All Forum Posts by: Drew Sygit

@Hitanshu Shah in Michigan either the water companies WILL NOT install more than one meter or they make it prohibitively expensive.

See if water company provides daily water usage reports, so you can trace back to when the usage spiked. 

Was it related to additional tenants? A new tenant MoveIn?

#1 cause of high water usage is "running" toilet. Have your PMC send a handyman to check that all flappers are seating correctly when the toilet is flushed and it's not getting hung up on the pull chain.

Other than that, check state & local laws to see if you can legally split the water bills between tenants based upon number of occupants or number of bedrooms.

@Alex Anschutz again, you need to understand the Property Classes of each City & Detroit Neighborhood to be successful.

Otherwise, someone will take advantage of your naivety and sell you a Class D property lipsticked to look Class B or C.

How will you know the difference?

Check out the map on our website:)

@Govinda Keshavdas your PMC may be great at maintenance, but now you're asking them to be a project manage or GC and do rehabs.

How much more are you paying them?

Even then, this may NOT be what they are set up to do.

There's a big difference between handymen doing maintenance and contractors doing rehabs!

@Nihal Osman did you not read our response?

@Mostafa Khalifa DM us the address and we'll let you know our thoughts...

@Shaheer Khan you want agents to find Guests to stay at your MTRs?

@Craig McConnell Here's some info we hope you find usedful:

-------------------------------------------------------------------------

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

• Property Tenant Pool: closely linked to location, but not always.
• Property Location: closely linked to tenant pool, but not always.
• Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.

We can also share numerous examples of properties & portfolios we’ve assisted investors with!

DM us if you’d like to discuss this logical approach in greater detail!

@Michael Hansen most states have laws about when rent is earned versus paid.

Any PMC that knows the law will do exactly what your PMC is doing.

Think of it this way - let's say the PMC forwards all the rents immediately to an owner. What happens if the property becomes uninhabitable and the PMC is legally required to refund the unearned rents and the OWNER refuses to send the money to the PMC? The owner will be opening themselves to a lawsuit, but they will also be exposing the PMC to that same lawsuit.

Why would a PMC take on this type of risk?

@Ryan Treacy who's going to take applications, chase documents and screen prospects?

Do NOT count on an agent doing this well!

I beleive that's the point @Adam Bartomeo is trying to make:)

@Shaheer Khan you'll either want to hire a PMC or go to nearby Home Depot on a Saturday at 6am to find serious handymen and contractors. 

You will still need to screen them to confirm licensed (handymen do not need in Michigan) and properly insured.