Maintenance Expectations in Metro Detroit

[Kenneth Jenkins]

This is just a brief post to give some insight into the local maintenance costs in the Metro Detroit area.  Maintenance costs are a huge factor in the profitability, or not of any investment property.  A little background about me, I have just over 200 doors in my current portfolio and our company manages just over 250 doors for third party investors in addition to those.  We have seen maintenance costs skyrocket over the past 2-3 years and every case is different but here are some general guidelines for reputable (non-crackhead) investor level pricing in our area of operations:

Furnace and A/C replacement with lineset for standard 3 bed 1 bath bungalow. Licensed with permits ~$4,000.

Full replacement of all water supply lines and shutoffs from the interior water meter with PEX and an open basement.  1 kitchen 1 bath 1 laundry.  Licensed with permits ~$3,250.

HWT standard gas single family low efficiency without exhaust retrofit $900.

Sand and stain hardwood floors, natural stain $3 per sf.

Paint interior walls, ceiling trim and doors 3 tone paint scheme 2 coats $3.20 per sf (floor area cost includes paint)

Click lock LVT flooring install overlay inclusive of prep and quarter round $4.50 per sf (materials and labor)

Asphalt roof installation 3/1 - 800 sf bungalow with 2 layers of shingles - ~$7,900

Standard porch cap replacement with 2 new precast concrete steps ~$2,500

Used stove or refrigerator delivery and install $350

New stove or refrigerator delivery and install $HD model specific

Use this as a general guideline.  YES, you can get the work done for less than this on occasion, in particular if you are doing some or all of the labor yourself, not pulling permits, or purchasing stolen materials as a starting point.  If you get a quote significantly below the numbers above you need to ensure that the contractor will actually execute the work and perform it to the required standard.  For instance we have seen dozens of sand and stain jobs on hardwood at $2/sf that needed to be completely redone. 

Knowledge and use of this information should help you to make a more realistic cost estimates for your models.  Happy investing!!!!

[Michael Smythe]

Agree with this post!

@Kenneth Jenkins you forgot to mention owners that expect a PMC to use contractors off Craigslist that are unlicensed, NOT insured and rarely have acceptable experience/skill - but, they quote the "best" price.

These same owners will sue a PMC if using these types of contractors results in a tenant lawsuit.

[Wells H.]

@Kenneth Jenkins thank you, this is very helpful to see. 

I'm just getting started and want to buy a multi-family unit in the next 3-4 months. I live in Detroit but envision running the investment as a business, not a third job: Pay top dollar for the best PMC. Fund higher quality cosmetic / light rehab for durability and dignity for tenants. Tell the PMC to screen *thoroughly* for quality tenants even if it takes a bit of time. Is this a realistic path to reasonable CoC return? I've shifted from trying to economize in everything in life to seeing that oftentimes it's well worth it to pay for the full service experience, no nickel-and-diming. Is it possible to make reasonable CoC return with that mindset when building my team? Thanks.

[Michael Smythe]

@Wells H. you need to invest in the right City of Detroit Neighborhoods!

[Wells H.]

@Michael Smythe thank you. From what I've read so far on these forums, don't start out investing in C- or lower blocks. 

I know your company offers a neighborhood ranking of A through D in Detroit, but it should be pretty clear just by taking an afternoon drive through the 'hoods, right?

[Michael Smythe]

@Wells H. you can spend DAYS driving through Detroit!

Our logical process:

1) Use Neighborhood rankings to narrow down area of city you want to invest in

2) Focus on getting to know that Neighborhood(s), so you know the good & bad streets, block-by-block.

3) Be patient to acquire properties on good streets that meet your buying criteria.

Our rankings are done with a "bell curve" approach. Meaning, a Class C Neighborhood will have majority of Class C properties, but there will still be some Class B and some Class D. So, you still need to be careful:)