All Forum Posts by: Benjamin Molnar

@Taylor@Taylor L. I agree with your approach.  I think there's a right time for everything regardless of the market, you just have to pick your spots and make sure your projections hold up.

@Robert C. My wife and I listen to the podcasts often and we're motivated but, we always feel like we missed the boat back in 2007-2008. We're not necessarily wishing for hardship but if rates go to zero, there's obviously opportunity there. We're looking for our next investment now but, we're going to slow walk it going into next year.

Also, we may look at new construction rental instead of BRRRR or flip. Call it a NCRRR? Doesn't quite have the same ring to it though, does it?

Just curious to see how this may be affect your plans for the next year: https://www.cnbc.com/2019/08/1...

My wife and I have made a couple of trips to Detroit.  There are a lot of good neighborhoods but, if you haven't been there, be wary of what someone is trying to sell you.  It literally changes street to street.  While you may be able to find a deal, find property management, good luck trying to find reliable and responsive contracting work.  I'm not a fan of these services but, we received zero response from inquiries made on Thumbtack, Houzz, Home Advisor, etc. and there is very little online presence from contractors that handle metro Detroit.  I'm assuming no one wants to provide the itemized estimate I've requested. 

Also, I wouldn't explicitly cite this as evidence but, I've seen a lot of "deals" on the MLS that are rehabs that are half done and now the owner is trying to get out. No idea what the actual reason is but, if they weren't able to follow through, do you want to take on that risk?

Turnkey companies have people they work with but, they typically guard the people they work with so they can charge additional fees (obviously).  The problem is you don't know if you're getting quality, licensed work or whoever was in the Home Depot lot that day.  We saw really bad work when we did a tour with one turnkey company there - not what I would want for a home I would want to own - hoping to achieve appreciation - and not the kind of work that would attract the quality of tenant that we're personally looking for.

Also, it's important to consider the micro/macro factors that introduce risk.  There's not a lot of money for realtors in these $25-50K deals so you'll need to find someone really hungry who will really give your deal full attention.  You'll likely need to find someone who's offering additional services to make it worth their while and hope that they don't get distracted by the next investor with a stack of cash burning a hole in their pocket.

As pointed out by a colleague, there is a LOT of inventory there.  Investors are coming in globally for the promise of cheap homes that rent for $700-900.  What's likely not part of the sales pitch is that rents are rising faster than incomes (I wonder why?).  We're seeing some evidence of potential economic instability nationally (i.e. stock market correction) that may affect an area that's still in recovery.  If the population is declining as some in this threat have argued, is the timing right to invest with the additional instability that an election year brings?  

I think there was a time when you could buy an amazing house in a great neighborhood for $20-30K and see $100,000 appreciation - I have a few of neighborhoods in mind - but, I think the market is starting to level out at this point. There's no evidence that price per square foot has increased dramatically - consistently - over the last three years within the better neighborhoods we've been looking in. MLS listings are artificially high in my opinion.  You really need a great wholesaler to bring you a great deal.

All that being said, I think there is opportunity in Detroit but you better have a good team in place and you better have a great grasp of where you're investing. I would question why people are so ready to promote Detroit as the next gold rush if they're already making so much money there - I would argue they need to keep the money to keep flowing. If that's potentially true, you should ask what the nature of the demand is - is it organic and sustainable or is it being driven by speculation? Why would you want to live in Detroit? What is there (employer mix, entertainment, quality of life) that would provide value to you as a resident that supports long-term sustainability and growth? I believe long-term that great ROI is possible but, it could be expensive in the short-term if you don't invest with eyes wide open. Just because you read a book on long-distance real estate investing, it doesn't mean that you can easily execute that strategy in Detroit.

Totally agree, we've changed our 

@Gordon Starr Totally agree - we've been impressed with how solid the houses are.  Some of the neighborhoods look like they're out of a story book and the homes are in the low $100K-200Ks.  We're looking to rent first now unless the house sells itself before we place a tenant.

@Travis Biziorek@Joshua B. We're not banking on what Dan Gilbert does, for all we know he's likely using the new tax law to leverage Detroit's Opportunity Zones to avoid capital gains. There's growth in Detroit but, there's also A LOT of inventory. It's a long term play and I don't care what anyone says about rising prices - it's not happening the way people say it is. I was just there for a REI event and people generally agreed there is a lot of inflated listings making the market look like it's growing but, SOLD comps over the last few years don't support this. The high listings keep dropping in price. The increase in price per square foot are marginal now and I'm happy to show data that supports this. Rentometer shows rents flattening in many areas.

That being said, we do think it's a great rental market if you know where to invest.  Big business is taking notice - it's all part of their cyclical, "Let's move operations to X because we can save Y on annual real estate costs."  

We think trying to flip at this point is great if you're running a turnkey company that wants to pitch a poorly rehab'd, rental to someone from out of state with dollar signs in their eyes.  Those people only want to take value out of Detroit and it's not sustainable.  If and when a recession hits - we are heading into a particularly nasty election year - do you want to be holding a bunch of $40-60K houses with - potentially - a non-salaried tenant paying $900 a month?  We'll deliver value by providing a great rental property in a strong neighborhood with high home ownership.  We'll be happy with the 1% rule delivering a superior product over the long-term and let everyone else chase the high-risk 2%.

@Alex K. Sorry for the late reply, I've been crazy busy. Totally agree. We are looking at a potential flip but, we're ready to pivot to a BRRRR strategy if we can't move the home. We're currently looking at a couple neighborhoods with high home ownership vs. rentals to make sure we're catering to buyers first. If the buyers aren't there, we're still in a neighborhood where people will want to be and we'll be able to get top tier renters.

@Angela Salvant Sorry for the late reply, I've been head down working on a few things.  The HMLs that I've reached out to are ok with it being your first deal, you just need to have a good working knowledge of your market and clear cut goals (i.e. exit strategy).  Having some experience helps but, if you're doing a fix and flip that's around $80-200K I'm pretty sure they'll work with you.  You should have some reserves and a good credit score but, those are not as important as they are in conventional financing.  They are going to assess your numbers to make sure they make sense to them.  If that passes muster on their end, it's pretty much smooth sailing.

I started with lenders in the Pro area but, there may be some Detroit-local HMLs that will work with you as well.  @Jamiel Strickland likely knows a few that he can connect you with.

Good luck!

@Angela Salvant  I've been able to secure funding for Detroit properties from multiple HMLs.  The pricing depends on the deal and your credit score - as should be expected - but it's not out of the question.  Just do your homework and provide a solid proposal to the lender.