Where are all the detroit Investment properties going?

[Stephan Akins]

I’m looking to invest in rental property, me and a few friends but we can’t find any good ones! It’s for sure a sellers market.

[Brian Kantor]

Hi, @Stephan Akins. I invest in Detroit, and please don't take this the wrong way, but my answer is simply "look harder/smarter."

There are a ton of great deals out there both on the MLS and off-market. I am also of the mind that almost any property is a good deal at the right price and with the right strategy.

First, ask yourself are you looking to fix and flip or buy and hold. Once you've got that settled, you'll want to ask yourself what a "good investment" means to you. Is it $20k+ profit on a flip? $40k? Is it $300/month in cash-flow on a rental? Is it an 8% annualized return on your equity? 9%? 10%? What's something you personally would consider a good buy?

Then pop a target property into a calculator to check out the numbers (the calculators here on BP are great). Instead of using the calculator to determine the end result (ie, that the ROE or cap-rate is say 7.5%), start with the end in mind. Start with that return percentage, and then figure out what the property would NEED to cost in order to get you to that number. Make sure you pad your renovation estimate by at least 30% because you WILL go over budget.

After this you know what offer you can make on that property to get that return you want. Maybe at it's $50k list-price on the MLS, it isn't a "good" investment, but at $40k, the numbers look good in your calculator or spreadsheet. Now you know that you can offer $40k on that property, and if they accept, awesome. If not, move on to the next one. (Note: paying cash or removing contingencies will help make your low-ball offer more appealing.)

You can find great deals both on the MLS and off-market. To find off-market deals, join some DET Real Estate facebook groups. There are a bunch. Wholesalers are always posting deals there. On the MLS, also look for properties where you can add value. Maybe something is listed as 1000 square feet, but you're looking at the photos, and it looks massive. It's very possible that the listing is wrong. Go check out the property with an agent. Maybe it's actually 1500 Sq feet. You've now found value. Look for MLS properties with only 1 photo. People are lazy and just disregard that property. If you go and actually check out the property, maybe it's a gem. Find a 1200 sq-foot 3/1 that you can build a master-bath inside a large bedroom to make it a 3/2. Maybe there is an enclosed porch that you can "easily" turn into a 4th BR.

There are a ton of great deals, if you're willing to put in the work. If deals just fell from the sky, everyone would be a real estate investor :)

Good luck!