All Forum Posts by: Christian Hutchinson

Money is looking for a home...Consider maybe Western Wayne County. You might have options out there.

I have been doing research into this fund. At first it seemed exciting.  But after SEC Filings, fee structure evaluations, etc . I feel uncomfortable making the investment at this time, and will reevaluate in 18 months; if its successful they WILL have another round of funding because that's the nature of the beast.

I know what I have done to get lending from banks, private investors, and funds.  It was a much smaller scale I had these items:

A listing of held RE Assets and performance for 2 years.
An executive summary of everyone involved in our operation: education/training, professional background, and role within the group.
Targeted Assets with rent rolls or Pro Forma for the past year, with plans for value added activities, rent projections, and cost-estimates of improvements.
Targeted clientele for desired assets backed with market research reporting or simply census data.

This venture very much feels like a guy giving a sales pitch for $50M and no exact plans on what to do with it.  The 8% wont happen in Year 1 for basic reasons.  Any MF Commercial Building will take 90 days to close if financing is involved, thats if its turnkey, earliest rents are Oct 1, 2018. If its turnkey the returns wont be 15%. A cash deal could maybe do 45 days, but with appraisal, environmental, inspections, title work little tight.  This isn't a husband and wife with $500K in their 401k buying an apartment building and accepting risk, investors are involved things have to be done above board.  This is like me putting in a furnace and HWT in a property I could pull a permit turning a 1 day thing into a two week thing, I just throw the stuff in, in this situation you have to pull a permit, slows down speed greatly.

A distressed asset will require at least 6 months of work, plus tenant turnover if occupied (loss revenues).

They stated they want to do non-profit housing, business investment, HUD housing, historical tax credits /rehabs, tax liens. When I hear that, I hear red tape, and time.

There is no skin in the game by the management.  $10k is loose change in a cupholder for most RE Investors, if management had $100K I would feel better, $500K-$1M would be ideal.

If I wanted a high-risk deal, I could do it myself, self-manage controlling the outcome directly, oh and own all the equity on the backend.

Lastly, this "Guru" pitching this has 57 doors based on what he said on Youtube recently. 26 doors is a single student housing complex in GA somewhere.  I'm nobody and I have 15, and I recently was able to get into banks talking about $1.25M to $2M deals and they were confident we could handle it, but my RE Assets were basically equal to the loans I desired. I feel like this guy is attempting to jump into the "next level" by using OPM to fuel his aspirations versus the reinvestment of his profits and his own assets. I question how sophisticated the management team truly is, because I know plenty of individuals with 50-500 doors (most I know is 3000), and they wouldn't dream of attempting something like this.

I've painted houses in Detroit 3 different times exterior wise. I would just do it. I wouldn't pull a permit for it. City Inspectors have 10000 things to worry about. You are in a non-historic district. Just do it.

I literally just reversed the color scheme on a house and its like a salmon color. No one cares.

Now if you bought this house from the Land Bank and need a COA to close the project pull the permit.

Everything is moving along well.  My triplex in Brush Park is obviously booming.  My property in the North End is going strong, I am little behind where I want to be with capital improvements such as windows and brick/masonry work, but that was from a project that was challenging for about 1 1/2 years on a non-Detroit property.  The rents are increasing faster than I expected though, and I should have a major jump in pricing next year.

I have one property I am sitting on, that I hope I can start work on this Fall ready for Spring 2019.  I'm waiting for the rents to hit a level worth rehab.  There are some larger developments happening around the property, but I'm just playing it safe, because its a property with very large units, and when the high-profile commercial units are ready I'll provide units double or triple in size for less money.

The LLC will give you anonymity you will most likely be a pass-thru anyway for tax purposes.

In the case of litigation any lawyer worth a dime will be able to break down the barrier of your LLC and you personally. It simply makes it harder. You have to really make sure nothing is in your name. You switch the utilities from tenant to property owner it switched to the LLC. Correspondence with the Govt entities same thing. I had a really good buddy who was still jammed up via lawsuit because though he maintained separate finances the courts viewed him and his brother and the LLC as one in the same because everything in the business was signed by himself or his brother.

The best thing with an LLC is the TIN you receive and after 2-3 years of operation your business can hold debt versus yourself or giving personal guarantees.

Go buy a $150 lawnmower and a $25 snow shovel. Issue it with their lease.  Make whoever has backyard privileges do it.

ALL my tenants SFH or MFH do their own lawn care. People rent homes because they want more privacy than an apartment. Make people be adults and take their of the lawn.

I would not spend that type of money for a home in Oak Park. Below Average Schools, no Downtown, and yes the rents look nice now but I would guess thats its population is highly sensitive to the economy. 

I just did a quick search online and see there is a place on the same street thats only $95K, it has only one bathroom, but it has a full unfinished basement, you can build a nice brand new bathroom for $6000. Your rents would be just as strong at the 3/2 you looked at, and you would have $30K in equity to play with in case a recession or drop in rents.

@Alexander Mair I am meaning that the property will not be turnkey.  Meaning it needs lots of cosmetic work, and maybe 1-2 major systems (HVAC, Plumbing, Roof, Windows, Electrical) need replacing on updating.  It might need 5-8 weeks of solid work before it generates revenue.

So yes it will force appreciation, but you might be underwater up to $10K initially.  But who cares if you spent $10K over on $60K value if its a 3 unit property pulling down $2200 a month? Plus you don't have the headache of trying to address issues between vacancies or when tenants are in the property. In 2-3 years that money would be more than recouped in loss rent, and the extra 25-50 dollars you get per unit per month, and the QUALITY of the tenant you can draw to ensuring payment.

@Alexander Mair

Detroit has depressed property values. Thats a fact.

A 3b/1ba house might run you $40K you rent it for $750 maybe $800 a month.

Property taxes and insurance are notoriously high.

Property crimes are very much an issue.

If you get a 2-4 unit fixer in Detroit because it has new updates, you would get $600/mo on a 2 bedroom, or a 700/mo on a 3 bedroom (duplex). Thats because property taxes and insurances are fixed basically. So for say $60K I get $1200/mo in rents at least.

Subsequently if/when a tenant moves out you don't have to worry about an empty property and HWT, furnaces, copper piping disappearing. Because there is still someone in the property, so the thieves pick an easier target.