All Forum Posts by: Michael Smythe

@Jesse Leigh we're here to help you invest wisely, so your expectations are met:)

@Alan Asriants exactly what we were going to say!

@Collin Hays great post! Waiting to read the comments from the ostrich-type investors...

@Darko Bozic in our experience, most contractors are more concerned with how much they can make off a client as opposed to how they can save the client money.

While gouging may make business sense when dealing with new clients, it makes zero sense if you want repeat business from a landlord or Property Management Company.

How does your company address this issue?

@Bernard Gowen 

1) Are we as home owner’s responsible for tenant charges accumulated during move out?
-Yes, it's your property

2) How can we verify if rental management company actually made good faith attempts to send move out balance to tenant after move out or eviction?
- They should be able to provide proof of email or letter sent.

3) Is a rental company not deemed negligent and responsible if items in a property are stolen for not securing a property when failing to rekey all exterior locks after an eviction or move out?
- Depends on if they had money to do so, your approval or covered in the management contract and they need to be given a reasonable amount of time once all those factors are met. If a break-in happens while they are waiting on your or it's in their queue to be done, how are they liable?

4) Does a rental management contract carry over to a new rental company if rental accounts are purchased to another company ?
- Typically yes, unless the management contract states otherwise. It's no different than a lease contract remaining in effect if you fire your PMC and move your occupied property to another PMC.

5) Where can I find the responsibilities a rental management company holds in regards to the home owner?
- Check with your state real estate licensing division, but most of it should be covered by the management contract. We always LAUGH when prospective owners tell us they are going with a competitor because they have a shorter and easier to understand management contract. These SUCKERS are setting themselves up to get screwed because if it's NOT in the management contract, the PMC doesn't have to do it AND can do whatever they want.

@Jad Alomari

Michigan has some of the most complicated property taxes in the USA. Here’s what to know.

State Equalized Value versus Taxable Value

Back in 1994 Michigan passed the Headlee Amendment:

(http://www.legislature.mi.gov/(S(k5m2va1uyfgwtbyjf4nqb1bx))/mileg.aspx?page=LoadVirtualDoc&BookmarkID=6536)

that capped annual increases to the Taxable Value of a property to the lower of 5% or Michigan's Cost of Living increase. This was done to protect senior citizens on fixed incomes from being forced to sell their homes due to unaffordable property tax increases.

Since the passing of this amendment, all properties in Michigan have two property tax values associated with them:

1. State Equalized Value (SEV): supposedly equal to 50% of the market value of a property, not based on recent sales price.
2. Taxable Value: the SEV annually capped as long as there is not a transfer of ownership.

City Assessors are charged with determining how much property values have changed each year. Since they can't do each property individually, they use comparable sales to make broad generalizations to determine percent changes. Then these are applied to all properties in that area of the city.

Property owners get an annual update on their SEV & Taxable Values with their city property tax bill, typically sent in December.

So now, the city assessor tracks the SEV, but homeowners are taxed based upon the capped Taxable Value. These two numbers diverge over time as the SEV increases with property value, but the Taxable Value is capped. The Taxable Value is uncapped and equated to the SEV upon a sale or other transfer of property ownership, with limited exceptions.

Homestead versus Non-Homestead Millage Rates

Counties & cities in Michigan are allowed to set their own millage rates, with one restriction – a primary residence (Homestead) is exempt from up to 18 mills of school taxes on their Homestead property. A property qualifies as Homestead for this exemption if an eligible owner files a Principal Residence Exemption (PRE): https://www.michigan.gov/taxes/0,4676,7-238-43535_43539-210891--,00.html#:~:text=Section%20211.7cc%20and%20211.7,purposes%20up%20to%2018%20mills.

Many investors have gotten an ugly surprise when they bought a property that was a primary residence of the seller for the last 20 years. The removal of the Taxable Value cap and the switch to Non-Homestead millage rates can double, even triple, the property taxes. By the way, the cutoff date is June 1 of each year for these changes.

City & County Tax Bills

Most Michigan properties receive TWO annual tax bills - one from the city and one from the county. Many banks handling tax escrow accounts for mortgages have mistakenly thought there was one tax due twice/year or totally missed one of the taxes.

Investors should research the SEV and the Non-Homestead property tax millage rates to project what the property taxes will be after adjustment.

You can use this tool to estimate future property taxes: https://treas-secure.state.mi.us/ptestimator/ptestimator.asp

Let us know how else we can assist you to acquire a rental property that cashflows!

@Jonathan Rivera we've taken over management of 100s of supposedly turnkey rental properties.

Two biggest issues:

1) Turnkey PM sevices were terrible, hence why we got hired.

2) We do a TakeOver Evaluation Video that ALWAYS shows subpar turnkey work and not uncommon to find work that was never done.

So, we recommend owners find a beatup property and have it renovated themselves. Then you KNOW what was/wasn't done and how well it was done. Mant PMCs offer this service.

We have seen a few turnkey companies that provide pics/videos showing the work being done to PROVE what they did and the quality - at different stages of the work (not just at completion).

You would also want to DEMAND similar proof of anyone you hired to rehab a beatup purchase.

Let us know what other questions we can answer.

@Vijay Kurhade create your own for the other parties to sign:)

@Anastasia Papyan welcome to the DIY property management school of expensive lessons!

What does your lease state about all this?
- Maybe time to update it.

Did you check with the utility company if they have a landlord or property protection program that will alert you if utility is shutoff for ANY reason? There are programs that will also auto-flip to owner's account to avoid shutoff and these resulting situations.

In addition to @Nathan Gesner great advice, you should check with an eviction attorney about how to legally keep the tenant from returning to occupy the property or pursuing eviction as necessary.

@Ginnie Vigansky why not Detroit?

Check out some of the great things happening in Detroit in 2024

https://michiganchronicle.com/2024/01/03/major-developments-that-will-define-detroit-in-2024/

@Eskat Asfaw 

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

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

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

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+, zero evictions in last 7 years.

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, some blemishes, but should have no evictions in last 5 years

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, 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.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or 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, 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”.

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

What else can we assist you with about the Detroit market?