Investing in Detroit, MI

[Savai Smith]

Hello!  I am a realtor, desiring to get into the investment side (flips/buy & holds).  I am in NC.  I researched listings in Detroit.  I understand they have a history of selling properties extremely cheap.  To the experienced investors: would it be worth it to travel to Detroit to invest the time, etc...... to flip a property there, since I cannot find anything similar in my area, with the market being so hot? 

Thank You!

[Drew Sygit]

Metro Detroit offers many options for meeting the 1% Rule and relatively high ROI.

The two most common mistakes we see investors make, over & over again, are:

1) Not understanding and running their own ROI numbers

2) Not having a clear understanding of the type of asset a property is

In our opinion, your best team member should be your Property Management Company (PMC). They have to deal with any property you buy every month until you sell or terminate them. Everyone else on your team will be transaction-based and not really involved after a purchase.

We're in the Metro Detroit area, so you may want to follow our blog here on BP, but at least read the following posts:

Follow our "Deep Dive" series we're doing about Metro Detroit cities and City of Detroit Neighborhoods: https://www.biggerpockets.com/...

How to “Screen a PMC Better than a Tenant”: https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

In our experience you will need to:

1) Learn to "Maintain to the Neighborhood", not your personal standards

2) Tenant-Proof everything you can

• Hard surface flooring, not carpeting (too easy to trash)
• Same basic paint for everything
• No garbage disposals for them to break
• Only spring-type doorstops also with plate on the wall
• Glue rubber mats under sinks to prevent water damage
• Sheet aluminum on walls around stovetops, for easy grease removal
• Towel racks - screw 1x3 to wall studs, then screw rack to that
• Install low-profile downspout ext, not aluminum that always disappear
• Plan on cleaning gutters and leaves up in the fall as tenants won't
• Avoid garage door openers

3) Have a great application screening process:

• Check credit for evictions & convictions, utility collections
• Focus on employment/income stability
• Require bank or debit card statement - you'll be surprised what they spend their money on!
• Make surprise visit to their current home to see how they treat it - that's how they'll treat yours!
• Deliberately have a few challenges in your screening process - it will weed out "entitlement mentality" problems

4) Allow payment plans, but create system to track when payments due, so they don't keep falling further behind

• You will need to call them on due dates or they will fall further behind
• Be prepared to give a strong NO when asked if you will change rent due dates to "make it easier" for tenants to pay rent based upon their SSI or paycheck dates. This shows total lack of budgeting and is a sign they will only fall further behind with more excuses.

5) Have a defined eviction process, but allow 3-5 days of flexibility for inevitable slow-pays.

6) Find handymen that live in an area only 1 Class higher than your property. Sending a Class A handyman to a Class C or D property will waste your money. Send Class B to C and Class C to D. They will also get along better with the tenants.