All Forum Posts by: Mark Krier

I'm sure it's just a formula based on inventory levels and trends, growth rates, etc..  One interesting thing to note as someone that lives and invests in Grand Rapids is that we've been making top lists like this a lot in the last few years, but we're usually excluded from the ones that limit the discussion to the "50 largest markets". I guess we're starting to break into that top 50 market now as we head into 2019. 

I would say that Detroit is going to be higher risk but higher reward, and will also be more difficult without really good local knowledge. I think Grand Rapids (where I invest) is going to be an easier place to buy (especially as a remote investor) and is more likely to have stable/steady growth. 

I know what you mean Scott... The lack of hyper-local knowledge is probably an issue in every market, but I think it's particularly difficult in Grand Rapids (I live and invest here). Plenty of reasons why, but mainly because the inventory is low and the neighborhoods are unique. I would suggest you analyze and run numbers on every deal you can without worrying too much about adjusting for local intangibles, and then just find 3 or 4 local people you trust to look over your numbers each time (i.e. Realtors, other investors, property managers, local lenders, etc.). 

So basically my answer is to put in place a system that will outsource the solution to the problem rather than trying to solve it yourself.  

I would be happy to check over your numbers and give you a quick opinion. Send me an email anytime. 

A nice big home on a great street in the Heritage Hill / South Hills area. It needs a full rehab (roof, electrical, mechanicals, drywall, etc,) but with similar homes on this same block selling from $225k to $279k there should be enough room to enable someone to restore this classic home to it's former beauty.

Hi Tereak, 

The land contract is official once it's recorded with the county, and it will be required to be notarized. 

Check with the local municipality too where the property is located... I know for Grand Rapids you need to also complete a property transfer affadavit form and file it with Grand Rapids city within 45 days of executing the land contract. Google "property transfer affadavit Michigan" and you'll find the form. If you don't mind paying something like a $165 doc prep fee and maybe another $200 for a closing fee then you can go to a title company and have them write the contract for you and help with the whole process.  

I've done land contracts both ways (on my own going to the county/city offices myself, and also through a title company with them handling it all) and I personally think it's worth it going through the title company. Especially if buyer and seller don't know each other very well because it provides some legitimacy to the whole process.

If you're looking to do it on your own, and if you're a member of RPOA, I know their website has template forms and resources to help you. 

Feel free to reach out if you have any questions. Good luck. 

Hi Chad, I just messaged you -- we can talk more offline. Thanks for the recommendation @Dawn M., I hope everything is going well for you and David.   

Hi Tareak -- If the property is in Grand Rapids it's good to know that the city's current practice has been to deny any requests to convert current SFRs into 2-units. As far as advice, I would try to soak up as much information as possible during your walkthrough regarding what major improvements the property might need. Cosmetics are easy to estimate, spend more time trying to figure out the likelihood of something major being an issue (mechanicals, structure, mold, etc.). If you have good construction knowledge you'll be fine, if not you may want to consider inviting someone along who does. For exit strategy, I would just try to run/estimate the numbers on several options (wholesale, whole-tail, fix and flip, BRRRR) and then choose whichever one gets you closer to your RealEstate/Financial goals. Message me or email me if you'd like some help.

Hi Tareak - Here's a list of the property tax codes for Grand Rapids: https://www.accesskent.com/OnlineServices/propTax_...

A couple of the codes you listed looked unusual, if you message me an example of a property with those codes I can try to figure out where they're coming from. 

Hey @Rob Gervais -- I agree with the posters above that cap rate is probably not the BEST way to analyze a duplex, but it's also not a terrible way to do it either... I think you might have an error somewhere in how you're calculating your cap rates which is skewing your numbers. 

If you're using an expense rate of 25% like you said I'm not sure how you could be getting a 3% cap rate... You should be getting cap rates way higher than that. I'm an full-time Realtor & Investor in Grand Rapids in both SF & MF and most of the duplexes here have been going for somewhere close to the 1% rule. (btw, the 1% rule is:  $150k renting for $1,500/mo... or $120k duplexes renting for $1200, etc.)

So, if you find a duplex around the 1% rule, and if you're using a 25% expense rate, you should be getting a 9% cap. For example: 

- Let's say a $150k duplex brings in $1,500/mo in rent. 

- That's $18,000 per year in gross rents.  

- 25% in total expenses = $4,500

- That's $13,500 in NOI (Net Operating Income)

- Cap Rate =  $13,500 / $150,000 = 9%

Actively listed right now in Grand Rapids there's a duplex at 142 Carrier Street NE renting at $600/ea ($1,200 total) listed for $130,000, and there's another at 649 Easter Ave SE that should get $750/ea ($1,500 total) listed for $145k.

**Last thing I'll say is be careful because I think estimating 25% in total expenses is light. You have to analyze it deal by deal to know for certain, but if you're going to be using a rule of thumb I'd be more inclined to use something closer to 50% instead of 25% for my total expenses. If you do that, you'll be seeing 1% deals come in at a 6% cap rate. 

Thank you everyone, great answers! And you are absolutely right @Mark Hayes, that is the exact episode I was looking for! Thanks!