.  NO bank will loan you money.  I paid cash for all my Detroit properties.

If your light on cash, but your credit is good and your Debt:Income is good, buy in the suburbs. Its a safer, traditional investment.  Detroit proper will eat a newbie from out of state alive.

 I picked up my 15th unit in October...I never had an eviction.  One tenant we parted leases because she was struggling to pay after paying easily for 18 months, so I let her out the lease early, she approached me actually she owed 850/mo and she could only afford 750, she found a place for 600. so hey it worked out.

are you self managing or you dole it out. Is there still lots of starter home inventory out that way...in MH and Warren its all overpriced and beat up.

Maybe upgrade the appliances, Stainless Steel appliances will entice someone. I have properties in Detroit and I provide upgraded appliances, lots of lighting on the property. You get someone willing to bite.  Maybe add onsite laundry.