I am planning to purchase a $30k 3/1 SF Home in Detroit. I receive lots of negative comments about this. I will appreciate some insights as the return % seems to be interesting.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
It is possible however you really got to know the locations beforehand. That applies anywhere. Can someone just chuck 30k in a random sfr in D and come out ahead? Not normally imo.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
It is possible however you really got to know the locations beforehand. That applies anywhere. Can someone just chuck 30k in a random sfr in D and come out ahead? Not normally imo.
Thanks for your answer Matt. The best advice is contact a good Property Management Co?
What is a reasonable net yield for a property in Detroit?
A PM is a good start. IDK what the yields are or could be anywhere from great to negative we can understand. My guess is outsiders end up more in the negative side of that spectrum for a variety of reasons from over paying to buying management challenges they were not ready for. Check The Shea Show on youtube for some of those challenges and he picks these up for sub 10k regularly. Even for those he passes on most due to real rough locations. Good luck!
Specialist · Detroit, MI · Member since 2018 · 36 posts · 24 votes
8y
HI. I live and invest in Detroit. There are many questions to answer this properly. Where is the house? Do you have anybody in Detroit that can help you independent of the seller? Is the home occupied? More to follow based on your answers.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
This is a bad idea for a few reasons: First, you likely have no experience so it's unlikely you're going to make good decisions. Anything good coming out of this is pure luck.
Second, 30k house will likely never go up (a significant amount) and you're probably limiting who will buy it in the future. Most loans (read that as gov backed loans) won't go below 50k, so you're going 30k (plus any reapirs now or in the future) just sitting there in dead equity. If you do find a local lender to loan it'll be at a higher cost etc...
Third, your tenants are far more likely to trash your house. You will have higher than normal turnover, you will have people stop paying rent and it'll take time to get them out. Then you're not going to be able to rent it out since they trashed the place and it'll cost you time and money to fix it and get it back out. The repairs will likely eat that cash flow you were making......and it'll just continuously drain your money.
Now, if you were experienced and local this is a different story. That story goes along the lines of you have a ton of these places. The few that are out of service is just part of the game, but on average you're making money. But you're hands on, you have the staff to get things done and people out. You have contractors that come in fix these places up and get them back ASAP. You sell the ones that aren't worth it anymore to out of state investors who don't know any better.....
The low entry point of Detroit was interesting to me too, until I learned that there is often no good exit strategy. A good exit strategy is highly dependent on the location.