Buying & Selling Real Estate
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 8 years ago, 07/24/2016
DETROIT and MICHIGAN (#1 Defender answers questions)
@Account Closed
I Live in Detroit. I proudly live in Detroit. But for the past couple of threads about my fine city I’ve stayed silent to see which direction it would go; but I’m back to answer any questions you may have about Detroit or Michigan. I’ll also answer some of the questions that weren’t completely answered or defended in other threads. I tagged the people that have asked me questions.
What do you think of Michigan
What do you think of Detroit?
Originally posted by @Steve Londeau:
Hi friends. Its been a while. :)
Join in the discussion, the latest two participants are:
A lawn boy Lawn Care Expert who I'm presuming has never been to Detroit reading 5 year old newspapers at the barbershop, and making jokes about Detroit.
An Attorney that lived in Beverly Hills California talking about possibly making Detroit his primary residence after the visit he made last month impressed him.
My #1 rule is if you haven't been here, your comments are not informed.
I'll have to catch up on the discussion I saw this flagged or something and wanted to comment so I'd see it later.
There are some really awesome areas in Detroit, some really scary areas, and then a lot of in between. The one thing there is a ton of is opportunity.. just don't be stupid. (but that goes in any city in this business right?)
Originally posted by @Logan Hicks:
You forgot about little ole me.
Im a heavy anti detroit person, but for things completely unrelated to the properties themselves.
I guess it's deja vu all over again!
I'll answer your objections in the coming days but
let me just say I'm glad you hate Detroit!
As long as people keep hating Detroit, I will keep making lots of money.
I agree with @Steve Londeau. You need to spend more time than a few hours during a drive through the city to make informed comments. But it does have a lot of really bad areas and to a lot of investors it is not investable. It all depends on your experience, risk tolerance, preference. For some of us, including myself, it is great. For others it will be a nightmare.
Ron its not that I wouldnt buy in detroit. I have no mind buying in detroit if I had massive amounts of capital laying around to the point to where I had no use for it, but put it in my perspective.
I can take 1M, put that into about 20 properties in detroit, spend another 1M sprucing them up, creating an exceptional neighborhood in detroit, and sit on the investment for many years (we'll assume 5 for your numbers), and hopefully double my money in that time at sell (4M)
Or...
I can take 2M, put them into 20 businesses vetted by the SBA, buy them on loans at 10% down, with each cash flowing on average 389k net per year, and in 5 years, take my 38.9M in profits, as well as my 20 businesses, and sell each of them for another 20M (Only what I paid for them), and keep a kings ransom of a grand total of 58.9M in my pocket. After only 5 years.
That only outperforms detroit by oh... I dunno... x14.725, or roughly close to 1500% (300%, year over year).
Now hopefully you see why, although detroit is a decent investment (maybe), Id much rather buy things that have been vetted by organizations much larger than me, built by experts far more knowledgable than me, started by people with far more money than me, and has been around a lot longer than Ive been alive. (average business I buy is 30+ years old, Im 25.)
Logan what are you specifically referring to, when you reference "buying businesses"?
If you don't mind I'm just trying to figure out what that is.
Thanks
Scott I buy a variety of businesses, depending on the performance, age, specific purpose, and market of that particular business.
I dont target any specific arena in terms of what "particular type" I buy, I buy with a specific mindset and discipline, avoiding things such as restaurants, "fad based businesses", franchises, and the likeness.
The true power and potential in a business is its age, its name, and most importantly, its life span average cash flow net income.
Businesses present a much higher demand in terms of social skills, creative thinking, and business mindset, but the reward is usually far greater than your average real estate deal.
Originally posted by @Logan Hicks:
Scott I buy a variety of businesses, depending on the performance, age, specific purpose, and market of that particular business.
I dont target any specific arena in terms of what "particular type" I buy, I buy with a specific mindset and discipline, avoiding things such as restaurants, "fad based businesses", franchises, and the likeness.
The true power and potential in a business is its age, its name, and most importantly, its life span average cash flow net income.
Businesses present a much higher demand in terms of social skills, creative thinking, and business mindset, but the reward is usually far greater than your average real estate deal.
Aah, you're like Edward Lewis(Richard Gere's character for those unfamiliar) from Pretty Woman. Nice :-)
Kudos,
Mary
Originally posted by @Jon W.:
You need to spend more time than a few hours during a drive through the city to make informed comments.
Agreed. I spent several months reading everything I could about Detroit - real estate, politics, economy, industry, infrastructure, etc. - prior to my visit. While there, I spent three days driving the neighborhoods from sun up to sun down. I have also consulted realtors, wholesalers, flippers, contractors, lawyers, and even the Detroit police about owning property there. I intend to be very well-educated before pulling the trigger on any deals.
@Michael Harris I am very glad to see that you have done so much leg work. That is rare and if you are doing it you will do well. Good luck.
Originally posted by @Richard Ball:
Excellent article
Originally posted by @Richard Dunlop:
Originally posted by @CK Hwang:
I would say yes, but the bigger question is at what risk? what is your tolerance for risk? As I tell my clients who eye the 15-25% returns in markets like Detroit and upstate NY, it's not whether the returns are there... the question really is whether the risks are worth it to them.
We don't work that cheap!
Rented for $600 0% Vacancy.
4 year tenant was in it when I bought it.
@James Wise said:
"Gotta call you out on this one Rich. What is the point of the post? Working up to a sales pitch or something? You know, I know.....Everybody knows that something like this is not going to be replicated on any sort of scale.
I assume this is some one off you bought at the very bottom of the market and you will admit that results are not typical.
There is not some magic neighborhood in Detroit where there are amazing $600 tenants happily living in $1,200 houses that we can just assume will never have vacancy."
To avoid hijacking the thread that these questions were asked in I'll answer them here since the original thread had nothing to do with Detroit
Detroit is a wasteland. Newspapers and local tv keep trying to talk about how the city is coming back. Total nonsense. In most neighborhoods you can go out your front door at night without risking being robbed or worse. Theres a ton of neighborhoods that only have one residence occupied per block. City has even cancelled waste pick up and city lighting in neighborhoods cause theres so few people living in em that its not worth the cost/ city can't afford the cost.
That city will not come back in our lifetime.
Originally posted by @Benjamin Timmins:
Detroit is a wasteland. Newspapers and local tv keep trying to talk about how the city is coming back. Total nonsense. In most neighborhoods you can go out your front door at night without risking being robbed or worse. Theres a ton of neighborhoods that only have one residence occupied per block. City has even cancelled waste pick up and city lighting in neighborhoods cause theres so few people living in em that its not worth the cost/ city can't afford the cost.
That city will not come back in our lifetime.
Thanks for your participation in this thread!
Read through this thread I wish Detroit progress would slow way way way down, I live in Detroit and it is coming back way too fast.
Let me point out the critics in this thread's early pages are gone from the scene and I presume are no longer investing in RE. I'm still here! The ones that told me there was no way to make money in Detroit.
But yes I'm glad you hate Detroit!
I will keep making lots of money as long as you and others hate Detroit.
Originally posted by @Richard Dunlop:
Originally posted by @Benjamin Timmins:
Detroit is a wasteland. Newspapers and local tv keep trying to talk about how the city is coming back. Total nonsense. In most neighborhoods you can go out your front door at night without risking being robbed or worse. Theres a ton of neighborhoods that only have one residence occupied per block. City has even cancelled waste pick up and city lighting in neighborhoods cause theres so few people living in em that its not worth the cost/ city can't afford the cost.
That city will not come back in our lifetime.
Thanks for your participation in this thread!
Read through this thread I wish Detroit progress would slow way way way down, I live in Detroit and it is coming back way too fast.
Let me point out the critics in this thread's early pages are gone from the scene and I presume are no longer investing in RE. I'm still here! The ones that told me there was no way to make money in Detroit.
But yes I'm glad you hate Detroit!
I will keep making lots of money as long as you and others hate Detroit.
Has nothing to do with hate, has everything to do with reality.
Detroit is booming! Ask our clients that buy 1, 2, 3......and up to 20!
Originally posted by @Richard Dunlop:
I assume this is some one off you bought at the very bottom of the market and you will admit that results are not typical.
It is a recent purchase it is not too far from Typical. My average acquisition cost over the last 6 months is $1825.
A big part that was not typical was the tenant in it with good income and since the PM started refusing the rent when the previous owner lost it to foreclosure, the tenant was relieved that the new buyer would still rent it without raising the rent and would allow him to buy it.
We discussed $8000 down payment and he said he would have it in one year so we signed a 1 year lease.
The other part that was not typical is the house was in excellent shape! All they needed was 1 gallon of paint and some new metal posts for the adjustable shelves in the kitchen cabinets as a couple of the plastic ones had broken with her heavy mixing bowls.
And a small area where a previous handyman (maybe them) had done an ugly job on a plaster repair.
It is a grand slam home run most of mine are only triples
@Richard Dunlop, since you are quoting me above, I want to clarify that I am not knocking Detroit. I think it is probably an excellent market to invest in, however, the original poster in the original thread is not from Detroit and what I was trying to explain to him is that blindly investing in a market simply to get 15% without knowing the lay of the land is risky. This blind risk is acceptable to some and unacceptable to others. I'm not knocking your market.
Originally posted by @CK Hwang:
@Richard Dunlop, since you are quoting me above, I want to clarify that I am not knocking Detroit. I think it is probably an excellent market to invest in, however, the original poster in the original thread is not from Detroit and what I was trying to explain to him is that blindly investing in a market simply to get 15% without knowing the lay of the land is risky. This blind risk is acceptable to some and unacceptable to others. I'm not knocking your market.
I didn't see your post as a knock on Detroit,,but I did want to correct the figures you use to evaluate your risk vs reward scenario.
I would not be investing in Detroit if the return was only going to be 15%-25%. (The figure you used)
I do not buy anything unless I expect the first year return to be 300% OR GREATER.
Originally posted by @Richard Dunlop:
...There is not some magic neighborhood in Detroit where there are amazing $600 tenants happily living in $1,200 houses that we can just assume will never have vacancy."
I wasn't trying to pretend there is. This was an "off Market deal" it is not a $1200 house.
It is worth about $18,000-$20,000 today and I expect it to appreciate at about 20% per year for the next 3 years.
The $600 rent is about typical and a TK provider would be trying to sell it to an out of state or out of country buyer for $45,000 to $55,000 based on the possibility of getting $700 a month.
I have bought houses that the real estate agent was trying to sell to his friends after he convinced the bank to list it low.
I have bought houses after the bank cut the agent's BPO in half to make sure it sold in less than 72 hours.
I have bought houses for less than $1000 after the listing expired for $30,000.
Everyone likes different kinds of real estate. One man's trash is another's treasure.
We can all list reasons why we like a certain price point, location, and type of product ( commercial,residential, etc.) but where someone sees reward another sees risk.
Forget the Detroit debate for a second. Nationally there is net migration away from cold belt states. Retirees are flocking to warm belt states for retirement which boosts economic development and growth.
Even my commercial clients living in cold belt states most want to invest in warmer climate areas.
I wish Detroit all the best but it will never be something I am looking at. That's more for you Richard to buy........................ : )
- Joel Owens
- Podcast Guest on Show #47
Originally posted by @Joel Owens:
Everyone likes different kinds of real estate....
Joel
When I'm Rich and Famous like you I'm going to be a Commercial Real Estate Broker in the Peach State just like you!
@Richard Dunlop Hi Richard, please let me know if you can help me to start investing in Detroit. Thank you!
Richard,
Thanks for your posts and 1st hand experience with investing in Detroit. I've read through this thread and appreciate you sharing your wisdom.