Detroit proper or the suburbs?

Question

This sub-forum may be more useful to us if we let each other know whether we are interested in the City of Detroit or the suburbs. I have partnered on deals in Detroit but all of my individual investments  have been in Southern Oakland County (Oak Park, Farmington, Farmington Hills). I have partnered on deals in several surrounding Counties.

Richard Dunlop · Answer

I think the Warren sub forum should be changed to the Detroit Suburbs sub forum.

Saul L. · Answer

To get back to @Jeff Rabinowitz original post, after initially investing in properties within the city (Zips 48223,48235) for long term buy and hold, and experiencing firsthand all the unforeseen complexities that go with that strategy in Detroit, I am taking a step back and reconsidering - looking for cleverer routes with the right partners on the ground.

I think that both the suburbs and the city proper have great opportunities (and am considering further opportunities in both)  but not necessarily the same strategy. They are different markets. What works in the city wont necessarily work in the burbs and vice versa. (Not sure how the @Joe Villeneuve BRRR strategy would work in the city without the stability of the burbs or if @Richard Dunlop 's strategies for the city would work with the higher priced properties in the burbs)

In my opinion, the burbs or city debate all comes down to the area you are familiar with, your strategy, and for an out of state investor - who you are working with on the ground.

Jeff Rabinowitz · Answer

@Richard Dunlop, I would second that. Though that would still be a very large area. I don't think the BP admins realize how large and diverse Wayne, Oakland and Macomb Counties are.

Joshua Woolls · Answer

In the right area, 30k could get you well on your way here. In fact, that may be able to get conventional financing for a duplex. If things start getting serious and you are really considering moving, let me know. I know the areas very well. What you may want to consider is moving to the area and renting for a bit while you get established(jobs) and then once you have jobs and financing in order you could go house hunting. It would also give you a chance to learn the area. I absolutely love this area for investing. I am sure there are other great places, but there is a low cost of ownership barrier here and the returns are pretty good. Also, if you know the areas, you don't need to invest in crappy neighborhoods to be able to afford a home.

Also, could you secure financing before you move?

Aaron Shuman · Answer

Wow, I can't believe I never responded to this - sorry @Joshua Woolls!No, I wouldn't dream of buying and renovating for only 30k. That's the total amount we would be able to put toward a down payment, although we would like to stay even below that. We are still trying to figure out whether it would be best/necessary for us to go through an FHA loan. After doing some research and talking with lenders, I'm starting to realize that it might be difficult to secure a loan shortly after moving. Because we will have to find new jobs, our work history might be viewed as unstable. Any thoughts or experience on that matter?Also, thanks for the tip on MoveInMichigan.com. Great tool!

Joshua Woolls · Answer

I think a Duplex/Triplex would be ideal. HUD Home Store is great, but don;t limit yourself to just HUD homes. The best local site to use to look at Real Estate is MoveInMichigan.com. It is pretty accurate and up to date. You can filter to just show multifamily on there.

When you say your budget is 30k, does that mean that is how much cash you have, or you want to buy and renovate for under 30k. If you want to buy and renovate for under 30k, you are going to be hard pressed to buy anywhere that is remotely stable. If have 30k in cash and you want to finance and use a 203k, you are golden. Get pre-approved for your loan first and then start shopping.

Aaron Shuman · Answer

My ideal timeline for the first flip would be 4-6 months, while my girlfriend thinks it would be smarter to stay in the first house for about a year. I guess my thinking is to do it as quickly as possible without rushing and risking making costly mistakes. We also need to consider where we are going to live in the interim between moving and finding our first house, as well as between our first and second house, and what that is going to cost.In terms of using HUD/FHA financing, we definitely are not trying to abuse the system, and plan to be completely transparent about our intentions. I was also thinking if we are planning to stay in the property for a year or two, it might be better to look for a triplex/fourplex. What are your thoughts @Joshua Woolls? I've been looking on the HUDhomestore, but I can't find a way to filter for just multi-family properties.

In terms of budget, I'd say we max out around $30k. We are going to need to factor in whether we can get a 203k loan as well, because if we can't, I doubt we will have enough money to rehab the property. We also are going to need to consider things like the cost of living before buying the home and what kind of jobs we will need to get to qualify for an FHA loan. I'm curious, @Richard Dunlop, what was your process when you moved to the Detroit area? Did you have something lined up before you got there, or did it take some time after moving before making your first deal? Did you have to get a job when you moved out there or did you devote all of your time to real estate?Sincere thanks, you guys, for your input.

Joe Villeneuve · Answer

PM me and I'll give you my contact info.

Joshua Woolls · Answer

You could use an FHA loan to finance a live in flip, but FHA loans usually have a minimum length of stay. 1-2 years I believe? That being said buying a HUD home under FHA financing would be a good way to get a deal before "investors" get the chance to purchase a property and if you wanted to do take your time doing that first flip, it could be a nice way to learn.

Now, as far as I know there are not really any checks out there to stop you from selling the house before the 1-2 years is past. That is not the intent of the program though and I do not suggest that you abuse it.

What type of investment are you looking to make? 5k? 50k? This isn't California and it is not priced like it either.

Aaron Shuman · Answer

@Joe Villeneuve

Thanks so much - I did some sleuthing and found your website. I've got some reading to do! I'm currently looking at areas like Oak Park, Soutfield, Warren, and Dearborn. The challenge is going to be finding a place that we can make the most use of what little money we have (we're still in our mid-twenties). We are taking a trip to Detroit at the end of this month, and, if you have the time, I'd love the opportunity to chat while we are there. I'll PM you.

@Richard Dunlop

It's good to see another SoCal transplant! Real estate investment is something I really want to do, but it is just too crazy down here. That is what brought my focus to Metro Detroit. I'd love the chance to speak with you as well, especially in regards to your moving across the country to pursue the great opportunities over there.

One question I have for the both of you: Is it possible to use an FHA loan to finance a flip? I keep reading different forums/articles with slightly different answers. We plan to live in the house during the renovation, so we will be inhabitants, but the message I keep getting is you need cash. @Richard Dunlop, how did you finance your first project once you moved out there?

Detroit proper or the suburbs?

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