New member from Michigan

[Kelly Choate]

Hello everyone! I am new to the real estate field and studying for my real estate exam in Michigan. I plan to become an agent, and eventually invest in properties, particularly buy and hold with a focus on aircrew as tenants.

I left the aviation field and am really going for something way out of my comfort zone for the first time in my life. So, I am on a quest for knowledge and to learn from the experiences of others...I am looking forward to participating in all Bigger Pockets has to offer!

[Account Closed]

Hi Kelly:

Make sure you find some educational classes specific to rentals. The pre-licensure course and test are very weak in the area of rentals. They also don't teach Michigan landlord-tenant law. Even if you’re not going to manage rentals, they are still good to know. Here are some of the big things that inexperienced real estate agents miss in the area of rental property sales—most of which can make or break a deal for a buyer:

• Limits on the number of unrelated people allowed to live together—this can range from -0- to unlimited but most communities have some limit somewhere between 1 and 4.
• Non-conforming use issues for multi-families, i.e. typically, if a rental is out of use as a rental in a strictly zoned area (e.g. R1), it may lose its non-conforming use as a rental. Bummer to find out after the deal is done and the politicos won’t grant a new non-conforming use. A two-unit could be restricted to single-family home. Or, a five unit could end up being restricted to a two-family. Both make a huge difference on income.  in some cities there are restrictions on the number of rentals and/or student rentals.
• Rental inspections and certifications– most larger cities require some sort of rental certificate which requires registration and certification. Some cities do not allow certificates of occupancy to be transferred to new owners—some have time limits. For example, in Grand Rapids, the certificate can only be transferred to a new owner if the certificate was issued within 90 days of the closing.
• Housing codes (typically the IPMC) – Most cities use the IPMC to inspect rental properties. The inspections are very subjective. What the city thinks needs to be done to a rental may not fit what the new buyer thinks is needed. For example, maybe the city thinks the whole driveway needs replaced but the buyer doesn’t. This is a multi-thousand dollar expense that is good to know about ahead of time.
• Not doing (or having the buyer do) due diligence. Were permits pulled for the new furnace and electric panel? Are there outstanding violations on the property? How much are the outstanding water bills? These are all things that could cost the buyer a lot of money.
• Security deposits not transferred at closing. The current tenants’ security deposits are theirs until they move. If the seller doesn’t transfer the deposits, the seller is essentially getting more for their property and the buyer is now obligated for the deposits.
• Incorrectly determining value based upon future income. An inexperienced real estate agent will be much less able to help the buyer determine if the price of the property is appropriate for the type of investment they are planning in the area that they are looking to buy in. Being an agent that has bought, managed, and sold their own rental property is very helpful.
• Treating the sale as a typical residential owner-occupied sale. There are a lot of differences between the sale of a home for an owner-occupied property and an investment property. Some of which is the required disclosure for lead-based paint. It should also be kept in mind that buildings with five or more units are considered commercial.

I wish you all the best! Good luck on your test!