All Forum Posts by: Matt Hurley

I think this question would be better addressed on the Metro Detroit Real Estate Investors Facebook group. Couple thousand people are part of that group and only deal with Detroit, good resources there

You may know this already, but as an absentee investor there’s a lot of things you’ll have to consider for Detroit that’s different than other cities. For example, the Detroit land bank is cracking down on vacant properties owned by out of state investors. As in, they’re actively searching for owners out of state, checking to see if their properties are vacant, then immediately slating them for demo at your expense. 

What state of repair are your properties in?

Simple answer, find a partner. If that doesn’t work, wholesale to another investor who has the cash

Woa, where are you getting your closing cost number? That’s almost 10% of asking, what type of property is it? Right now I’m not understanding your numbers: 

Purchase $ + rehab = $555k

HM loan @ 80% of $555k = $444k 

Down payment $111k + closing costs ($4k?) = $115k cash needed to close

Interest only/mo. $4440 + utilities = $5k

Holding costs for 5mo. = $25k

So: holding costs + cash to close+ loan payback = $584k

ARV $685k x 75% CO refi = $513k

Sounds like a losing deal to me. Also keep in mind you’re going to need at least another $50k cash on hand to act as a slush fund for your contractors. HM lenders pay in draws, meaning you have to complete the work first, get final inspection from the city, THEN you get your draw money. You don’t want to keep your contractors waiting that long, they won’t work for you again. 

That 7 day due dillegence is a HUGE red flag. For commercial multi’s of that size, standard op. proc. is 30 days. That probably means he’s hiding something he doesn’t want you to find (major repairs, tax problems, liens etc.). If there’s no wiggle room there, then you need to have your contractors READY on day one. The day you close you need to do a walkthrough with every major contractor you’ll need. Screw the inspector, walk through with your hvac guy, plumber, drain scope, roof, everything and make sure they know your contingency is 7 days and can get you their report yesterday. 

This is not even the financing part. 

I agree with Geordy, a HM lender might be the way to go on this one but be ready to put 20% down. What's the ARV?

Lots of Potential, check out the Metro Detroit Real Estate Investors facebook group. There's people posting questions and experiences about everyone of those cities, in addition to people wholesaling properties. Great place to start! 

The area of Westland you're probably looking at is called Norwayne, was a huge duplex housing push in that area in the 50's & 60's to support the booming auto industry. If it gives you any idea of whether you should invest there, it's known as "shacktown" to everybody in my local REIA. Really low quality houses, most properties run slumlord style (because that's the only way they'll cash flow), and a really poor tenant pool. Before I closed on my first property I had one in that area under contract, backed out because the owner re-drywalled a week before putting it on the market covering up a severe black mold problem + bedbugs. My story is a pretty common one.

So long story long, I recommend you avoid that area. Other spots of Westland can be great though. 

Short answer, talk about this to everyone and network your butt off. My personal finances are tied up my first BRRRR right now, but through my local REIA I met a dude who wanted to partner up. He has plenty in cash and a decent amount from his 401k he can borrow, we're forming the LLC right now and looking for property #1.

Longer answer, TALK about this new thing you're doing with EVERYBODY. If you're passionate and knowledgeable about it, you'll find your people. It might feel crappy to straight up ask family/friends for money. But if you just talk about where you are you'd be surprised what comes back to you. Buddy of mine in this area discovered his uncle could borrow $100k from his retirement 401k by talking about his new endeavor and the 10%-15% ROI he gets on every deal. His uncle came to HIM and asked, "how can I get that return?"

Btw, the above is not just how I found my partner, it’s also how I found a landscape designer that’s re-working my exterior for free, a handyman that just wants any job because he’s about to get his contracting license, a 20+ yr union drywaller who lives 2 doors down from me...you get the idea. Good luck Mark! 

Check out the Metro Detroit Real Estate Investors Facebook group. It’s not 100% Detroit but most people there the majority of their business there and are open to questions. Do you have a good idea of your finances? How much you can offer? What you bring to the table? 

You're on the right path! A lot of people try to start putting offers on places before getting their finances in order, it's one of the most important steps other than deal analyzation. 

The biggest hit points you need to know walking into the conversation:

1. Your DTI (debt to income ratio)
2. Your general credit score
3. The type of property you're going to be purchasing

#1: Your total debt will show up on the hard credit pull they do when you apply for a mortgage, don't try to massage the numbers here. They'll know if you're lying. 

#2: This is good to have in general, but it can start the conversation in the right direction. "I have a credit score of 720, what do you imagine my APR will be?"

#3: Financing products differ whether you want either a Single family home, 2-4 unit, or a 5+ unit. There are different products for each type of house, so knowing what you're going to be investing in is relevant to the conversation. 

If you decide to move forward with that lender, they'll do a hard pull on your credit and create a pre-approval that you can use to shop around for houses. This pre-approval is not only important for the offer, but it also give you an idea of exactly what price range you can buy in. No sense looking for properties in the $250k range if you can only get a mortgage for $175k. That being said, if you aren't approved for a lot there are other creative means to get financing using no doc loans, hard money, partners etc but that's a whole other conversation. Plenty of other posts here for that!

That's highly dependent on the deal. The whole idea behind BRRRR is that you get back all the money you put into it. If the money that went in didn't come from you, then what you're looking at is leveraging the equity in the property to use on your next deal (if you have enough equity to do so). When you BRRRR with a partner, the normal end game is you're splitting the rent 50/50 having put no skin in the game.