All Forum Posts by: Joe Delia

Keep the real estate agent out of the deal . There are pleanty of real estate contracts out there , I believe there are some on this site . I bought my first house FSBO , I got a contract from the office supply store and added a few extra things , I t was easy ( I was 23 years old ) My second purchase was another FSBO , I went to my filing cabinet and found the same contract (blank) and used it again , we added a few clauses we both agreed on . My 3 rd purchase was with a real estate agent , WHAT A PAIN IN THE A$ . . My 4 thand 5 th purchaces were FSBO still using the same old contract that I used 27 years ago and things sailed right thru . If this is a friend charging you $ 1375.00 for less than 1/2 hour of work , I will be your best friend for $ 250.00 more .

Joe, correct. But they are supposed be "qualified to do the work", whatever that means.

What city is it in? If it's Pontiac, then it might as well be in Detroit.

I don't know about the Homepath specifically, but the only thing affecting the rehab I can think of is that the Homepath probably requires a certified GC for the rehab (203k does), which will probably raise your costs verses the "non GC" guys you'd probably use on a typical rehab. The inspections shouldn't be time consuming.

Originally posted by @Aaron Yates:

Originally posted by @Kevin Auyong:

Mike, all kidding aside, did you actually get a chance to visit the area? Curious to see how this pans out. How much will the area be affected by Detroit's woes?

@Kevin Auyong , That's the thing about Detroit. The city limits are like an invisible wall. 8 Mile over on the East side truly has been a divider for years. All my properties are within a .5 mile or less north of 8 mile and all are safe and in good neighborhoods of South Warren and Hazel Park.

But if you go south of 8 Mile, and you are WHITE... be very cautious of which neighborhood you go into then. Essentially you coud sit on the north side of 8 mile at night time and might even get to see the crime on the south side of 8 mile.

Another example. 10 Miles north of the Detroit city limit ( 8 mile is the line for the city border) is a city called Birmingham. One of the most expensive cities to live in Oakland County Michigan. You better have some serious cash to live here and all surrounding areas are not cheap either.

The problem with EVERYONE from OUT-OF-STATE on here who bashes or puts their negative two cents in about Detroit and Metro Detroit is that they don't know what they are talking about.

@Account Closed , @Tom A. , @James Ross , @Rob K. are just a few names who can confirm what I am telling you. We are all local investors. Yes the CITY of Detroit has lots of problems within the CITY LIMITS. But many still invest there as well.

So to end my rant and add a final statement (not aimed at anyone specific),

"unless someone lives and invests anywhere in or around Detroit, then what do you really have to say that will truly be of use because all of your opinion's are created from watching the news and listening to other out-of-state investors bash Detroit and Metro Detroit. Give advice on truly what you know and not what you THINK you know "

@Mike Wallace , congrats on the deal. I hope everything pans out for you. The numbers look great. Similar to the numbers I see in my market as well. Don't let nay-sayers deter you. Do your due diligence and decide for yourself if it works for you or not. Its your choice and no one elses.

Aaron, thanks for the info. I'm going to go look at a map to see the areas you talk about.

Detroit is a big area, do you think the city's problems will trickle out to these better areas and bring them down-businesses closing, crime rising, etc?

Or do you think the area is strong enough to do well even if Detroit totally tanks?

Originally posted by Mike Wallace:

seems like a no brainer to me. What do you guys think?

This property is in the Metro Detroit area.

Seemed like a no brainer until that last line :)

You might find some people who are supportive of Detroit, but most won't even consider the city as a whole. If you think you can keep it rented with good tenants, then it sounds like a great deal. If you're going to have 10-20% vacancy and 2K-5K turnover costs every time around, then it doesn't add up to a very good deal.

Except you neglect the fact that management is budgeted into the expense calculations, so whether it's 2 houses or 50 your time per week is zero.

You also do some hand-wavey math when saying, in example one, you could cover the rent for all six houses without it being an issue, but in example two covering the rent for only four (1/3 of 12) would dip into your (greater than example one's) profit. Not quite sure of the logic behind that one.

Leverage, as I understand it, is primarily about your risk tolerance. On the one hand, if you own more properties, you're more protected from a nightmare scenario at any one of them. Basically, it's a form of dollar cost averaging for owning rentals. That said, your capitals expenses can be way higher. Lots more roofs, HVAC systems, and plumbing than if you just own one property. Again, though, this expense is accounted for in the 50% rule (and, if you're actually buying, your due diligence calculations), so if you are careful with your buying you should be covered.

The argument BUT YOUR EXPENSES ARE WAY MORE! is spurious, because YOUR INCOME IS WAY MORE TOO!

It seems like where people have been burned on leverage is either (1) when the market crashes and the properties are suddenly not worth what you owe, or (2) not buying each individual property very carefully. Both of those dangers are present when you buy cash, in smaller doses. For instance, if you own a SFR free and clear and the market tanks, there may suddenly be a glut of rentals out there undercutting you, meaning you can't fill your rental. The bank doesn't take it away from you, but since there are carrying costs it's cash flow negative. If you don't come out of pocket to pay those costs you'll lose the property. If you paid cash betting on appreciation and you don't get it, same potential issue. You're stuck with a place that is costing you money. It's just less money than if you financed 10 of them. So, again, it's about risk tolerance, and (IMO) it's a difference of degree; not kind.