All Forum Posts by: Isaura Orellana

Hi Natalie! You asked about mitigating risks when owning property in Detroit..

The biggest factor to help mitigate risk in Detroit for property owners is hands down without a doubt to find TRUSTED BOOTS ON THE GROUND to help you navigate, minimize or eliminate risk. And this goes triple for Out-Of-State investors. Let those with established expertise and learned and earned know how steer the ship for you or with you. My husband and I ran into all sorts of low risk, medium risk and high risk situations buying, rehabbing, tenanting section 8, managing and owning and selling close to 100 properties in the passed 6 years. We actually started off wholesaling and doing BRRR's out of state from California and then moved to Birmingham (20 min from Detroit) and than Darren my husband would drive to and from Detroit every day working 16hrs a day 365 days of the year for 1/2 a decade owning, building, managing section 8 tenants while I helped him on the other side of things and together we weeded through all sorts of risk over the years. All this gruelling work , commitment and consistency though has groomed us into advanced or highly experienced Detroit section 8 property investors/owners/sellers/turnkey providers, operators, managers and BRRRRer's that has enabled us to see risk coming a mile away and than wether we need to steer clear of it all together or perhaps wether it's worth entertaining that risk for reward.

Your welcome to send a message if you need any other advice on risk in Detroit. Cheers!

Quote from @Vinay Sanapala:

Hi, all! Appreciate the amazing insight and support you all provide

I'm looking to build a Section 8 portfolio and looking for some guidance from those who have done it.

Some details:

My personal mission is to take care of Veterans and families who are not able to take care of themselves. 

I have about $200K to deploy. Goal is to get to 1 Section 8 property, then 5, then 15, then 50. Timeline contingent on good deals. Looking to invest out of state (TX is no good with its high taxes). Areas that interest me are the Midwest and Southeast.
-Any mentors you recommend reaching out to?
-Got markets to target? Where have you been successful? Less successful?
-How do you analyze what a good deal is to put in an offer for a Section 8 property?
-Got a trusted realtor who understands Section 8?
-Got inspectors who accurately captured the issues with home(s)?
-Got lenders who do DSCR loans? (I have no interest in owner financing)
-Got contractors who know how to get a home to Section 8 code?
-Got a Property Management company with significant experience with Section 8 homes?

Any tips, tricks, or best practices you wish you knew when starting out?

Stay blessed. I appreciate every single one of you.

Hi Vinay , Welcome to BiggerPockets and congratulations on your mission to use real estate to take care of others. In Detroit we like to call this a WINWIN …. We have proudly built, renovated and turned over close to 100 SFR's, Duplexes, Triplexes, Quadplexes and housed close to 150 section 8 families and Veterans in Detroit. We pride ourselves in specializing in all things section 8 and we have found housing section 8 tenants and Veterans in Detroit rental properties to be very lucrative with the government guaranteed rent and very rewarding at the same time in knowing we provided and managed excellent affordable housing to Veterans and families in desperate, uncomfortable and sometimes even dire situations. Some of our renovation were cosmetic rehabs , many full gut rehabs and some in betweens but we always went one step further to make certain the property was beautiful and in full compliance with section 8. The last time we failed a section 8 inspection was approximately 30 properties ago and then passed our second inspection on that failed one with flying colors a few weeks later. We have long outstanding relationships with the best of the State (MSHDA) run section 8 agencies in Detroit. I noticed some people in this thread turned there nose up on section 8 and lower class neighborhood rentals but in Detroit THE ONLY way to go is section 8 and anyone that tells you different when it comes to Detroit is totally full of it and getting less than 1/2 of market rent if there lucky. One learns very quickly and unfortunately usually the hard way that cash tenants are a huge gamble and that section 8 is the only way to find healthy, consistent, positive cash flow in Detroit and many of the other inner cities accross America. A few other great advantages to section 8 outside of knowing that rent gets wired directly to your account on the monthly like clockwork or in the case of Neighborhood Legal Services a check lands in your mailbox monthly like clockwork, is that section 8 is Covid proof. Also, through certain programs sometimes we are even able to negotiate higher than market rent. You can also raise rent each year to the following years current market rent. Less vacancy with section 8 as well. Fewer evictions. High demand for section 8 housing in Detroit. Section 8 leads to increased profitability. Furthermore, there are annual inspections that take place as an added checkmark for owners/landlords/managers to make sure everything is working with the property as it should. Also, when buying section 8 rental properties via DSCR loans , section 8 is looked upon favorably by banks/lenders. We've been on the receiving end of about three dozen DSCR loans in the passed three years here in Detroit. I'm a big fan of DSCR lending. Sure the million dollar suburbs are nice if you have that kind of money and are playing the larger appreciation game but dollar for dollar pound for pound when it comes down to rent to value ratio its difficult to find the same kind of cash on cash returns section 8 rental properties offer in Detroit. If you have any other questions regarding housing Veterans or Section 8 participants feel free to reach out. All the best in your investment endeavors! Cheers, Isa.

Quote from @Imani Naomi:

Hello Everyone, 

I am looking to purchase my first rental property in Detroit. I am interested in using private money lending to make it happen. I have been studying for my real estate degree for the past 3 years and would love to get my feet wet. I am hoping to get some advice from those who have gone down the "private money lending" path before. 

What are some of the best practices for finding and approaching private money lenders? Are there specific things I should look out for or avoid? Any tips on structuring deals or ensuring a smooth process would be greatly appreciated?

Thanks

Hello Imani, my husband and I have been building big beautiful brick properties day in and day out in Detroit for the passed 5 years straight and I’m proud to say we are experts in all aspects of building and maintaining successful rental properties in Detroit City.  If your looking for the least amount of risk and biggest bang for your buck I would look for a company that is a reputable turnkey provider thats actually in Detroit and offers things such as an efficient boots on the ground team, all sorts of established local relationships, solid in-house management, an operation that is highly skilled and well versed in section 8, a company that has proven relationships with both out of state and local lenders. (Not to say its there might not be very capable lenders here on BP as well.) This way you know you are in good hands and that it will take minimal involvement from your end on all aspects of your investment. Definitely the way to go on rental properties if you are an out of state investor NOT looking for an enormous undertaking with a BRRRR type scenario or investment of that nature or part time or full time job. If you want to minimize risk and capitalize on investment with passive income and stable cash flow this is the rental property strategy that is most advantageous and works best in Detroit. I also highly recommend going with a section 8 government guaranteed rental property. A nice SFR (single family rental) brick home or perhaps a duplex but for your first purchase actually, wise to just stick with an SFR to keep it real simple. Why do complicated when out of state!?..If you would like to discuss more Imani feel free to reach out. Happy Hunting!

Quote from @Frankie Paterno:

Good Morning,

What areas are still cashflowing and I can scoop up and hold? Is Ohio/Indiana/arkansas over-saturated now? Looking to network with realtors and investors in the game! Cash ready. 

Hi Frankie, If your looking for the biggest bang for your buck there’s strong section 8 government guaranteed Cash Flow all over Detroit. Plus many of the homes, duplexes, triplexes and Quads are monster gorgeous brick properties that dwarf most of the other homes offered in some of these other cash flowing states. Just make certain to build a relationship with a reputable turnkey operation who treats the city like it’s there own backyard, specializes in section 8 and has in-house management as well as day in and day out boots on the ground crews, etc. If you would like to discuss more feel free to reach out. Cheers!

Quote from @Kristi K.:

Quote from @Isaura Orellana:

Haha, thx, you just made this 63 year old kids day. 

Haha, glad could help! ;)

Quote from @Kristi K.:

Quote from @Isaura Orellana:

Quote from @Travis Biziorek:

Hey Richard, I'm doing a lot of them in Detroit still (and I live in California).

Detroit still has cash flow, although it is getting increasingly difficult to find. The best way to find deals is to add value via a BRRRR type strategy. This is what I help out of state investors do with my team on the ground in Detroit.

We're generally seeing SFH's in the $80k-$90k range all in and duplexes in the $110k-$130k range. Then we're seeing appraisals from $100k - $120k on SFH's and $150k+ on duplexes.

I literally had a client email me yesterday. His duplex appraisal came in at $206k and he was in for $160k total. Not bad!

In terms of net cash flow, you'll see anywhere from $100 - $200 per door. And it can definitely go lower if you have a high equity deal (e.g. that duplex I just mentioned). 

I'm in the camp where I'd rather get as much of my capital back as possible and operate closer to break even.

It should be noted that net cash flow includes all expenses... that means a line item for capex/repairs/vacancy as well (lots of folks don't do this in their numbers).

Finally, I can talk for hours about Detroit. The city is crushing it and going through a major revitalization. I personally own 12-doors there and I'm under contract for another duplex currently.

I've been buying there since 2019 and I have some decent equity in my properties. I'm starting to do cash out refi's on them to buy more.

Happy to talk any time or share a bunch of resources about the market there.

If I had a nickel for every out of state investor who came to the Detroit market to attempt to do a BRRRR or got into bed with folks claiming it’s a viable way to succeed in the Detroit rental market if they hired them to help in a direct or non-direct manner and fell on there face I could build another couple dozen rental properties on top of the couple dozen we build in Detroit every year. It’s one thing to come do it yourself and stay in the city to oversee the construction/rebuild of your rehab it’s a whole other trying to oversee from OOS or OOC full time or part time for that matter. Or even worse paying someone else who resides Out of State to oversee your rehab lol. Our clients appreciate that we lower they’re risk on investment drastically because we are in fact the company that built they’re property, and we’re the one’s that are familiar with it, we’re the actual boots on the ground team and we’re the actual in-house management team. Finding contractors in Detroit that aren’t going to take advantage of you and your investment and sink your BRRRR or eat up most of your profits and put you under water is extremely challenging as well. Just another big reason our clients are thankful for our large number of our trusted skilled workers and tradesman that have been with us for years. Again, I HIGHLY recommend when doing the BRRR Strategy in Detroit or anywhere else for that matter to make certain that you reside nearby your rehab or at the least In-State and not accross the country. Happy to chat anytime or share more thoughts on the market.

OOS = Out Of State

OOC = Out Of Country

The BRRRR strategy or method is a real estate investment method that involves buying, fixing up, renting out, and refinancing properties to build a portfolio and generate passive income. BRRRR stands for "Buy, Rehab, Rent, Refinance,

You forgot the last R - “Repeat”

Uh-Ohhhh …your one of those kids lol.. Anyways, 1 typo doesn’t change the overall message but thanks sweetheart.

Quote from @Travis Biziorek:

Hey Richard, I'm doing a lot of them in Detroit still (and I live in California).

Detroit still has cash flow, although it is getting increasingly difficult to find. The best way to find deals is to add value via a BRRRR type strategy. This is what I help out of state investors do with my team on the ground in Detroit.

We're generally seeing SFH's in the $80k-$90k range all in and duplexes in the $110k-$130k range. Then we're seeing appraisals from $100k - $120k on SFH's and $150k+ on duplexes.

I literally had a client email me yesterday. His duplex appraisal came in at $206k and he was in for $160k total. Not bad!

In terms of net cash flow, you'll see anywhere from $100 - $200 per door. And it can definitely go lower if you have a high equity deal (e.g. that duplex I just mentioned). 

I'm in the camp where I'd rather get as much of my capital back as possible and operate closer to break even.

It should be noted that net cash flow includes all expenses... that means a line item for capex/repairs/vacancy as well (lots of folks don't do this in their numbers).

Finally, I can talk for hours about Detroit. The city is crushing it and going through a major revitalization. I personally own 12-doors there and I'm under contract for another duplex currently.

I've been buying there since 2019 and I have some decent equity in my properties. I'm starting to do cash out refi's on them to buy more.

Happy to talk any time or share a bunch of resources about the market there.

If I had a nickel for every out of state investor who came to the Detroit market to attempt to do a BRRRR or got into bed with folks claiming it’s a viable way to succeed in the Detroit rental market if they hired them to help in a direct or non-direct manner and fell on there face I could build another couple dozen rental properties on top of the couple dozen we build in Detroit every year. It’s one thing to come do it yourself and stay in the city to oversee the construction/rebuild of your rehab it’s a whole other trying to oversee from OOS or OOC full time or part time for that matter. Or even worse paying someone else who resides Out of State to oversee your rehab lol. Our clients appreciate that we lower they’re risk on investment drastically because we are in fact the company that built they’re property, and we’re the one’s that are familiar with it, we’re the actual boots on the ground team and we’re the actual in-house management team. Finding contractors in Detroit that aren’t going to take advantage of you and your investment and sink your BRRRR or eat up most of your profits and put you under water is extremely challenging as well. Just another big reason our clients are thankful for our large number of our trusted skilled workers and tradesman that have been with us for years. Again, I HIGHLY recommend when doing the BRRR Strategy in Detroit or anywhere else for that matter to make certain that you reside nearby your rehab or at the least In-State and not accross the country. Happy to chat anytime or share more thoughts on the market.

OOS = Out Of State

OOC = Out Of Country

The BRRRR strategy or method is a real estate investment method that involves buying, fixing up, renting out, and refinancing properties to build a portfolio and generate passive income. BRRRR stands for "Buy, Rehab, Rent, Refinance,

Hi Richard! I highly recommend looking into the Detroit, Michigan, market. We're still seeing deals here at the $150K-$200K price point that have positive cash flow/COC returns as well as steadily increasing appreciation thanks to the growing economy and massive amounts of building and construction taking place everywhere you turn, not to mention the growing population for the first time in decades. The enormous demand to purchase rental properties here in Detroit has also grown immensely. Detroit is undergoing revitalization efforts that are continuously gaining national and international attention. Also, Detroit has demonstrated a special sort of resilience over the years that many aren't aware of. The spirit is high, and it truly is experiencing a resurgence. With the booming tourism and plenty of local attractions, as well as a general higher quality of life than there's been in the past 50 years, they have all played a significant role in greatly lowering the risk for investors and lenders alike in this ever-growing market where one can still enjoy the 1% rule and government-guaranteed Section 8 rent. So all that being said, Detroit is an excellent choice when looking to purchase giant, bolstrous character-driven brick rental properties that are second to none for below $200K. Furthermore, with the recent lower mortgage rates and the steady increase in demand, this all continues to push the market here in a positive direction. And let's just talk about downtown Detroit itself for one quick moment; it's in much better shape than, let's say, downtown Los Angeles or many of the other big west coast cities that are drowning in homelessness, death, and decay at an ever precedented rate. Detroit is much more modern and bussling with tech, innovation, and spirit than one would ever imagine. These are just some of the reasons why my out-of-state and out-country clients love it here. Happy to connect and answer any and all questions you may have.

Buying an out of state rental property from a realtor, wholesaler or off facebook or zillow etc as opposed to from an operation or turnkey provider who has an active, substancial, and effective boots on the ground team or teams to support you after you close on the sale. 

The one thing you and the rest of us have working in our favor is the market has never not bounced back. It always ends up more lucrative than ever before. I suppose it could be a first time in history sort of thing but as far as statistics go the market has always recovered and always went up further than ever before. So not as much risk as one might think. Now dont get me wrong purchasing power is something else all together. So regarding ‘the old’ when to buy strategy I beleive that should come from a balanced place of financial stability, wisdom, knowledge, experience, and gut instincts. If you have any further questions or thoughts on the matters or others feel free to reach out.