2 family deal metro Detroit area

[William Ware]

OK here we go. Looking for advice, comments or deal or no deal. As a new investor I think I may have found a good deal on my first multi family property. I've taken the advice of this board and others to look at owning brick/dirt instead of condos/T-houses (my first two deals are t-houses :D )
Here's the details
two family
first floor - one bedroom (needs work to create 2nd bedroom)
2nd floor - three bedroom
full basement
has separate utilities (2 water heaters, 2 elec boxes, 2 gas meters
2008 taxes $2000 (love Michigan and taxes)
house mortgages in 2003 $120,000 and 2006 $125000
Should rent for $1600/month (both units)
best guess..needs $10-$15000 in improvements
most work will be done by self and family (brother is a carpenter)
great area (single families homes)
Sale Price $25000.00
This would be a cash deal
Look forward to your comments
Bill W

[Scott M.]

I will never turn down a free lunch - look at my photo!

So I was correct about the homestead taxes - trust me when I say those taxes will more then double - it isn't just a homestead VS non-homestead - in Detroit you will pay 18% more for non-homestead the problem is the difference between the TV and the SEV.

In most states (Michigan is one of them) the TV can only go up X amount per year - in Michigan it is 5% or the rate of inflation or whatever is less. So each year the SEV can go up (or down) as much as the assessor says.

However that is uncapped the year of a sale – so the year of a sale the TV will always become equal to the SEV….in this case your TV will jump from $35K to $60K (technically not really $60K as assessed values in most counties in the country – wayne included have come down – so your 60K may be 52K or something – so your new TV will be say $52K meaning your new taxes will be approx. $4,000 plus the 300 or 400 for garbage and your tax bill will be around $4,300……WAY different from the $2,000 you thought it would be.

So that is what I mean by the TV will be the SEV – that is the same in most places around the country but since tax levels are way less – like this very same property in OH or MS or AL may be $1,200 taxes for the year – so if your off your only off by a few hundy a year – in places like Detroit if you don’t understand how the tax system works you could be off a few hundy a month – not a year.

The reason your other property has the same TV and SEV is because the year you bought it they were brought to equal – if you look back in the tax records you will find the year prior to you buying it they were different (unless someone else bought it that year) etc…..

From a straight numbers game since this is cash on cash you need to figure out what return you want / need but I think $30K for a duplex is way overpaying in today’s market – not just in Detroit / Michigan but in a lot of markets – I wouldn’t pay that in most of the markets I work in.

Not sure if your property is really in the city or in the burbs or whatnot but there are better deals to be had in the city for sure – just my opinion and this really depends on the type of hood you buy in.

But – I would examine three things….when you started this thread:
- You were going to pay $25k – now your going to pay $30k
- The rent was $1,600 now the rent is $1,300
- Your taxes were $2,000 now they are $4,300

How sure are you right now about your other numbers and assumptions?