All Forum Posts by: Todd Brittingham

Yes, you definitely want to include working class neighborhoods in your search. One easy way to do this is to start plotting out 3/2 properties that have sold in your area. You will start to see where the various areas are that should solicit good rental markets.

As a general rule of thumb, high income areas are 90% owner occupiers
Working class neighborhoods are split 50/50 between owners and renters, and low income areas are about 80% renters. Your returns will rise as you move from high income to working class to low income neighborhoods, but your risk moves up as well. If you would like to venture into the low income areas, there are usually great opportunities for higher returns but you need to do so carefully. Fully research the market, go out and drive around in the neighborhoods and get a good sense of where you are buying. If you're still not comfortable, then stick to the working class neighborhoods.

Karnine, this should not be a problem. If I'm looking at this right, you have the following:

ARV = $279,000
Repairs = $80,000
Mortgage = $115,000

So there is a potential profit of $84,000. I don't see what the issue is. You need to put a plan together for the rehab on this property and then start marketing that plan to other investors. Take a look at my blog post at the website listed below and I give an example of how to do this. You really just need to lay things out on paper, and if the project makes sense the money will show up. You just need to communicate it to the investors effectively.
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As far as selling the property quickly, this should not be a problem, you just need to know your market. Go and look at the properties that are similar to yours and see what amenities they have. Then when you do the rehab, make your house the best of the bunch...make it a 10! Think about this for a minute. How do buyers buy a house? They go look at all the properties in the area they want to live in, and they choose the best one to submit an offer on. So if yours is the best house, you will get the offers.

My guess is the last couple houses you sold were just "average" when compared to the rest of the homes on the market in the area. This is why it took so long to sell. You need to differentiate your property from the rest and it will sell.

Hope this helps...

Victor,

As with anything else, you need to do you due dilligence before investing with any of these companies. If you are going to be an out of state investor that is fine, but if you're willing to invest in a property for thousands of dollars, it's probably worth the time and effort spent over a weekend to visit the area you are going to invest in. This will give you a chance to meet and interview various companies you might work with, and also get a very good perspective of the areas you will be investing in. There are a number of Turnkey sites popping up, and they are a good way to go if you find the right team.

Michael,

You are on the right track. I think a property manager is absolutely the way to go whether your rental is next door, or 2000 miles away. I have a few rental properties that are local, but I have property managers managing the properties. Could I do this work? Absolutely, but I know the time spent managing the properties is time spent away from creating more deals which is much more profitable.

I'm not sure of the level of friendship you have with this guy, but if he was a true friend he would not do this to you. Or, he would be straight with you and say look, I don't have the money right now, can we work something out. To just come back and say I'll give you a $1000 bucks without even acknowledging your original agreement, well let's just say he's trying to take advantage of you. His poor situation is not your fault.

If you continue to manage the properties, you should put a contract together and let him know that you will be collecting the rents and taking your fees & any maintenance costs out BEFORE he gets paid.

I have two degrees in engineering, and the best thing I have gained from those degrees is the ability to think logically and make a well thought out decision.

Now, with regard to the question of college, I think as the years pass the answer is going to change. 15 years ago it was a no-brainer college absolutely made sense. But now, I'm not so sure. With today's job market, I wonder what percentage of new graduates will be living at or below the poverty level because of their student loans. As college gets more expensive, this is going to become a bigger problem.

Honestly I don't think there is a good solution, but here is what I am going to offer my kids. If they would like to go into real estate I will encourage them to purchase their first property at a young age (I'm thinking 12 or 13). Of course this will be done with a watchful eye, but if they excel at it, by the time they are 18 they will have the choice to continue with real estate investing, or go to college. The nice thing is that over the previous 5 years they just might make enought money to pay for that 4-year degree and be that much further ahead.

I just wish my parents had the forsight to do this for me...I eventually figured it out though...

Check out http://www.zilpy.com. I've found it to be pretty accurate with the rentals I have.

However this should just be the start of your analysis. Get to know 2-3 property managers in your area and they should be able to give you the real rent rate you can expect. Their word is gospel over whatever you see on any website, because they are looking at the market real time.

1) MLS
2) Craigslist
3) Fannie Mae (Homepath.com)
4) HUD
5) Bandit Signs
6) Business Cards

Michael,
This is a very interesting discussion and you are asking all the right questions. With regard to Jeremy's statements I can attest that he is one of the leaders in Detroit and he runs a top notch business. I am just starting to get into Turnkey rentals in Detroit and Pontiac, and I am using Jeremy's business as a model for what to do and more importantly what not to do. Jeremy is absolutely right...those $10,000 houses are trouble and you want to stay away from them. If you do decide to invest in Detroit, before you do you should come visit for yourself. I'm sure Jeremy could show you the difference between a $10,000 house, and the $30,000 - $50,000 houses that he deals in. It truly is about location, and if you are particular about where you invest, there is a lot of money to be made in Detroit.

What is your incentive to bypass the EMD? As Bryan mentioned most sellers are going to want you to have some skin in the game, and you can actually use the EMD to your advantage to make your offer look stronger. Any offer that has a low/no EMD with lots of contingencies might not even get a look from a seller, where as a high EMD with no contingencies may get accepted even if multiple offers are present.