All Forum Posts by: Matt Souza

Hi @Brock Hoffman,

If you are already leaning away from getting your license, then I would not bother. There are plenty of agents out there that do this full time, are experienced in their market, and have a good sense of comps. Just make sure you talk to a few different agents and find one that is investor friendly. Best of luck!

Matt

Hi @Mustafa Ahmad,

Welcome to BP! If you are serious about getting started in real estate investing, it sounds like your best bet would be to leverage a FHA 203k loan for a "house hack" into a 2-4 unit property. FHA only requires 3% down and is forgiving about low credit scores. Plus, when you live in one of the units, it greatly reduces the risk of the investment. You should be able to find a property that meets your needs near Dearborn Heights. Best of luck!

Thomas is correct, CoC ROI works best when initially evaluating a property. Other metrics that are more helpful to use are IRR, dollar per door, and cap rate. I personally use a few different criteria in my analysis, ROI is just one of them.

@Tony Gazetti,

I think going in with the mindset that "it's acceptable to settle for an okay deal since its my first" is a dangerous line of thinking. It sounds to me like you are trying to justify a bad deal to yourself. Separate emotion, evaluate objectively. I personally think that 4% for repairs is too low. As John mentioned too, you should always factor in PM, even if you plan on self-managing. All these and your CoC ROI is only 5.4%? What happens if you need to evict? If the last tenant destroys the place and you need to do some rehab work? Your numbers do not leave a lot of room for error.

Regarding your question about rent rations, you can find deals above 1% everywhere in Michigan, not just in C and D class neighborhoods. You just have to actually FIND a deal and not just scour the MLS. I see wholesale deals all the time in B neighborhoods where rent ratios push 2%, you just have to work more diligently at finding real deals. The market is hot right now, prices are inflated, which means deals are going to be even more difficult to find on the market.

I am not trying to deter you from getting into real estate, I think anyone who has interest should take the leap. I just hear people all the time who are so eager to get started that they justify bad deals to themselves. I just caution you not to let emotions overshadow rational thinking. Best of luck to you.

Andrew Johnson , You are correct. With the exception of Ann Arbor and a few other towns, most of Michigan shows a minimum of 1% rent ratio. I invest in Metro Detroit and only do a 2% minimum.

You are going to have a difficult time financing a property at that low of a price, most local banks will not lend less than $25k on a property. If you can get one to lend, it will have to go through a seasoning period. From the banks I've spoke with in Metro Detroit, that is 6 months and 1 day from when you closed on the property. Best of luck!

Hi @Lisa Craig,

The State of Michigan has pretty straightforward rules regarding security deposits, you should reference this document: http://www.legislature.mi.gov/publications/tenantl...

Refer to Page 8 and 9, it outlines exactly what you need to do if you want to withhold any portion of the security deposit to cover. As long as the tenant completed an inventory checklist at the beginning of the lease, and you have proof of damage, you should be covered. Best of luck!

Looks like a pretty good deal to me. I would increase your CapEx and Maintenance expenses (I use 10% each for older, lower valued properties), but I err on the conservative side.

Do tenants pay the water/sewage bill? Are they responsible for lawn care? If not, these should be added.

Are the two units sharing a furnace and water heater? How does that work exactly? If not, adding these items will cost you a lot more than $1500.

Best of luck!

Hi Nichola Dotson , You should always screen tenants through your normal screening process, regardless of whether they are inherited or not. If they have good standing with the previous owner, you can use your best judgement on whether to let them stay. Purchasing properties with inherited tenants requires careful handling. You should have already spoken to all three to see how they feel about all of this. Are they happy there? Do they want to move? Are they angry the place is being sold? It's possible that if do this AFTER closing, you end up with a few evictions on your hands, which will destroy a good deal. My suggestion is to learn how the tenants feel before closing. You need to be prepared for all scenarios: let them stay, allow them to leave after a month, give them cash for keys, or evict them. From my experience, inherited tenants rarely go quietly if you tell them to leave. Again, this is a delicate situation and requires careful handling. Best of luck!

Hi @Delmas Edwards,

PM me, I have a local lender that can help.