All Forum Posts by: Kenneth Jenkins

This winter was pretty cold in Metro Detroit, but it was nothing compared to the rental slowdown we have seen from November until now.  Our average days on market inside our portfolio extended to roughly 49 over this time period.  This is about 12 days longer than the same period last year.  In softer areas, like C- Detroit proper we are seeing lower demand.

As always we recommend that rental comparisons need to be independently arrived at.  As an investor you should not be relying on the realtor selling you a property as the sole factor in determining it's market rental rate.  Listing rental rates do NOT equate to signed rental rates.  The number one factor in renting a property (assuming it has market competitive in finishes) is if it's priced appropriately.  So make certain you are working with someone who has access to data on actual signed rental rates.  This typically means a licensed property manager.

That being said, we took 7 holding deposits last week on our 26 available rental properties, and the weather has gotten above freezing for a couple of days last week.  So now, it's officially March in Michigan again!! Last year we started March with 20 vacancies and ended with 0.    I have a suspicion this year will be the same.

I'll also say that the Renegade meetup is the most valuable one to attend.  It's typically the 2nd Tuesday of each month and starts at 5:30 at Shields Pizza on Telegraph Rd in Southfield.  It's free to attend and will put you in the room with wholesalers, contractors, lenders, fellow investors, and property managers.

If you decide to go, let me know and I'll introduce you around.

 Try "A OK" Appliances.  Really I would just call around to local used appliance stores for the area my property was in.  I'd expect delivery, install and removal of the units at the price point I noted above.

My opinion is don't try this in Detroit proper.  I'm sure Detroit isn't unique in this, but managing without being present requires you to rely on others.  Detroit in particular has been a haven for out of state money and there is a sub culture that has developed of "contractors" advertising to provide this type of service while at best underperforming and at worst completely stealing from you.  Yes, on paper you can do it, and seasoned investors with very close ties to the area are also successful.  So it's not impossible.  But we field calls several times a week from investors who fell into this trap.

One very knowledgable and successful guy is @Travis Biziorek take his advice seriously.  He is making it work, and has a multiple year track record.  I see he commented on this thread above, so reach out to him.

 Acquisition can be a challenge.  Is there a reason why you have chosen that specific geographic area?  It's not very densely populated.  You would do much better to expand your search and build a team where there is more opportunity.  I would consider Western Wayne County (suburbs of Detroit).  Have you thought about making commercial multifamily your next step?  If so I may have a property that would be suitable (off market).  It really depends upon your availability of capital.

 @Yoav Gilad is a great lending resource and sounding board.  Also, I second the meetup in Ypsilanti as it is very close to you and should be a convenient way to meet people face to face.

The experience you have will set you up quite nicely. As I'm sure you know there is a pullback in STR going on at the moment in the states. That being said, it's tough to get over the relatively high rate of return for STRs when you are comparing them to LTR. We have found that in metro Detroit at least LTR can absolutely be a "set it and forget it" strategy with very little input beyond major asset management decisions being made by the owners. $450,000 can buy you an amazing return in the C class suburbs around metro Detroit. We like Western Wayne County for LTR because of the responsiveness of the courts, high wages relative to rent levels, and access to a lot of quality contractors.

Best of luck in your search!

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In the immortal words of Ross Geller "Pivot!!!! Pivvoottt!!!!". I had a similar situation in which I bought a 20 unit at 100% occupancy and 90 days later had 8 vacancies, with NO placements at all. It was a shocking realization that URGENT action needed to be taken. I fired one PM company, placed 6 tenants in the course of a week myself and hired another one directly after that. That wasn't the end of the story or my PM saga, but I was able to sleep knowing that I had rescued the project from certain bankruptcy.

Now, 5 years later, the property is amazing and I'm still satisfied with my proactive approach. Of course I never could have done it remotely, so you are facing other challenges as well. If you'd like to chat directly about some options moving forward (including how I hired my first direct employee as a PM) I'd be happy to do that.

 The number one thing I tell fellow investors is that in the city proper you will deal with 36th district court and that has a material impact on the speed with which the court process will proceed if you need to evict.  It can take 2-3x longer than in the suburbs and that does impact economic vacancy.  Not everyone starting off gets hit with this, and if you can buy a portfolio it can "de-risk" the issue to some extent, but if you have one property and experience an 8-9 month fight to collect rent prior to eviction with a large repair bill after that it can be very painful.

ALWAYS use a licensed PM in Detroit.  Otherwise prepare to cry and wonder if your money is being stolen.  

To answer your questions, yes we have encountered issues with property managment. That's the reason we self manage today.

Yes, our properties are cash flowing, but to varying degrees.  Our best property may be 20% coc and the worst is around 2%.  The average is in the low double digits.

Yes, we typically buy and renovate.  See my other posts for typical renovation costs in Metro Detroit, and how to build a portfolio in Metro Detroit if you don't live locally.