All Forum Posts by: Joshua B.

In Michigan, landlords have a duty to mitigate damages (i.e. try and re-rent the apartment) if a tenant leaves early. Michigan law also prevents landlords from inserting a provision into a lease that would release the landlord from the duty to mitigate damages.

You could offer them an option to pay a fee in place of rolling the dice on your ability to re-rent it (I think a lot of management companies do this), but I think if you tried to put in a fee like that it would be voidable by the court.

The best way to come up with your reletting fees is by simply adding up your actual costs (listing agent fee, zillow ad, whatever else). I think trying to squeeze as much as possible out of a termination and trying to force a tenant into staying put when they don't want won't really serve you well in the long run. 

@Steven Rubino That looks great! Nice work

@Aya Inoue There are deals to be had in Ann Arbor but they’re few and far between. Certain neighborhoods lend themselves to deals more than others due to ownership profile. For instance, nearly all the houses just north of campus by the nursing school are owned by investors and it’s unlikely you get a deal there. In more owner-occupied areas you may find something. The best way is to force equity through improvements, which is easier in Ann Arbor since there are wealthier buyers who pay a premium for updates and there are comps to support that sort of deal. And high ppsqft makes it easier to do that since the discrepancy between ppsqft of labor/material costs and finished product ppsqft is much greater than in a place like Ypsi. All of that takes a lot of cash though.

 That's helpful. But the question isn't whether it's permissible to get an assignment fee. The question is whether it's permissible to wholesale without a license.

The logical consequence of claiming that wholesaling is legal is that agents could avoid the entire regulatory framework around real estate licensing on every single transaction. They could just have their seller sign an assignable contract (between seller and agent) instead of a listing agreement and amend the sales price at closing to reflect the agreed upon price with the end buyer. Voila.

Here's the quote from the Michigan statute:

"Real estate broker" means an individual or business entity that, with intent to collect or receive a fee, compensation, or valuable consideration, sells or offers for sale, buys or offers to buy, provides or offers to provide market analyses of, lists or offers or attempts to list, or negotiates the purchase, sale, or exchange of real estate; that negotiates the mortgage of real estate; that negotiates for the construction of a building on real estate; that leases or offers or rents or offers for rent real estate or the improvements on the real estate for others, as a whole or partial vocation; that engages in property management as a whole or partial vocation; that sells or offers for sale, buys or offers to buy, leases or offers to lease, or negotiates the purchase or sale or exchange of a business, business opportunity, or the goodwill of an existing business for others; or that, as owner or otherwise, engages in the sale of real estate as a principal vocation. 

A wholesaler may say "Oh, no, I'm not offering for sale real estate. I'm offering a contract." But any regulator would simply point out that contracts don't exist in a vacuum. You don't buy a contract for the contract's sake. You buy it for what it conveys to you. In the case of a wholesaler, its the right to purchase real estate. 

If the wholesaler's argument were acceptable to regulators, no one would ever need to be licensed to sell houses! I'd put pretty pictures up on Zillow. "For Sale, contractual right to purchase this house for $100,000". 

 1. You don't know what they'll assess it at after the sale. If I were you, I'd just assume the taxable value won't change from what it currently is (so, an SEV of $4m). That's the conservative way to do it.

2. Once you buy, and assuming you don't transfer the property, your taxes can only be increased by the amount of the Consumer Price Index (CPI) or 5%, whichever is lower.

Correct. 

The local government has to ascertain its own idea of value because they have no idea of knowing for sure whether a sale is truly arms length, whether it was truly representative of market value, etc. That's why I said a sales price is informative but not dispositive.

Uncapping isn't going to hurt you in this case, which is the concern investors have most of the time, but it's not necessarily going to help you either.

If taxable value always reset to purchase price, people would engage in shenanigans all the time (sell the property to your dad who has a different last name for half its value and claim it was arms length).

@Matthew Orton Your purchase price will be informative to the assessor but not dispositive. Their job is to assess at the true cash value and that’s what you’ll be taxed on. That being said, the bigger the property is the more difficult it is to comp, so the more likely there’s a tax dispute if they’re overly aggressive. Most of the time assessors in Michigan are a bit conservative because they don’t want to have every property owner fighting them.

Here a helpful link to explain it. I’ve never heard why Michigan does the whole 50% thing though:

https://www.a2gov.org/departments/finance-admin-services/assessing/pages/sev.aspx

I will say one thing - be very careful what school you buy near. As part of your DD, I’d add school financials to the list. I’ve heard some scuttlebutt about certain universities here that are facing serious financial issues, to the point of posing an existential threat to them. Feel free to send me a message.

Lol, no. Just hadn't put in the proper date ranges yet. Whoops.

I did almost nothing to it. Only work done was some stuff necessary to pass rental inspection (moving some smoke detectors, fixing some rot here and there, and a few other minor things). A few days from a handyman and that's it. All the expenses were related to how we structured closing.

I did non-renew a few difficult tenants so that those units could be easily renovated by the buyer. That was probably the hardest part.