All Forum Posts by: Christian Hutchinson

hit off 6 mile as close to U of D as possible.

If you are a newbie with no experience I'd start there. Thats like a super-average neighboyhood.

What you get is all driven by access to capital, risk tolerance etc.

I don't do the $10K Detroit house game, some people do though successfully.

Update

After calling my lawyer and he laughed hysterically for 5 minutes and 45 seconds. He confirmed I can addendum the lease.

So I notified the tenants I received permission to deliver a new dryer to the property next week. I am sending an addendum saying they must agree any future appliance repairs are solely their responsibility. All appliances were on site are brand new, installed brand new, signed off by city inspectors and less than a year old.

If they refuse to sign I will consider that they are giving their notice to vacate. Which they can do without penalty.

They are now complaining I am kicking them out during pandemic. I said I am not kicking them out, I am not going to continue to replace brand new appliances less than a year old.

They are upset. But as far as I am concerned they got their dryer that I had to pay a premium to get. They say I am being mean and bullying them. But it was like their emails and text messages complaining about not washing clothes wasn't overboard and I went this route once they threatened not to pay.

Lesson is dont negotiate with terrorists.

Warranty Dept and Service calls are prioritized to:

Refrigerator, Oven, and Oven. Meaning Major Manufacturers and Appliance stores aren't even entertaining this.

At issue is we have 1 brand new dryer that broke.  I am going to have a 2nd brand new dryer put in, and leave it up to tenants or an uninsured party to install.  I personally can't install it myself.  And if the tenants intake the delivery you know they will claim no responsibility if something breaks or it doesn't work upon opening.

Do I want a warranty claim yes, I do.  What I can't get around is they say they can't wash clothes without a dryer. Lastly, we were told all non-essential work had to stop.  Painting a house was non-essential, cutting grass was a no-no, fixing a plumbing issue was okay.  Malfunctioning Dryer...where does that fall.  Do I literally need to call the city for every fix right now? Thats a way to become a nuisance property owner too.

I have a MFH housing unit.  Two units share a washer and dryer.  Both tenants moved in within 2 weeks of each other.  The Washer and Dryer were purchased brand new in August 2019. The washer and dryer were delivered the day before the first tenant moved in.

The dryer malfunctioned in mid-March, and will no longer dry clothes.  I had a handyman look at it attempt to fix it. Then everyone locked down due to Coronavirus.  I called 2 appliance repair shops and they said they would only come out for a $200 fee + any additional parts/labor. I held off because of everything happening, I figured I would address it in early April. I called the appliance store regarding warranty fixes around March 25th they said they were closed.

Then I was having some exterior work being done on the property and the City of Grosse Pointe ordered us to stop. I was told even if I had the grass cut I would be issued a ticket.  This happened April 1st or April 3rd.  During the quarantine period there have been a plumbing and electrical issues on property that was fixed same day (with approval from City).

Early in the quarantine period tenants had issues with internet/wifi bandwidth. I provide internet on site (mainly for the security cameras). I increased bandwith/speeds and made hardware adjustments. I did this at no costs to the tenants.

The dryer is still not fixed because of:

1. Delivery isn't possible, deliver companies won't enter the property
2. Means they can't hookup or remove the dryer that is currently there
3. Dryers are non-essential (Grosse Pointe is saying as of today they are though)
4. Numerous threats by the City saying any work would trigger the $1000 fine.  Today, they said I could have a dryer delivered.
5. I have to quarantine because my spouse is still with Covid+ patients(she works in an ICU Unit in a Metro Detroit Trauma 1 Center) so we are not going into stores(we are ordering everything online) or people's homes unless absolute emergency. So I can't really do it myself.

What triggered today's events.  The painters, who did 80% of all the exterior paintwork, they want to get paid.  They attempted to show up and complete work. I was alerted and stopped them. This made the tenants upset.

The tenants are saying they are unable to wash their clothes and they going to rent strike.  Because of I haven't fixed their dryer.  Making threats of non-payment over a dryer to me is laughable, esp considering the circumstances, and the fact of the matter all other maintenance calls are being addressed immediately. Thrown we are replacing a brand new dryer, something less than 7 months old.  I didn't accuse anyone with abuse or user damages.

I have tried to be transparent about the issue, explaining I have been threaten with fines for doing work, service call fees are double/triple the costs, and it just comes down to, its cheaper to buy a new dryer ($475)

To add to the issue, I have a 3rd year law student and the other unit is some 24 year old that works at a Big 4 Firm who think/view this is an unimaginable inconvenience, and the law student is citing all sorts of legal codes on why blah blah blah is a certain way, but obvious has never been to small claims courts where paperwork and circumstances matter greatly, or the costs of having to deal with the this stuff is problematic. I explained, I can get a ticket if someone does work.  He says 'thats non-transferable', and I said "in the real world i you hire out the service as a property owner/business owner and it breaks a law guess who is on the hook or you have to spend money trying to prove you are not".

Either way whats the best way to handle this? Because at this point its out of control.

What scares people about the Southeast is natural disasters (hurricanes) and wages are not particularly strong. But they are growth driven. So the cashflow is low.

I use to install payroll systems, and wages in the Southeast are not good.  When investing from across country it scares people off. Also, because of the nature of economies in the Southeast, the asset pricing is very tied to the economy.

In say Chicago, Detroit, CLE, INDY, Pitt, Cincy, Stl, KC those cities have existing business operations and HQ or major employment outpost directly tied to those regions they cant go anyway in many cases even if they wanted to.

Lots of the major companies in the Southeast relocated there for tax reasons. IM not talking about Coca-cola, Delta, FedEx.

Look at a booming area like the Research Triangle. That's 2M people spread over 9 counties. They have some high wage jobs. But the lack of density and honestly all of those companies have operations there they aren't really headquartered or highly ties to the region. They would move as soon as it was tax friendly to do so. Indianapolis, CBus, Milwaukee are all close in size and those people are typically packed into maybe 2-5 counties at most.

Then honestly, you leave a place like Detroit and you drive a hour in each direction to Flint, Lansing, or Toledo you have decent size cities that have a major-large university, a trauma 1 medical facility, and it's on TV Newcastle and media market.

In many places in the Southeast from my experience that just isn't the case. Maybe its changed in 5 years because my heavy travel was from 2013 to 2016.

Even "not hip" MSAs of the Great Lakes Region are bigger than that and the people are packed in way tighter. So it's easier to get a renter.

Can anyone explain the recent talk of what is happening here? Lots of conflicting information. FYI not an investor.  But I just been watching from the sidelines deciding if its viable.

 HAHA

Such a small world. So I think I know this outfit.  I have a completely unrelated business dealing with them.  But we have spoken about this venture. 

@Gilles Gutnecht

The long and short is they bought a whole inventory of properties a 5+ years ago on an insider deal. They might have between 40-300 properties they are sitting on, these were purchased when whole neighborhoods had been foreclosed due to taxes and mortgage default and they were bundled together (Great Recession 2007-2010). Basically this was City/State/Feds/Banks packaged properties in 2011-2014. There was a RFP/bidding process, maybe they bought 100 properties for $4M ($40K/house). These properties were in lower/middle class neighborhoods in Detroit or inner-ring suburbs. These homes now if livable would sell for $100K, the ones in the suburbs prob $150K. These homes often are extremely outdated, not 'shells'. This investment group has tons of equity on the holdings at this point. Easily these properties are worth $80K. What this company needs is for you to put up money for rehab say $60K. They recoup their investment. They get a $120K valulation on the property and its nicely renovated. They have a lending partner or a couple banks, they do the mortgage (paying off the fund's position). Easy to get through for a 50% LTV. That 60K rehab really costs $45K, rest is profit.

Next they provide property management at 10% of rent. They charge about 20% markup on any repairs. So painting a room costs $150 typically, they charge $180+materials.  

The "guarnteed" returns are simply done via Section 8 or numerous other govt alphabet programs related to housing.  That means basically direct payments via the govt or housing foundations. They pitch it as renting to "Detroiters", code word for "Black" so that way, Councilpersons, Congressional Members, and State Lawmakers can point to what they did for "Detroit". They put a Black face out front, and this person believes or rationalizes she/he is helping keep the neighborhood from being gentrified, or giving a chance for lower income families to live in a nicer area.  Because a bunch of lower income families, old people, veterans, or people with disability benefits get a nicely renovated home to live in a better neighborhood they could otherwise live.

I have dealt with this several times for numerous reasons usually its a spouse getting a divorce settlement.

Simply, request to verify the funds (bank account with redacted information such as account number).

Also, I provide a list of planned projects on the property. Gutter cleaning, furnance checks fire extinguishers, smoke alarms. For cashflow reasons this stuff is spaced out. Also it let's them know I am around.

Also I still run a background/credit check. Them paying in cash/upfront is just their method of payment.

Lastly payment has to be made with cashier check/wire. Basically use KYB(know your buyer) guidelines.

These small things hold up the transaction just enough criminals keep moving.

 If you dont know already learn how to do drywall, painting, basic plumbing, and electrical. Michigan has lots of distressed houses, and if you can do the work yourself you can unlock value in so many ways.

Then in college take an accounting, marketing, and read up about the automotive business cycle. Being in Southeast Michigan understanding the largest industry is vital.

So I have some units pay on the 1st and others on the 15th.

So out 1st of the months I have 5 of 7 payments. These last two players one always pays last day of grace period, the other usually the same. But it's a med student who went home for spring break early march and school was cancelled and they are remote. This one might get interesting. The other one, they are in industries where they might be furloughed or laid-off. So we shall see by tuesday afternoon.

1 person from 15th paid yesterday oddly though.