Why would you throw another $800k into a market that you're bleeding money in? It seems you're justifying it with appreciation, but it's not a time-proven appreciation market. Plus I suspect your valuations are high compared to what your actual net sales price would be if you sold those properties today. Don't forget transaction costs, seller concessions, vacancy loss if you sell vacant (which you should), capital gains taxes on the profit if there is any, etc. You need a minimum amount of rent to support a rental (realistically $1,500/month or more, this is what you need coming in to have the minimum amount of $300-500 going towards maintenance/repairs/capex/issues that come up), so your best buyer is probably an owner occupant. Can locals afford to buy a property there for $100k? Are there other less expensive options for them nearby that they might buy instead? If so, your valuations are high and your days on market will be long, and your list to sales price ratio won't be good. Maybe a newer investor with similar loose underwriting, just looking to get in the game will buy them (it's an offensive term and I'm sorry for that but it's called "The Greater Fool" theory).
You're seeing the truth in your portfolio performance. Hiring a new PM is not going to fix this I'm afraid, because it's simply a math problem. Operating rentals costs a certain amount of money and it's really hard for low-rent properties to make enough to be self-sustainable and spin off any profit unless the owner is hands-on, self-managing, fixing things themselves etc. Every time a tenant has an issue, the PM calls an electrician, plumber or handyman to fix it, it's going to cost a few hundred bucks minimum, sometimes thousands. If your monthly budget for this type of thing is $100, you're losing money. Not making these repairs is not an option, you can't just not fix things or you lose tenants and suffer vacancy loss, potentially have legal problems, and just end up with more differed maintenance/ bigger issues over time if you don't stay on top of repairs. This is just the normal operating costs, never mind the big things that come up occasionally with capex like when you have to replace a major component (furnace, water heater, sewer line, driveway, steps, deck, windows, roof, doors, siding, landscaping, etc,) and it costs $10-20k. A typical turnover can be a month or 2 of vacancy and $2-10k in make-ready costs (cleaning, paint, flooring, appliances, towel racks, vanities, etc. that gets beat up and broken norma wear and tear). There's no budget for any of that when the rent is only $800 and at best you're putting $200 aside for those things in a rainy day fund. Realistically you're probably taking a haircut on these purchases, and definitely continuing to lose money every month if you keep them. What is the point?
It seems that you can afford to invest in a better market where you'd be more likely to make money instead of losing it. Why not do that? Not to mention it would be so much less of a headache and so much less time and energy invested on your behalf, plus much less exposure to risk, easier to manage etc. to just buy a single multifamily for $800k in a good location with strong underlying fundamentals. If you were somebody who could only afford a $75k property and your only option is to bootstrap your way up starting from the bottom, then that would be different. I'd say go for it, everybody has to start somewhere. If you were to self-manage one property like this like a hawk then slowly add another and another, ideally down the street from where you live, doing all the maintenance and repairs yourself in order to avoid losing money, then that could make sense. But it sounds like that's not your situation, so I don't get why you'd want to hold a portfolio like this. Too much risk, too little upside.
Detroit is not what most investors consider an appreciation market. 2 years of appreciation during a time period when every other market appreciated also, following decades of up and down with extra down doesn't suddenly make it an appreciation market. Not if your strategy is long term buy and hold. It's more of a classic boom/bust town that is still bulldozing whole neighborhoods because of an oversupply of housing due to the population shrinking by half. In 2010 the values there went all the way down to what they had been in 1993, 17 years of appreciation gone. The next downturn could be a repeat, if the subsidies dry up and the dumb money stops coming in, propping up prices. One thing I like about real estate over stocks is that there is always the underlying asset with RE, and it's rare for RE values to go to zero in good locations, but there is the risk of that happening in places like Detroit. These assets are illiquid in a downturn. Why buy the real estate equivalent of a penny stock when you can afford to buy blue chip aristocrat dividend stocks (Class A multifamily properties in good locations with actual strong fundamentals like population growth, a diverse and recession-resistant job market, limited supply and high demand, affordability, and consistent long-term appreciation)?
