All Forum Posts by: Vincent DeLucia

 I'll 2nd Caleb, he nailed the main property concerns. Indy markets differ, not sure about Cincinnati. The most important question to ask  yourself is are these home ages typical in the area. Put yourself in a buyers shoes, if 100 yr old homes aren't the norm you made have a hard time flipping it. On the other side of the coin, if you plan on a long term buy and hold you should fix 100% of the problems immediately and that should be factored into your budget. Otherwise the property will nickel and dime you over the years. Knob & tube is always a deal breaker for me. Any excessive water damage I avoid as well. If you can get the property into perfect condition and it pencils, then go for it

I will agree with Scott local market and the laws and code is said markets are very important.  Some markets might have more strict regulations and cost more to own older homes while others will be more flexible.

Older properties can be OK but your maintenance, repairs will be higher if you are comparing them to 50/60s or newer builds. You want to make sure you do inspections and check the sewer line. See if there is still plaster, old wiring(knob & tube or aluminum), old galvanized pipes, termites, etc. I will say structurally they are solid. You do want to tuckpoint and keep the foundation sealed. Don't ever finish the basement if it is stone/rock foundation. 

 I think the local market matters a lot here. Can you share what city/state in the midwest?

@Vincent DeLucia check out our website where we have the entire Metro Detroit area listed by Property Class and the 183 Detroit Neighborhoods.

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

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.

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+, 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 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, 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.

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

It's absolutely worth taking a deeper dive.

I've been investing in Detroit proper since 2019 and have 12-doors there. I've done it all... buying tenant occupied, doing BRRRR's, section 8, doing full gut renovations, etc.

I also help clients do these things from out of state.

I lived in Troy (just outside Detroit) from 2017-2022 but I'm back in California now. Detroit is coming up big time, but it's still flying relatively under the radar.

Suburbs are getting increasingly expensive while the city is getting stronger and more attractive to move into. It all makes for an interesting dynamic that we've yet to see fully play out.

Detroit prices are up 2x in the last 5 years. And it's not slowing down. The Census came out and reported the first (modest) uptick in population in 2023 for the first time in nearly 70 years. So yes, it's still early here.

Happy to discuss more about the market with you or anyone else. I can also point you to a ton of resources if you'd like to do your own research.

Investing in New Builds: Considerations and Process

New Build Investment Options:

Build and Sell (Fix and Flip):

Pros: Potential for high profits with modern appeal.

Cons: Requires significant upfront investment and market risks.

Build and Hold (Long-term Rental):

Pros: Attracts quality tenants, potential for higher rental income.

Cons: High initial costs, market fluctuations.

Process Overview:

Market Research: Identify high-demand areas.

Land Acquisition: Purchase suitable land.

Design and Planning: Work with architects and obtain permits.

Construction: Oversee build quality and manage costs.

Marketing (Fix and Flip): Highlight new features to attract buyers.

Tenant Management (Rental): Implement thorough screening processes.

Advice:

Educate Yourself: Understand local regulations and market dynamics.

Risk Management: Prepare for potential delays and cost overruns.

If you have any other questions/just want to discuss feel free to reach out to me directly!