All Forum Posts by: Joe Hammel

Monthly cashflow is definitely still attainable. It’s not what it was in 2021, but if you know where to look it’s still possible to find good deals that pencil out. That being said, you need to go into it with realistic expectations. If your goal is a turnkey property in a grade A location with 15% COCROI, then yes it’s going to be a lot harder to find right now.

I wouldn’t personally put too much emphasis on your interest rate though. Lower interest rates can end up driving prices up even more. You can’t change the price you pay, but you can change your interest rate by refinancing later on down the line when they’re lower. Using heloc can definitely be a great strategy as well.

Metro Detroit has what most investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation (#1 appreciating city 2023). It still gets skipped over often because many invest in Detroit wrong and get burnt. I'll save you a ton of time. Don't get caught in the $10k-$40k house trap. Just buy the $100k house and you'll be fine.

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Happy to share a picture of my portfolio if you/anyone is curious.

In short: yes, be wary of the seller. Between you and your agent, you need to do as much digging and due diligence as possible. From there, all you can do is try to put the pieces together and determine if it’s still a solid deal for you and/or something you still feel comfortable taking on at the price point you’re at. Sometimes sellers just don’t have good documentation. A lot of times failed landlords are the reason you’re getting a decent deal. Pretty much no deal or no good deal comes without some hurdles. These are the road blocks that separate investors who see through it and others who can’t. A good agent will have good experience to help determine what is what.

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here, which includes some multifamily. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

Househacking is a great option if it’s something you’re able to execute in your area. In fact, it’s actually one of our favorite investing strategies. The longterm equity you can get makes it an excellent first investment move.

That being said, if your goal is immediate, consistent cashflow then investing in a cheaper market might be more suitable for your needs right now. Investing out of state can definitely feel intimidating, especially if it’s your first time investing! It sounds like you’re already taking the right steps to educate yourself before taking that leap. One of the key pieces to long distance investing is building a team you can trust

When it comes to building your core four, it comes down to your own due diligence. Once you pick a market, you’ll be able to look more into specific people/companies there. One thing you can do is find a local investor group after choosing your market and ask people in that group for feedback on anyone you’re thinking of working with.

Anyway, here is some info we put together on the suburbs of Detroit that seems to help when OOS investors are trying to decide on which market to invest in:

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

Market Suggestions

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Asset Classes

We notice in the metro Detroit market the returns are arguably best on SFH. The price to rent ratios are the best and there is very good demand.

Key Criteria

When screening out of state deals, building a core four that is knowledgable and trustworthy is crucial. Unless you’re planning a trip to walk every property and do extensive research on the market while you’re there, your team will be your boots on the ground. Especially in a block-by-block city like Detroit, it’s imperative to have people in your corner that know each pocket of the area well. The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those. Avoiding these types of deals will help you mitigate risk as you get started on your investing journey from CA.

You should also look for signs of appreciation such as job growth, population growth, etc. For example, we have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

Resources

We use the BP calculator as well as a custom total ROI calculator to run and analyze all our deals. Rentometer can be helpful to gauge rental income. Local investor groups can have lots of good info in there as well as sometimes off-market deals.

I'm happy to share a picture of my portfolio I mentioned if you/anyone is interested.

Metro Detroit has seen immense appreciation over the last couple years (#1 appreciating city 2023). It has what 99% of Real Estate Investors want overall. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation.

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs. While you can't necessarily predict an appreciating market, all of those things impact appreciation and can be helpful to monitor as you're looking for high appreciating markets.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Happy to share a picture of my portfolio if you/anyone is curious.

Quote from @Carissa Atendido:

Quote from @Joe Hammel:

The numbers you’re using are reasonable, and it’s great that you’re planning on budgeting out your reserves when analyzing deals. What defines a “good” deal is pretty subjective to each individual investor and their goals (cashflow, sweat equity, long-term appreciation, etc.) If your goal is instant monthly cashflow, which it sounds like yours is, then it’s important to look at the big picture of each deal and all the factors that come into play:

• - The market: It sounds like you’re looking in A class areas. The higher the property class, the harder it’ll be to cashflow simply because of the price/rent ratio. The property taxes in those higher grade areas are usually pretty high for an investor, which adds additional strain to your potential cashflow there. While it’s still possible, it’s more difficult to find deals that pencil out in those markets.

• - Financing numbers: I’m not sure how much you’re planning on putting down, your rate, etc. but all of those things will factor into your ability to cashflow as well. You can always look into different types of loans and even buying down your rate if needed to make the numbers work better for you.

• - Appreciation/Total ROI: Appreciation goes hand-in-hand with the market you pick and is one factor that plays into your total ROI. If that market has been seeing steady year over year appreciation, then it can still be a good investment even if it's not necessarily cashflowing day one. Another factor to consider is if you're looking for something turnkey or if you're open to sweat equity.

While it can be difficult to find “good” deals in this market, it’s definitely not impossible if you know where to look. It comes down to give and take. If you’re not willing to sacrifice location, then your cashflow may suffer a bit at the beginning as you wait for longterm appreciation and rent growth. If you’re not willing to give up immediate cashflow, then you may need to be more flexible when picking your market. But it’s also important to note the other factors that can make a good deal too, besides just immediate cashflow.

Here’s how we typically run our deals in the Metro Detroit area to give you an example. If you do it right, it’s arguably the best market to invest:

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years. Here is a picture of my portfolio if you/anyone is curious.

 Hey Joe, 

Thanks so much for your response, i found it incredibly helpful. And thank you for sharing your spreadsheet - wow, congratulations on that cash flow! I hope to get there one day. Just hope I'm not starting too late lol 

Do you rent by to room for any of your rentals? Doing the math on a 3/2 property - renting a room for $230 a week is $2760/ month vs renting the whole house for $1900-$2100. Looking into this strategy to see if this is what I want to do. I find myself with shiny object syndrome preventing me from making a move. I was dead set in looking for a LTR in the Ocala, FL area but now this rent by room strategy has me looking in cities like Austin or Atlanta. 

Any advice in this space?

Thank you!

Carissa 

I'm glad it was helpful!

Renting by room is a strategy you can look into, but the pool of renters you could attract by doing that may decrease as opposed to just renting the whole house. And because of the decreased pool, you may end up having to lower the rate per room significantly to attract anyone, which would defeat the purpose for what you're trying to do.

There may be more liability if you’re renting by room as well. You’d definitely need to do a thorough screening and background check on everyone.

Rent by room varies market to market. For example in metro Detroit there’s only a fairly small demand for it. Perhaps California or really really expensive markets might have demand. Personally I’ve found super specific niches to be harder, such as rent by room or mid term rentals.

Sometimes the most boring and oldest proven strategies simply are the best. As you see reflective in my portfolio.

Since you’re OOS and also pursuing Section 8, you’re really going to have to do your due diligence to minimize risk as much as possible. When building out your core 4, interview multiples of each to have comparisons, look at honest reviews, and get insight on people from local investor groups. Detroit is a block by block city, so you’ll need someone honest who knows the area well. Google street view can be helpful when you’re trying to get a feel for a specific property/area.

When you’ve found a property and are moving forward with Section 8, the biggest piece there is going to be vetting and screening. Each housing department is a little different, so just make sure you know their requirements upfront.

As far as picking your market, Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those. Avoiding these types of deals will help you mitigate risk as you get started on your investing journey from CA.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

The numbers you’re using are reasonable, and it’s great that you’re planning on budgeting out your reserves when analyzing deals. What defines a “good” deal is pretty subjective to each individual investor and their goals (cashflow, sweat equity, long-term appreciation, etc.) If your goal is instant monthly cashflow, which it sounds like yours is, then it’s important to look at the big picture of each deal and all the factors that come into play:

• - The market: It sounds like you’re looking in A class areas. The higher the property class, the harder it’ll be to cashflow simply because of the price/rent ratio. The property taxes in those higher grade areas are usually pretty high for an investor, which adds additional strain to your potential cashflow there. While it’s still possible, it’s more difficult to find deals that pencil out in those markets.

• - Financing numbers: I’m not sure how much you’re planning on putting down, your rate, etc. but all of those things will factor into your ability to cashflow as well. You can always look into different types of loans and even buying down your rate if needed to make the numbers work better for you.

• - Appreciation/Total ROI: Appreciation goes hand-in-hand with the market you pick and is one factor that plays into your total ROI. If that market has been seeing steady year over year appreciation, then it can still be a good investment even if it's not necessarily cashflowing day one. Another factor to consider is if you're looking for something turnkey or if you're open to sweat equity.

While it can be difficult to find “good” deals in this market, it’s definitely not impossible if you know where to look. It comes down to give and take. If you’re not willing to sacrifice location, then your cashflow may suffer a bit at the beginning as you wait for longterm appreciation and rent growth. If you’re not willing to give up immediate cashflow, then you may need to be more flexible when picking your market. But it’s also important to note the other factors that can make a good deal too, besides just immediate cashflow.

Here’s how we typically run our deals in the Metro Detroit area to give you an example. If you do it right, it’s arguably the best market to invest:

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years. Here is a picture of my portfolio if you/anyone is curious.

Quote from @William Mulder:

@Joe Hammel if you're still sending this out or an updated version, I'd love to see it. Thanks!

Quote from @Joe Hammel

 Absolutely, I'll send you a message.