All Forum Posts by: Michael Wayne

@John Moorhouse

Respect your hustle so much, but don’t ditch high school. I’m gonna recommend the Gary Vee approach: go to school everyday and sit in science class while you read a book/surf online and learn about what motivates you. You don’t need to do well if you don’t plan to base your future off what they’re trying to teach you in the classroom. If you think your time is more Valuable focusing on the RE game and you’re committing your life to it after you graduate, send it. Added bonus is you have to be finished up for the summer and can spent 2 and a half months doing nothing but learning about real estate. A GED is a must have, finish strong my friend.

@Larry Caper phenomenal reply. Thank you very much!

I'm going to build this out on our next deal. Couldn't get the price we needed for this one. Know any good multi-family brokers in the Oakland County/Metro-Detroit regions? 

@Ben Leybovich while I agree that revenue and CapEx are largely uncorrelated, I think the metric is an effort to create some sort of benchmark that you can manipulate based on the specifics of the deal.

It sounds like you probably have a better suggestion?

@Kenneth Bullock Great question! We are speaking with the current owner in a few days and that's one item on our list.

@Bjorn Ahlblad

@Bjorn Ahlblad Thanks for the insight. I suppose that makes sense. Do you think 8% is a fair budget?

@Brian Garlington If we can get our offer accepted where we want it, it'll be about a 6% cap. Pretty thin, although the property is in the number 1 highest occupied market in the state and the building has averaged 98% occupancy over the last 10 years, so vacancy risk is rather minimal 

Thank you all for the insights!

BP Family, 

My partner and I are about to put an offer in on our first multi-family property in Oakland County, MI. We've built out a model and really like where our numbers are at, but the one variable we're having trouble estimating is the CapEx budget. I've read that 8% of gross rents is a safe target, but I want to get more granular than that.

Here are some details: 

- 12 units 

- ten 1-bedrooms, two 2-bedrooms 

- Covered parking garage

- Asphalt driveway 

Capital improvements made recently:

- Window replacement (summer of 2014)

- New roof on main building & Car Port (summer 2018) 

- Replacement of entire driveway and uncovered parking

- Gutters Replaced with Commercial Gutters 

- New concrete in courtyards between car ports and building 

- installed cameras with 10-day DVR loop 

Post LOI, we plan to do a full inspection to check on HVAC systems, but we want to still put in an informed offer and ensure the property is still worthwhile with a budget for CapEx built into our projections.

Anyone have any best practices for this type of property? 

Thank you, thank you!

Hi Mike, 

I think one of the biggest variables to consider as far as the investment thesis here are the cash flows in the near term. A new build, depending on the size, will take 12 to 24 months to complete and that's after all the headaches on the front end of that for designing, gaining approval, lining up a contractor, etc. Then you have to fill the place, which depending on number of units, can easily take 3-6 months or beyond. that's 18-30 months of minimal or no cash flow. 

Not sure how you plan to fund, but there are much higher risks for both the debt and equity investors on a new build vs. a renovation project with an already occupied property. But as with any worthwhile risks, this inherently carries the bigger upside.

If your investors can tolerate this risk and you're able to finesse the zoning, I think building is the way to go, but both of these could easily up-end your deal which might leave rehab as your only option. 

Thanks @Gary Carver 

I've posted about Detroit a hand full of times and have received 10+ inbox messages asking for help/recommendations, all of which were out of state investors interested in Detroit. Very interesting to see such interest from other parts of the country 

@Chase McArthur

Thanks for the insightful reply my man. Really cool to get a local inside perspective like that. Guess that's why it's so important to get ingrained in your market. 

Hey BP -  

Recently responded this to an inbox asking my opinion of investing in Detroit, Mi. What do you think about the future of real estate in Detroit? 

(written a little theoretical - would love some data to prove/disprove my opinion) 

"

Although many parts of the country are still apprehensive, I’m all in on Detroit. I lived in Michigan for most of my life, and have seen Detroit at a lot of different stages, but none more energetic and vibrant than now. Recently had a chance to hear Dan Gilbert speak and asked him where he saw Detroit in its recovery (mind you this Guy has $1B+ invested in the city) if it were an inning in baseball, he said we haven’t hit the top of the second.

I think a major reason the population is declining is because Detroit is shedding its outer layers in massive quantities. The core near Campus Martius is incomparable to its far surrounding neighborhoods. That area has cemented the development and everything seems to be moving out from there. Evident now with how nice the midtown and Cork-town neighborhoods have gotten, even Mexican Village has improved. The movement of development has forced a bigger portion of the low income population out of the city, causing the population decline and yet the heavy culture influences and growing corporate footprint is causing a regeneration from the center outward.

Detroit has enormous upside and will be a great market long-term. In the near term prices seem a little high, which seems to have caused a lot of deal volume to shift further off market.

With that considered, supply in Detroit is endless and prices will correct. Lots of growth already, even more to go. Slow and steady....

"

What do you think about the future of the real estate market in Detroit? 

@Jackson I. I know how cool is that!! Thank you for the replies and wealth of information everyone