All Forum Posts by: Account Closed

If property appreciation was your objective, a well established market with little room for growth combined with a market that did not experience a significant drop in price was not the market you should have chosen. 

Factor in tight credit conditions, low buyer confidence who want anything but a 30yr financial commitment and an ample supply of investors with attractive rentals, and where do you expect a significant # of bids to come from to boost appreciation? 

We use a phrase called "buy the dips" in equities/futures markets... if appreciation is your game, buy where the dips occurred. If you do your homework, you'll find markets that cash flow as well.  

Cost of ownership (taxes & insurance) is fairly high, but you have the benefit of lower entry points. Risks are high but so is cash flow potential. Finding a legit property manager who will take care of your properties and not nickel & dime you for every little repair is the main concern IMO. 

Welcome Hugh. Property management seems to be the most important variable in the Detroit market for non-local investors. I got lucky and found a good one, so if you want her info, shoot me a private message.

Hey all, 

Have a problem tenant who caused ~$2000 in damages and some unpaid utilities... let her dog soil the carpet and refused to pay water bill last few months. 

We have her security deposit, but it only covers ~1/3 of cost of repairs. 

Question: 

• What is the most cost effective means of collecting funds owed? 
• What is the most cost effective means of reporting this on her credit report while abiding by current regulations?

I don't want to drop another $250-$500 in legal expenses when I probably won't collect funds owed anyway, but curious what techniques the experienced landlords have done when this has happened to them.

I don't know how many (if any) local lenders would specialize in esoteric lending vehicles like an IRA LLC, but I'm guessing a big bank (i.e. JPM Chase) would lend on such projects. I get JPM letters twice a year saying they'll lend in such parameters, and there are probably 10+ Chase branches in Detroit Metro, so perhaps that's a starting point. Best of luck!

Dan, 

My results have been fairly good, but I got in at/near the bottom and bought a few good Detroit Metro properties for 10-20 cents on the dollar what they sold for 10yrs ago. So naturally, my ROIs are >average, but there are greater than average costs of ownership... Detroit Metro taxes are fairly high (hire a tax appeals firm to lower them), insurance is higher than average in most places (call 10+ insurance providers to get quotes b/c the results vary quite a bit), and as you'll find through the forums, you must exercise extreme caution hiring property managers, contractors, etc (read many posts of investors getting ripped off).

If done correctly, you can do very well. If you take a day off, and don't verify things are done accurately or you get scammed by a shady PM or contractor, consider it a costly educational experience. I'm not trying to put down Big D as a whole, but it seems to be at/near the top on the investor headaches list, but as with all things, with risk comes reward.

DM me if you have other specific questions. 

Matt

Look into buying a closed school. I don't have a link, but Detroit's school system closed dozens of old schools and put them on the market for developers. 

 Jim, 

If this property is in Detroit Metro area (a presumption on my part), I'd would seriously look into selling it "as is" under the "handyman special" marketing term using a land contract. Lots of folks in Detroit Metro who want a home, but simply can't qualify for a mortgage. 

Likewise, lots of investors who want a rental property, but will want to conserve cash to pay for repairs, then use the rent to pay for the mortgage. 

It's not ideal... but it's a non-credit score hit option for you.

Since you have a mortgage, you can use the incoming monthly payments to pay your existing mortgage. Set the LC payment at or above what you currently pay. I'd also suggest hiring a title company with experience in owner financed deals. 

Alternatively, you can always go the short sale or foreclosure route, but if this were me, I'd go land contract. 

$50 house comes with... 

• $1000s in rehab (if not 10s of $1000s) 
• $1000+/yr insurance
• $1000+/yr property taxes

Add in little things like crime rates, bad schools, copper thieves and landlord unfriendly regulations, and you're playing with fire. 

Not saying it can't be done. But there are a myriad of reasons they've been trying to give these homes away for last 5+ years. 

@Mark R. 

What you may be missing is the crime stats, cost of rehab and the after repair value (ARV).

Problem w/ many of these cheap foreclosures in Detroit (and every other area like it) is the total cost of rehab shocks investors. Usually, that shock occurs once you already own it and your brain is telling you to keep dropping money into a sunken cost. 

Pretty soon, you realize you need a furnace/HVAC system, new plumbing, new paint, refinished floors/new carpet, etc., etc. Thus, you're out another 10k+ unless you're doing it yourself or you've got a lead contractor who really knows where the bargains are. 

And let's not forget the final detail... your ARV better be above the amount of $$ you've sank into it, otherwise you've just paid a hefty amount of $$ to work for free (or worse).

To make matters worse, every crook w/in a 10 block radius will see you're fixing up the property, and likewise when you list the property on the MLS or Craigslist, and will make note to "visit" your newly rehab'd property to relieve you of the newly installed furnace, copper lines, and anything else of value they can sell.

Conclusion... do these cheap properties present a bargain? Absolutely. But they are the best example of a double edged sword I can find in the real estate market right now.

Don't mean to scare you off, just the market as I've experienced it thus far.