Why invest in Toledo Vs Detroit

[Molefi Branson]

Hi,

I’m starting this conversation to know more about both Markets. I’ve been told many people call Toledo little Detroit but i don’t know what that means. From my research both Toledo & Detroit favor cash flow over appreciation. Is that correct ?

Why are homes so cheap in Toledo ? Is cheap always good?

Do either market favor single family or multi family?

Is the Brrrr method a viable method in both markets w/o appreciation?

Thanks answer a newbies question! Have a great Day?

[Ujwal Velagapudi]

You will find it very difficult to find financing due to location/low cost for lenders (commercial especially), finding good tenants is much harder and you will have to lower your criteria, safety concerns if you self manage, and difficulty trying to get anything done with the city. Dealing with low barrier to entry means you're dealing with everybody and anybody, which is not good if you're trying to run a professional business. 

There are many horror stories you can find on scams. People investing from out of state, meanwhile local PM's/contractors eating up their $$, and in a lot of cases outright scamming people into deals. Fake P&L's, squatters as "tenants", etc. 

Detroit can also be night and day from one block to the next. It is something I urge people to see for themselves. Dirt cheap homes are available still, but do you want one in the midst of a street with 50% blight that has no removal date in sight?

Jobs - or lack of them. The city is gentrifying, that will cause appreciation and rent increases, but for most other residents there still lacks job growth. 

City governing: It has improved as of late, which is nice, but tough to undo decades of degradation in just years. The city offices are difficult to work with & cumbersome. the policing of permits, licenses, violations, etc. is a headache even when you're doing everything right. The courts for evictions and all are also always backed up and dreadfully slow. I automated my business nearly 100% as I traveled out of country a lot, but because of some minor things I did need to physically be present for some city documents, which is just an archaic way of doing business. Not discussing why these issues are there, but just simply sharing the issues I've come across with the city. The city is severely understaffed & under-funded. We even had 911 calls go unanswered. 

PM's - It is tough to find a good PM the worse the neighborhood is. Very tough. Ones who will manage in the worst of areas I've found have a direct correlation with poor performance, poor tenant treatment, greed/borderline steal, etc. especially as a small PM company scales. It's the territory, it is tough to do an excellent job at scale with small buildings. 

Self manage - Can be tough managing different tenants and backgrounds if you're not local. Also, it is violent and can be dangerous. I've been told by numerous tenants basic things of what to do and not to do when going there, like carrying, blend in with a simple car, dress casual, racial things, etc. I've learned a lot from self managing my Detroit buildings. 

Contractors - It is tough to find good contractors. Many of them will not go into Detroit, or only will at certain times (not late night emergencies). You'll have slimmer pickings to choose from, or unlicensed contractors. 

I've rambled on a bit, but just some that came to mind. I'm sure there are many other factors, which I'm sure are similar to other cities as well, but Detroit is its own unique beast. Tame it and it can be great $$$ for you, otherwise you could easily be out $$$.