So this may be a long post, but I want this to help others who are exploring out of state investing in a new territory like Detroit. I've been in investing in Detroit since early 2023. I started my investing journey in Toledo where we have over a dozen properties, all section 8.
The appeal of low property prices with high cash flow yields is what drove me to the market. I searched and interviewed various turnkey companies and ultimately landed on Own It Detroit -- Owned and operated by Mousa.
Today I fired them after spending $800,000.
This post is to make others aware of my experience and to ensure you don't make the same mistakes. As well as to heavily vet your management team in the future and fully understand how they're operating procedures work.
The positives:
Property Acquisition Made Easy!! By far, the cleanest and most efficient process to purchase and renovate a home I've ever seen. If you're looking to acquire properties and pay a slight premium on the rehabs to get them done well, this is absolutely a service I recommend. In total, I acquired 11 properties last year, of which half of them were complete rehab projects. The rehab work came in on-time and on budget for 5/6 of the properties. There was one property that took 4 months, and felt like they forgot about it till I emailed them 10 weeks in to inquire...The others were swift and the before/after photos were good.
Appreciation in the area is genuinely insane. Some of the properties that we picked up for $20k, put $60k in, and flipped appraised for over $100k. Some of the property acquisitions came in around $70k, and recently financed and appraised for $100k.
Overall, I've spent a total of over $800k, and after rehabs and appreciation, the ARV's are coming in around $1.173M for the portfolio. Not a bad return for only a year in the market, but I'm a buy and hold investor. I do this for cash flow.
The negatives:
Unfortunately, outside of Acquisitions and rehabs, the management, tenant placement, and collections side of the business is terrible. Spending over $800,000 there has yet to be a single deposit to the account. Of course, we racked up major construction bills and we paid those in full, but the portfolio is now stabilized, collecting $9,000 in rents, but every month, like clock work, the expenses surpass the amount collected. Only about 60-70% of the rent is collected on a monthly basis. The expenses somehow continue to rack up even though the properties have been newly renovated.
Rent is not prioritized. They allow for a 30 day payment period with no late fee's to the tenants, and often times rent will go without collection. As the properties got rented, I imagined surly the collections will surpass the expenses, but like clockwork, you'll find thousands in repair bills every month across the portfolio. There is no communication from the management team and everything is automatically approved and billed to your account. It's a daily surprise when you login to your owners portal. I found myself having to email several times about repair bills being posted that were not communicated to me nor asked if I approve of the bill.
After months of of a stabilized portfolio with $0 net return from the rents, I've decided to just remove them from the equation. We'll now see if the new PM I've hired can fix this. I plan to give Detroit a solid few more months. I believe the market there is truly one of the best in the world right now. The neighborhoods when selected right are truly rewarding from an appreciation point of view.
Worst case scenario, I'll dump the portfolio this year and continue in Toledo. Best case scenario, I add another 20 doors to Detroit and hold the property management company accountable to fast evictions and prioritized rent collections. Probably gonna look at stabilizing with S8.
I wrote this to share my experience publicly with those looking to invest in Detroit out of state and may be considering Own It Detroit. Acquisitions was fun, fast, and a great experience. Management and stabilization of the portfolio has caused me to lose investor confidence in the region.
We'll see if the new management team (logicalPM) can fix it. I'll provide a 90 day update.
My advice to new investors going into the area -- Do it much slower than I did. I aggressively pursued the market. It's now been a great appreciation play, terrible cash flow play. Also, the quality of tenants at this level is absolutely what I expected, but wasn't sure. In Toledo, my S8 tenants have all be heavily vetted and rarely have any issues.
Moving forward in the Detroit area, I'm looking more towards $100k sub prices and strong neighborhoods like Bagley. You'll find strong appreciation and cash flow here.
Feel free to reach out with any questions you may have. Happy to answer publicly any questions.
