First rental. In Detroit. Off-market. Buy-and-hold.

[Brian Kantor]

Investment Info:

Single-family residence buy & hold investment in Detroit.

Purchase price: $20,000
Cash invested: $45,000

Purchased run-down, vacant, 1100sq ft 3BR/1.5BA SFH in Warrendale neighborhood of Detroit for $20k. Renovated for about $25k and am all-in at about $45k. Renting for $805/month to a Section 8 tenant, so 95% of the rent comes from the state and I don't have to stress missed payments due to covid or otherwise.

What made you interested in investing in this type of deal?

I like Detroit because the cost of entry is super-low and easy to find a cashflow-positive rental. It's a short flight from NYC where I am based. After bottoming out in the aftermath of the 2008 crash, DET has been appreciating nicely and new economic developments are popping up everyday.

How did you find this deal and how did you negotiate it?

I found a different property on the MLS in the same hood for $40k. I showed it to my PM who said that one of his other clients was liquidating his portfolio and had a similar property in the same hood on a better block for half the price. So I bought this from him for $20k and he got to keep it under his mgmt.

How did you finance this deal?

Paid cash. In the process of refinancing.

How did you add value to the deal?

New roof, new kitchen, refinished bathroom, new windows. Graded and trenched along the rear wall to fix a leak in the basement.

What was the outcome?

Cash-flowing about $450/month after capex and expenses prior to the cash-out refinance I am going through. After the mortgage, I'll be around $300/month in cash-flow. With that said, I am only going to be able to pull about 50% of my investment out of the deal at this time.

Lessons learned? Challenges?

This is not going to be a great BRRRR, but I am OK with that for Property 1. Net-net, the property cash-flows well and has a strong cap-rate. Because I purchased this through my PM, I was obligated to use him as the contractor and while the work wasnt bad, it wasnt as good a I would have liked. Lessons learned: (1) Let my PM know up-front that he can bid on the renovation, but I want other options, (2) make sure I get the property inspected before close, (3) make sure the BRRRR works in advance.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Steve Saleh was my agent. Great guy who I would recommend, but he's now at a different company and only works with sellers. Mousa Ahmad at Mutual Property Management has been great to work with on the PM side and will be using him again for Property #2.