All Forum Posts by: Christian Hutchinson

We have several rental properties.  Some owned outright for Cash, one has a mortgage.

We are selling two properties in the next 60 days.  We want to take the proceeds from those sales, which will be between 85-115K and roll the funds into 2-3 properties.  What are the loan options available for this? I would like to avoid three separate mortgages.  I would like to bundle them all together.

What do I need to speak to a bank about?  Also, besides evaluating our Cash Flows, and personal credit, and the potential purchases, what else will I need to execute the deal?

MODERATOR:  This is not a request for lenders.  Such requests can be made only in the Marketplace.  Advice only in this thread.

FYI my insurance on my Sterling Home is 500/yr has for 120K(I get my cash back essentially), taxes are 1700/yr. Water bill is $80 bi-monthly.

We are selling our condo in Clinton Twp because the HOA jumped from $104 to $225, taxes were $2200, and the rent was $800-850. Insurance was $300...It was our first place so hey we learned a lot but working all month to project clearing $400 is no good. Plus we had $55K tied up in it(poor return on cash, but the property jumped in value). So we are cashing out at a nice profit, and moving to somewhere else.

On the exterior they look alright. But having a location is will help people.  Lots of us do business all through out the City. I'm a Woodward Corridor guy, @Mike Carino works SW Detroit, Some people are in the Villages, there are even people who work the 48205(City Airport/Osborne). We are all locals so just give your major cross streets, I mean there is a market everywhere if you look, even on Wyoming and W. Chicago.

I have a home on Chalfonte in the Farms...I also have 7 other rentals properties in Metro Detroit. Grosse Pointe homes don't cash flow well because of taxes.  Also, rents are slightly lower to comparable high priced areas(B-Ham, Troy, Northville, Bloomfield).  There are some good values on the Duplexes and Triplexes if you can pry them out of the owners hands at a good price.

I see in your profile you are trying to build a portfolio.  Is this a Cash purchase, or a Mortgage? We are eyeing up a purchase in the Woods(Duplex) once we sale a property in Northern Macomb County. Its mainly because we want a $800-$900 units 10-15 minutes from Downtown Detroit in an very good/excellent School District.  We see the momentum Downtown(we have a triplex Downtown too), and know those people will leave the City but want to stay close, but maybe can't afford a 300K-$400K home in GP right when they have their first child/get married.

Lets not make this more complicated than it needs to be, if your monthly rent is not 1% of your purchase price, the deal is no good for investment purposes in most cases.  Now if you said "I have a family member who stays in the area extended period of time and you can stick them in there and rent out the other unit then the rule doesn't apply.  Or if you were buying a property for your child at college, and you were going to rent out the space your child wasn't using" the 1% rule doesn't apply. Thats just the initial evaluation.

If this is your first and only property do it yourself.  Someone will take 7-12% from you.  That kills your margins.

If you have $85K in cash you can do some real damage in Metro Detroit, in places like Roseville, Clinton Twp, Madison Heights, SCS, Sterling Heights(Pricier) even.  We have a place in Roseville its a Duplex I bought it for $66K in August 2014.  I get 1350 a month(750/600).  We had to put down 25%.  We paid cash for a place in Sterling Heights has Utica Schools.  It was $92K needed $12K of work, we rent it out for $1400/month, we bought that in May 2014 comps in the area are for $130K-$145K. As we collected rent we upgraded the appliances to stainless steel(tenants were excited cause their rent stayed the same, and guess what its a tax write-off, and they basically paid for those appliances). So in one year we paid for our renovations, and our cash invested jumped 30% in value.

There is something to be said of getting a high value piece of property breaking even and getting 3-6% appreciation/yr for 10-15 years.  But I imagine you want some monthly cash, and some appreciation The Pointes are not ideal. You could do investor mortgages at 20-30% down and walk away with 3 properties that are between $75-125K that are paying you 800-1300 each month, and they will be in nicer places than Harper Woods.

Its ultimately your money, and you understand your goals, risk tolerance, and most importantly time better than anyone. If it was me with $85K there is only one Property I would purchase in GP for investment purposes. If you PM me, I'll send you the listing.  I absolutely love the property, the issue is again tying up $85K. I know of plenty of other places my money could do better in even High End areas in Oakland County.

Where are these properties?

How bad are they?

Talmer Bank has some money you can get if your household income is 25K-65K I think.

Otherwise, if its just cosmetic it stuff, lots of Credit Unions in SE Michigan do signature loans for 5-20K for home improvements.  All you need is an invoice, or rehab plan.  Of course you need to be a CU Member, have a direct deposit, and decent credit(660+). We have used that for short-term money, for 3-6 months to get us through a few projects if we had multiple renovations going on two different occasions. Interest Rates are 5-9% typically for 4-6 years.  But its you are generating income you can pay them off pretty quickly.

Of course, you could source some of that cheap Detroit Labor on Mack and Bewick, you might have to make sure they don't walk off with the foundation to your house, but hey your options are limited.

I know on a 180K loan 250 a month extra pays you off in 15 years on a 30 year...I say take the 30 and pay the extra

We have several properties, between family members, and we are going to officially organize into a business entity.  The goals are to reduce liability legally, be able to pool resources when going through underwriting(Person A can claim rental income, and pass underwriting, they may share with Person B, but Person B is not involved directly with this particular transaction.

What entity and structure will best meet these goals?  We are talking about 7 properties with 11 Units in total at this moment. Could be 9 Properties with 14 units by year end.

Yes, I have heard of him. Take this whichever way you want, but guys like Strather are a whole different level than say someone like myself or Mike.  My operation is a family operation, all of us have FT jobs(IT, Medical, Engineering), and we are pinching pennies together leveraging via your standard 20%-30% down payment, Investor Mortgage, or paying cash for a place to add to the Portfolio of Properties.  Working on properties ourselves, or hiring people to do the work. Mike can speak for himself, but from what I understand his situation is similar or more advanced.

Strather gets OPM(Other People's Money), tax credits etc, engineers deals that sometimes do well(Motor City Casino) or others with so-so results(Woodbridge). He is a full-out developer.

If you have access to his deals, and you can ride his coattails, and learn from him that's an opportunity to take advantage of. Google Herb Strather, and you can get a full scope of his dealings and projects.

I don't know what type of Cash and Credit you are dealing with.  So whats happening or projected to happen over at old Detroit Southwestern High School, I wouldn't even know or understand how to profit off of something like that...But I can tell you in that part of town on the other side of I-75 there is Mexican Village aka Mexicantown that has lots of properties you can get fairly cheaply, rehab, and then rent them out for a nice return. 

Basically, meaning if you had maybe $100K in cash and another $100K in credit you could easily generate $3000-$7000 a month in rental income with moderate effort in 6-18 months. In terms of rentals I do not see people who are Engineers or someone in a White Collar/Gold Collar job living in SW Detroit in the next 5 years in even moderate numbers.  To put it in perspective those Interns I discussed.  They first will look in Mexican Village because its cheap its near Downtown, it has a density of bars and restaurants.  They just see $300-$700/month...They feel its worth a shot.  Some actually do decide to live in SW Detroit, but most live the "7.2".  Then after looking at a few places they circle back to the "7.2".  They pay $1000+ for a place, and they are happy to pay it.

You have to understand Dearborn Heights(New Rochelle), and the Pointes(similiar to Rye or Scarsdale) to place them similar to NY suburbs(I travel extensively for work) which are nice areas aren't far down I-94, nice schools, parks, extremely safe, lots of amenities.  Then if they chose the City of Detroit they wouldn't want to live in that section of town, there isn't even a grocery store, gas station or pharmacy within 2 miles of Southwestern HS.  Not to mention its surrounded by old industrial factories that are abandoned, warehouses, power plants, water treatment facilities, shipping docks.  They would move to Corktown(which is less than 3 miles from Old SW HS), Midtown, Boston-Edison, East Jefferson, or the Villages.  All these locations would be less than a 10 Minute drive to this place.  SW West Detroit has ALWAYS been a working class community even when Detroit had 2M people and had the highest standard of living in the country.

Again, if you are plugged in with guys like Strather and his deals you are in luck.  For people like myself, if $50K goes out the door, I need to start seeing some money in 60-90 days.

Here is the map of the "7.2" here. Thats 7.2 sq miles of Downtown Detroit, and the "Greater" Downtown Area.  Once you get outside of those boundaries life gets very interesting.  Of course being just on the other side of the street or one or two blocks outside of it is no big deal in some cases(New Center).  Then there are other places Woodbridge, and Eastern Market where you will discover why Detroit has the reputation it does.

 @Bridget Smith-Osbourne Mike is very right...the areas that are "next" changes month to Month.  You are eyeing up Detroit because of a "Cheap House".  Yes its cheap, compared to other cities, but its very Cash Intensive, banks are not going to do you any favors.  For instance, Herman Kiefer's Medical Complex announced plans for redevelopment this week. Deals not done; but in the works(headed to City Council for approval).  So you would want an attached neighborhood(the closer the better) to this project. This area around Herman Kiefer, and Henry Ford Hospital has LOTS of brick duplex to quads, or even Multi-Family buildings with 6-12 units.  But realize these homes were built almost 100 years ago, and most likely have not have been updated with HVAC, Electrical, etc, and will be distressed. Be ready to open up your wallet to renovate, and spend time not earning any cash.

I found a really nice Duplex right behind Henry Ford Hospital, and it was completely updated, and reasonably priced(just short of turnkey but you could rent it as is no issue). But it was sandwich between two homes that were burnt out, and only 5 homes out of maybe 20 on the block were in livable condition.  Are you ready to dump say $85K into that even though you can get $800/month on each unit?  Remember, you can't mortgage this property because comps are non-existent, and you have tie up $85K of cold hard cash(or Home Equity Line/Loan).

But like all real estate deals, and especially those in Detroit, I don't trust its actually happening until I see Construction Equipment working. Lots of projects die in Detroit for numerous reasons. Its a tough market. So you could position yourself to feed off of Herman Kiefer, and now you are holding a real dud, hoping to get Downtown/Midtown spillover when they come.

I tell anyone the best bet is the Woodward Corridor.  If your feel more adventurous work Michigan Ave and Jefferson.  If you can score a deal within 4 blocks of these major streets, and within 3 miles of Downtown(lets just say Campus Martius) you will be able to get a tenant, and of course do well if the money lines up.

Once you come here you your network will direct you to areas you can dig into.  I urge you to pay attention to the calendar here.  Several Foundations, and Companies based in SE Michigan have special Internships specifically for people who are 20-25ish, college graduates, and willing to LIVE in Detroit.  These people don't make LOTS of money only $25-33K per year, but will pay 1K-2K+ a month in rent.

These groups descend on Detroit starting in Mid to Late June until about the 1st week of September. This has been going on about four years now. As you can imagine these Interns have huge networks. They have fellow Interns who end up in some not so desirable areas and they will do anything to move after a few weeks. I have rented to a couple of these groups. They are great tenants.

These "Interns or Fellows" have Ivy League Backgrounds, Top Public Universities, Masters Degrees from Local Public Universities in STEM Disciplines, did time in the Peace Corps, etc.  Why do they take these Internships? Want a job at DTE(Energy Company), GM, Blue Cross, etc. in a highly visible roll with direct access to the C-Suite Management, this is your golden ticket.  You aren't just an accountant pushing Payables through some morbid process in a cubicle trying to meet some Performance Metric.  Companies end up offering a Permanent Position to about 60% of the Interns after a year, and another portion extend them a year. Or these people find different employment.  Either way most have minimal ties to Michigan and Detroit, so them having a job, and desirable living area, they WILL stick around.  These programs don't provide housing, and the "Interns" must find it on their own.

We are going to attempt to purchase a duplex/triplex/quad for my wife's retired parents(about 10 miles from us).  They currently own a home 300 miles away.  We are going this route so that way the property will have minimal cost or even cashflow on the monthly basis, while they travel to their various residences.

What loan options are available? Would this be considered an investment property? would we be required to put down 25% even though our parents occupy one of the units? could be "write-off" the lost rent while my in-laws occupy he unit(we dont charge them, but the home would be in my name)...all input is greatly appreciated,