All Forum Posts by: Garett H.

The Mount Washington area is beautiful, if I were to move back that's where I'd be looking to go to. Not sure how the rental/flipping market is there, but it may be somewhere to start looking. 

Great views, quick drive into the city, and if you're close enough to the Mon incline you can easily take it down to Station square where there's usually quite a bit going on.

The Best Real Estate Investment Markets Last Year on the BiggerPockets forums http://www.biggerpockets.com/forums/25/topics/238837-best-real-estate-investment-markets-last-year Here's an interesting read

I guess it depends on how you plan to pay for the rehab. If you're going to finance it then I would probably calculate it into your monthly cash flow. If you're going to pay for it out of pocket then I'd figure it into the cash on cash return. Interested in seeing what others say though.

Welcome to the site. If you're ever considering getting rid of the ferndale property send me over the details. ;-)

I originally posted this on another forum, but figured someone here has some input to give also. 

I’m looking at a property that has the potential to be a decent cash-flowing place, but it’s currently way under market.

The current rent between the 2 units is $1000/month with a market of $1100/month, and the owner currently pays for their heating oil, water, sewer and garbage. This totals $215 a month. Typical for the area is garbage, and mayyybe water/sewer, but definitely not heat.

So, that’s a decent return, but the problem is that’s a lot of change for the currently stable long-term tenants. Totaling a $265 per month increase.

I’m wondering if it’s going to be best to make the adjustments in increments:

1. 1. Have tenants sign an active 1 year lease and start charging for heating oil ($125/month)
2. 2. At year 2 update a 1 year lease and require tenants to pay water and sewer ($66 a month)
3. 3. At year 3 update a 1 year lease and raise rents $50 a month to market value

So at year 3 you finally are at market value and making a bit more profit than before.

Or, I could go in, require a lease, increase their rent by $50, and have them cover the $215 utility costs all at once.

Even if they do move out and I have a month or even 2 of vacancy I would still come out ahead by making all the changes at once and getting fresh tenants in. This would also give a bit of time to inspect the units and make any necessary fixes or updates.

A poster on the other site brought up the point that a long term tenant will be much more valuable in the long run, so it would be best to make the changes gradually to try and not drive them away. I didn’t consider how large the impact of constantly changing tenants would actually be so I tried to put some numbers behind it.

After taking a look at the numbers it shows that for the initial 6 years it would be beneficial to immediately raise the rents by a total of $265 and if the current long term tenants leave I may be stuck with short term year to year leases for awhile. After year 6 though the Long Term tenant comes out ahead due to avoiding the short terms with costly vacancies, cleanings, and repairs between tenants.

After year 20 having a long term tenant equates to a ~$75k advantage over the short term cases which is quite a bit more than I expected.

So there’s something to think about, if you have any input I’d appreciate it. 

Auburn Hills has quite a bit of industry with GM, Oakland University, OCC, and other various engineering companies. I find it’s a decent rental market due to a lot of younger people/families coming to the area for jobs/school.

Another big thing is due to all of the commercial industry (the entire Meijer/Walmart plaza is considered Auburn Hills) in Auburn Hills, the city has a lot of tax revenue coming in which you see in how they try and keep it pretty well maintained. 

About 18months ago the city sent around a letter to some of us owners letting us know of their plans to expand the downtown area, and they redid some of the street parking to accommodate that it seems. There’s some new apartments directly in downtown which I’ve heard will have a shuttle going between there and Oakland which will be great for the students so they won’t NEED a car. Hopefully it’ll bring some of the on campus students to downtown also to help business.

Across from the funeral home in downtown is a pretty decent size abandoned lot that I was looking into purchasing, after some research I found out it was actually purchased by the city a few months prior to me looking, so there’s plans in the works.

Now with regard to Pontiac... I’m still trying to figure that one out. There’s a lot of cheap housing, and there seems to be quite a bit going on in the downtown area on the weekends. Concerts, parties, etc.. I feel it’s going to follow along the same path as downtown Detroit. Slowly start coming back to life starting from the center out, not sure what kind of timeframe, but it’s definitely on my radar to keep an eye on.

Hey Dave,

I was following this topic as I was also interested in hearing some feedback, but it doesn’t look like anyone has any for us.

Take a look here at this site: http://www.homeadvisor.com/c.MI.html I just ran across it, and it has quite a few reviews of contractors in the area. 

There’s no doubt in my mind that seminars/trainings like this are extremely valuable, but..... I have a hard time justifying the costs of something like that when there is such a large, open, and FREE knowledge base right here on bigger pockets as well as other sites. 

Perhaps once I’ve read every article, blog, and guide and listened to every podcast out there, and still feel that I’m lacking something then I would jump on a paid course, but in this day and age I’m more skeptical that they’re just presenting free information in a different way.

wordpress is a pretty common platform. You can find youtube videos/forum posts on almost any problem that you may have as well.

Originally posted by @Will Koederitz:

Originally posted by @Garett H.:

Welcome to the forum Will. It’s great here, a ton of information and you’ll make quite a few local connections - like me!

Props for not suffering from paralysis analysis and just jumping in! It seems like a pretty low-risk property to do it with, and from your numbers it looks like it could be a decent deal as well. 

I agree with your assumption that having a smaller place in a high rent area will probably lead to a more stabile tenant. I don’t think the loft part will hurt you too bad on the prospective tenants. Mainly because as you mentioned your target tenants are going to be bachelor/ettes with decent jobs, and from first hand experience I feel those type of people aren’t too terribly picky as long as the property is half decent. 

For a better analysis post up what your taxes and insurance are on the property. Are you doing the property management yourself? Are there any repairs needed in the near-term?

Garrett, thanks for the reply! 

Yes, I forgot to mention some numbers. The taxes are $1142/year, insurance is $600/year (will most likely change to a little higher), HOA is $145/month + gas/water. I will have PMI of $29/month initially due to putting 15% down.

The unit is very simple and part of a small complex so I do intend to do the management myself to start. Thing like the hot water heater are common equipment and therefore any replacement expenses come from HOA. It appears to be a low maintenance unit...at least as of now. Only repairs initially are cosmetic, including a little caulk and paint, and a few things to freshen it up.

Thanks!

 I’m coming up with an 11% cap rate and around $6900 yearly Net Operating Income. Now just subtract your mortgage and interest payment from that and you’ll have your yearly cash flow. Then divide your yearly cash flow by your cash out of pocket to get your cash on cash return.

Looks like a decent deal! Normally I don’t like properties in HOAs, but the numbers seem to work out with this out.