All Forum Posts by: Drew Sygit

@Mike Teeple yeah, you should schedule a chat with @Matthew Irish-Jones

@Rohmah Ismael when do you want to chat?

@Jessica Privitera it WILL NOT GET BETTER!

So, the sooner you evict the better.

If you are worried about embarrassing holiday events, hire a Property Management Company and let them be the bad guys.

@Amy Jones are you looking to remotely self-manage or looking for referrals to property management companies?

@Chelsea DiLuzio the Midwest markets are way different than the markets out west!

Don't be suckered into buying cheap properties - unelss you know exactly what you are getting into.

Here's some copy & paste advice that applies to just about any Midwest rental market:

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Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.
Section 8: Rents are too high for the program and cash paying tenants are better overall.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years
Section 8: Rents are usually too high for the program.

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Section 8: This is the Property Class S8 was designed for. Still need to screen S8 prospects though.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.
Section 8: All the S8 “gurus” promote putting S8 tenants into this Class of cheap properties to “get rich”. If only it was that easy!

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

@Kayla Elliott is the handyman 1099 or W-2?

If 1099, why can't he get his own liabilty coverage?
- sounds like your friend's PMC pays this way.

If W-2, why isn't your business properly insured to cover him?.

FYI - licensing and insurance are two DIFFERENT things!

When you say you, "can't let him go" - why not? He has too much historical knowledge? Affordable? He's like one of the family?

You are going to have to weight that against your desire to transfer management.

If you want to go down the path of outsourcing some of the burden, suggest you make a list of everything you do. Rank everything by how much you like/dislike doing it and how much time it takes you. Then you can identify the tasks you dislike the most & take the most time. These you want to outsource first!

@Stephen Akindona in our experience, the PMCs offering:

- No Termination Fees
- Tenant Replacement Guarantees
- Eviction Guarantees
- Flat Fee Management
- Etc.

only manage Class A & B+ properties, or bite off more than they can chew and their services suffer.

@Lexi Blocksom suggest you discuss in detail with @Russell Brazil

You've made a mistake thousands of naive investors have made - expecting Class A results from Class C & D properties:( 

In general, you'd want to compare what you can sell the property for now versus what it would cost to update it and what you could then sell it for. Two concerns:

1) How much of the repair investment would you get back?
2) How fast would it sell if repairs made vs not made?
- it's tough factoring in carrying costs as they're a "guess". But, they can drastically alter the numbers.

What type of pre-purchase inspection did you have done? How did they miss the electrical & roof issues - or did you just not understand the inspection report?

You may want to have another inspection done to evaluate the plumbing and heating systems as well as having the sewer camera'd. You want to know of any & all problems before spending any additional funds on the property!

@Rohmah Ismael this can all be covered faster on a phone or Zoom call.

DM me...

@Sarah Hadassah Negrón so you get a money judgment.

Now you have to turn that into a garnishment action with the courts.

To do that, you typcially need to have the tenant personally served - which means finding them or hiring a skip-tracer to do so.

Then, what are you going to garnish?

Do you know where they currently work? Currently bank?

In Michigan, the ultimate garnishment is state tax refunds (federal cannot be garnished).

Not seeing how you are going to successfully do this on your own - remotely:(