All Forum Posts by: Justin Thind

Quote from @Nicholas L.:

@Justin Thind

-I don't know anything about Detroit

-I don't trust anything that anyone says about anything - it's my responsibility to verify everything.  not the agent, not the contractor, not the seller, not anyone but me

-maybe this house is located in a challenging neighborhood

-maybe some of the mechanicals need to be updated

-the bathroom doesn't look to be what I would consider done

=it doesn't have appliances

-I can't tell from the photos if it has 3 legit bedrooms, or if the attic or living spaces that aren't actually bedrooms are being counted as bedrooms (that's a big thing here in Pittsburgh, my market)

AND...

-there is no possible way you're buying a house off the MLS and netting $700 a month - it just ain't happening in today's market

so... you're right to be skeptical

hope this helps

Those are all good points, but my question was less about that particular house and more about that method of real estate investing. There are lots and lots of houses that are similar (maybe 5k+ more) but still much more affordable than just 2 blocks north).

Hey everyone! I am about to close on my first single-family rental property soon, just two months after first dipping my toe into real estate research. It's in a regular B-grade type of area, and projects to have decent appreciation & good cashflow. Pretty ordinary stuff, but I'm already looking for the next deal. This time, maybe something different...

So when I posted this thread a little bit ago, one of the posters in there questioned my stance on avoiding inner-city properties, despite my plans to use always a property manager. I listed some reasons of avoidance that other trusted real estate pros told me including a lack of appreciation, higher repair costs (rougher tenants), higher vacancy rates, and occasional difficulty collecting rent.

Still, with that said, my eye kept wandering towards properties in Detroit city limits, and that brings me to posing the ensuing case to you all.

Looking at a property such as 20300 Albany St, Detroit, MI, it is listed for 39,900 and is turnkey (and looks pretty nice). The estimated monthly payment would probably be around $300 at the very most. Being moderately conservative, the estimated rent is looking like $1,100 per the BP calculator. Take out $110 from there for property management fees. Not including repair costs & vacancy, you're looking at a net profit of around $700. 

Not only is that the highest CoC return I've found (relative to non-Detroit addresses & neighborhoods), but I would also be able to pay this house off much more quickly than the other options in traditional neighborhoods and net its full potential much sooner.

So, my question to you all is this: What am I missing with these types of deals in general?

Let's say I'm okay with this house not appreciating much, and that I understand that I'll probably have to pay for slightly more repairs than with a house in Warren or Roseville for example. However, with that bottom line, why would that still not be worth it? Especially since I'm hiring a property manager regardless of where my houses would be.

Really appreciate any insight in advance! I'm sure many of you on this board (and many investors in my area) could easily afford houses like that in cash right now, yet I don't see those houses flying off the market at all, contrary to houses 2 miles north. I've gotta be missing something lol

(Note: The house I linked above is one of *many* similar options. My question is not about that house itself, otherwise I would've posted in the deal analysis subforum. My question is about this type of market/rental philosophy in general. Doesn't even have to pertain to Detroit. Take Baltimore, Cleveland, etc the same way).

Update, if anyone cares lol: Put in an offer today on a house I found yesterday & immediately went to go see. Already got a promising counter that I’m thinking of jumping on. Enjoying the process for sure.

 Justin, I genuinely don't care where you invest. 

But let's understand what's going on here. 

The property managers you are talking DO NOT DO BUSINESS IN DETROIT.

It's that simple. They don't understand anything beyond the suburbs and they choose not to operate in the city. So, do you think they'd tell you to invest in Detroit proper over the suburbs and steer your business away?

Yeah... no.

My point is to take everything with a grain of salt. Do your own research. Again, I'll repeat... you are on the ground there. If you don't actually take the time to understand your own market, well the reality is you shouldn't be investing in real estate at all.

Everyone told me the same garbage when I was getting started in 2019. So many naysayers about the city of Detroit. It was so loud that it finally made me want to look at it even further. I figured the risk was low (given price points) and upside unlimited.

I'm thankful every day that I went against the grain and invested in the city. It's literally been the best financial decision I've ever made.

 I should clarify - the two property managers I talked to *do* indeed do business in Detroit (and the surrounding areas as well), and still were pushing me towards the suburbs due to appreciation, since I will be holding onto these houses well into my own retirement age. With a 30-year outlook, they said that appreciation should be a bigger focus of mine than immediate cashflow, but that they're good with it if I choose Detroit at the end of the day.

Then the one local investor/real estate broker that I am leaning on for advice has invested in Detroit himself but had a bad experience, as the amount of repair costs he would have to spend after each tenant moved out greatly ate into his cashflow profit from the year prior.

With that said, I obviously understand that is a very, very small sample size and for every person that has a negative experience, there is one that has a positive one like yourself. Also, it's not lost on me that property managers would be getting a bigger cut per month on 10% of a suburban rental, given a higher rent, so that may be their agenda.

Either way, I appreciate you nudging me to continue diving into Detroit and asking questions, instead of ruling it out so quickly.

Quote from @Blake Novotney:

As far as what you mentioned with your plans to purchase a primary residence, I think the 5% option makes the most sense. If you are going to be using cash on hand to quickly invest in one or two additional properties, I'd want that extra money there. Your primary will (hopefully) appreciate regardless of what your downpayment is.

 Thanks for weighing in. Was hoping someone did touch on that point of mine and either reinforced it or debunked it. Glad to hear you agree!

Quote from @Ke Nan Wang:

Thank you for your post. I think your market cashflow pretty well. I would start talking to property managers, realtors and lenders and start shopping. 

It got me interested in looking into your market and I'm surprised to find hundreds of >1% rule properties that are in decent shape in Detroit, MI. 

Got me interested in what is it like to invest and own LTR there. Did a quick google search and found that Detroit is relatively Landlord friendly. Anyone who's specialized in operating in Detroit? 

I'm more so looking just outside of Detroit. In Warren, Ferndale, Roseville, Oak Park, Eastpointe, etc.

All 3 local investors and property managers that I've talked to say they caution away from Detroit itself due to vacancy rates, the amount of expenses to repair the property just after tenants move out, and the lack of appreciation with those houses over time (compared to areas outside of city limits).

Quote from @Nathan Gesner:

Quote from @Justin Thind:

The cost of buying increased dramatically and rent rates haven't caught up. It may be years before we see the same returns we were able to get in 2018.

My first investment was a mediocre townhome for $67,000. BiggerPockets didn't exist. I hadn't ready any books on real estate investing. I didn't have a calculator, the 1% rule, a mentor, or anything. I bought a house that rented for $35 more than the mortgage, taxes, and insurance. I put that $35 into an account and saved up. Fortunately, we didn't have any major expenses the first couple of years. I raised rents as we went and was eventually able to upgrade the unit. By the time I sold it eight years later, the property was cash flowing $400+ per month and I sold it for a profit of over $80,000.

Real estate is very forgiving. We push so hard for cash flow, but there are other ways to make money through real estate and people have been doing it throuhout history without the benefit of the tools we have available today. In fact, I sometimes think the tools make it harder for people to buy because they spend too much time analyzing, looking for the perfect deal, or trying to match the results of some guy on YouTube that probably exaggerates his results.

 That was a cool real-life example for sure. Appreciate you sharing!

Quote from @Nathan Gesner:

Quote from @Justin Thind:

Stop thinking and start doing.

You are in a market with hundreds, maybe thousands of opportunities. Set a goal to put something under contract in 30 days. Find a REALTOR and a Property Manager. They will help you focus in on a good neighborhood. Buy a house, give it the Property Manager, then set up to do it again.

I look forward to your update in July.

I'm definitely good with setting a goal like that, but haven't found anything with CoC return higher than 5-6%, where as the rule of thumb I'm seeing is to not settle for anything under 8%. While I don't want to keep sitting on the sideline, I also don't want to bust buy something for the sake of buying and it not cash flow. Are the days of 8%+ CoC return not viable right not because of high interest rates?

Hi everyone, just joined the community here. Looking to get started in real estate investing asap. Began the process last month and have been analyzing deals and even put in an offer today. Still, I'm not entirely confident in my vision/direction.

Context on myself - I live in Metro Detroit, graduated college 2 years ago and have been working as an engineer. Work is close to my hometown, so I was able to move back home with my parents and have saved a huge chunk of my salary the last 2 years. In addition to making pretty decent money, I've recently added a side career in the digital media space, so it's time to put the income & savings to use. Also, in addition to these two jobs, I'll be starting my MBA (company-funded) next month. I say all of this to paint the following picture:

- I have very little free time, so I plan to hire a property manager.

- I have $90k cash in hand. As a result, I'd prefer to not do anything creative like home hacking or leverage private lending. 

- With that 90k, I plan to buy 1-2 SFH long-term rental properties, and a home for myself and move out.

My question is very open ended, what would your strategy be if you were in this situation? 

Currently, this is my vision: I am looking at single-family houses in the $90k-120k range. I hope to buy two of them at that price point with 20% down and try to cash flow as much as possible, without being too risky with vacancy rates (aka, avoiding inner-city Detroit). I'm looking at houses that don't require too much work, as I don't have the time or skillset to refurb them. Plus, I believe it has to be in pretty decent shape to get a traditional mortgage approved on them anyway. On the flip side, I am hoping the home isn't totally maxed out and I can go in and replace the carpet with vinyl flooring and change out the kitchen cabinets and counter tops. This way, I can do little stuff to add value instead of buying a recent flip someone else is maximizing profit on, but also not doing a full refurb either. A nice middle ground, I think. With my own house (that I'd live in), I'd like that to be about 250-270k. I've come around on only putting 5% down even if I have the cash to do 20%, as real estate experts seem to say "just buy another rental instead of lowering your own mortgage a little. You can only do that 5% option on your primary residence, so take advantage of it." Hopefully you all agree? If not, I'd happily go back to my previous, traditionally-rigid mentality of paying the "usual" 20% since I have it lol

Anyway, that's my current line of thinking. However, so far, I haven't been finding great cashflow margins on the rental property numbers I'm running, and that's what has led me to make this post. Do I have the wrong idea about diversifying and getting two cheap rentals, and maybe should instead be looking at one medium rental? Am I being stupid when I'm saying "I saved money, so I'm going to ignore alternative, creative options like private lenders & the BRRRR method" and missing out on the more profitable avenue that way? Can I go with the BRRR method without needing to dip my toe in the priiate lending sector? Should I not be avoiding lower-rated communities and am overexaggerating the vacancy/tenant quality element? ...Or is my vision not flawed at all, and it's just hard to find high cashflow opportunities in the current market?

I know the YouTube videos all talk about "how to buy your first rental if you're broke" and have creative, bold advice on how to leverage other people's money. There isn't so much about the nitty gritty of which traditional "boring" option to go with if you have decent money. 

I definitely wouldn't say that I have analysis paralysis, but I do want to fine-tune my exact vision and then commit to offering on everything that meets my subsequent buying criteria.  Really, really appreciate any insight, and I apologize for the lengthy post. Just wanted to cover all the variables and factors instead of saying "I'm new, tell me where to start. Go!"