Started Real Estate Adventure 3 Years Ago and It's Time to Grow

[Felix Wong]

     Hi Everyone! It has been a long journey. I moved to Detroit 3 years ago with big dreams, a pocket full of cash, and was naive about what I could expect and produce here in Detroit on my first project. 

     When I moved, I found work as a Property Manager with a tech-enabled PM company that managed over 700 units in Metro Detroit. My previous experience in real estate before then was a year in sales back when I was 18, and that was in NY. Other than that, I had some basic understanding from my family's dealings with real estate in NY and Texas with managing commercial tenants. 

     Simultaneously, while I was working as a PM, I bought my first off-market, completely distressed historic duplex in Southwest Detroit for a meager sum. I had budgeted $220,000 for renovations, received multiple bids at $400k plus which completely threw me off. I eventually settled with my roofer who did a pretty decent job on the roof, to help me to GC the project and promised he could tackle it within my budget. This was one of my first mistakes.

     Eventually as the project slowly moved on, I needed to be on site more often to manage the contractors he hired. I had to fire 3-5 drywall crews. The project went overbudget by $250k and I was struggling to get the job done. The project took 2 years and during that time as a PM, I learned a hell of a lot dealing with maintenance, contractors, tenants, etc. If I had to do it again, I know I could have saved an immense amount, but the reality is, I would not trade that experience for anything. It taught me that even under immense pressure, I would not crack. 

     At the end I was able to secure tenants, drawing in $57,600 gross a year with 0 vacancy (mind you, I only signed 2 x 1year long lease cycles, and yes, I had new tenants come in the literal next day after move-out so 0 vacancy. I prepped the homes myself with the wife in 1 night). These first 2 years were a net zero due to some minor compliance issues and a plethora of upgrades I decided to do (already included in the $250k cost overrun). Next year, I will be cashflow positive.

    This 3 year ordeal taught me so many things:

1. Do not go for the cheapest bid, you get what you pay for and then some

2. Always negotiate on the price. Everyone is out to milk you.

3. Do not be afraid to pay more for quality work if it means it will save you money in the long run.

4. Do not be afraid to threaten to sue, to fire people, walk away from a bad deal and to withhold money

5. Learn to repair, it will save you money but also teach you how to effectively gauge workmanship and deal with contractors

6. There is no one right way to get tenants. I currently gross almost $5K a mo on a duplex in Southwest Detroit because of how I market the unit and cultivate relationships.

7. Under whatever circumstance, treat your best tenants well and they will stay and work with you under the most stressful situations

For those who are wondering, OPEX is currently $5,400, and if we add in a 10K reserve fund and assume its used each year, that's $43K NOI or 9% cash on cash ROI. We have no debt. I believe this is be fairly good considering all the failures we had to overcome during the 2 year rehab.

As I head into a new year and a new fresh start with positive cashflow on this property, I am searching to start my next project with a sharper mind attached to a set of more determined and stronger shoulders. I am currently searching for loan options (quite possibly HELOC) for drawing equity from this property to get into commercial real estate. If anyone has lender recommendations, I am open to receiving them.

As I continue on my own personal mission to build a small real estate empire, I'll keep everyone posted. Perhaps I will bump into some of you in the future.