All Forum Posts by: Paul S.

Metro Detroit offers many options for meeting the 1% Rule and relatively high ROI.

The two most common mistakes we see investors make, over & over again, are:

1) Not understanding and running their own ROI numbers

2) Not having a clear understanding of the type of asset a property is

In our opinion, your best team member should be your Property Management Company (PMC). They have to deal with any property you buy every month until you sell or terminate them. Everyone else on your team will be transaction-based and not really involved after a purchase.

We're in the Metro Detroit area, so you may want to follow our blog here on BP, but at least read the following posts:

Follow our "Deep Dive" series we're doing about Metro Detroit cities and City of Detroit Neighborhoods: https://www.biggerpockets.com/...

How to “Screen a PMC Better than a Tenant”: https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

In our experience you will need to:

1) Learn to "Maintain to the Neighborhood", not your personal standards

2) Tenant-Proof everything you can

• Hard surface flooring, not carpeting (too easy to trash)
• Same basic paint for everything
• No garbage disposals for them to break
• Only spring-type doorstops also with plate on the wall
• Glue rubber mats under sinks to prevent water damage
• Sheet aluminum on walls around stovetops, for easy grease removal
• Towel racks - screw 1x3 to wall studs, then screw rack to that
• Install low-profile downspout ext, not aluminum that always disappear
• Plan on cleaning gutters and leaves up in the fall as tenants won't
• Avoid garage door openers

3) Have a great application screening process:

• Check credit for evictions & convictions, utility collections
• Focus on employment/income stability
• Require bank or debit card statement - you'll be surprised what they spend their money on!
• Make surprise visit to their current home to see how they treat it - that's how they'll treat yours!
• Deliberately have a few challenges in your screening process - it will weed out "entitlement mentality" problems

4) Allow payment plans, but create system to track when payments due, so they don't keep falling further behind

• You will need to call them on due dates or they will fall further behind
• Be prepared to give a strong NO when asked if you will change rent due dates to "make it easier" for tenants to pay rent based upon their SSI or paycheck dates. This shows total lack of budgeting and is a sign they will only fall further behind with more excuses.

5) Have a defined eviction process, but allow 3-5 days of flexibility for inevitable slow-pays.

6) Find handymen that live in an area only 1 Class higher than your property. Sending a Class A handyman to a Class C or D property will waste your money. Send Class B to C and Class C to D. They will also get along better with the tenants.

Wow! The wisdom you've shared is priceless. Thank you both so much the real scenarios and crunching the numbers. I NOW have a new longer term perspective on the BRRR method. Cashflow for the first year or so is realistic, but it sounds like the location and quality of renter is super important to "lower" the risk of being sued, cost of evictions, and having my appliances stolen!!! I may look at the suburbs of Detroit, as suggested by someone earlier in this convo. This means I may pay a little more for the property but the area may mean higher cashflow. Another take away is to do minimum updates to make the property liveable. Does anyone add a "clause" in their lease related to the first $100/200 of repairs being the responsibility of the tenant? Has it worked/not worked? Also, I considered condos downtown for Airbnb. I just hate not owning the land and structure and of course paying HOAs. Are either of you doing short term rentals? @Paul S. @Christian Hutchinson

 @Paul S

"I mean its not sexy, but thats an easy win on the low-end of the scale, and a couple buckets of paint.

People who are local know the play...but like all investments proceed at your own risk."

I can appreciate your analysis.  Hence why I said what I said. I have things I do to a property, that raises the tenant pool a little bit.  Lighting, and security systems(Cameras which I can remote monitor).  I'm local and self-manage.  Yes, the risk tolerance is higher being local. Its all high-risks.  But I view it I'll be ever present at a property.  I mean Detroit tenants are bold, but I've haven't had the 'steal on camera' bold happen. If a tenant decides to cut the security wires (thats inside of steel tubes) cut the dusk to dawn lighting wires (inside steel tubes) so that way they can walk off with appliances, and I have their name, cellphone number, driver's license, SSN, and place of employment.  They are a determined criminal.   Frankly, someone with that mindset would fail the screening.

If someone does all that to get the appliances they better hope they leave no evidence and they beat the cloud backup, because they literally would be caught.  lets be honest most criminals are extremely lazy.  I do my setups that makes them have to try.  Oh and they have to do all that with another tenant in the property.  So that means the tenant has to side with person stealing their washer and dryer.

Hey BP, 

I has been a while since I posted last and just wanted to get a update on how my journey is going. Well I have managed to land my first deal!! I partnered with my cousin and went in on a big duplex in Detroit Michigan. We bought it with cash and are doing a delayed purchase with a hard money lender. The property is in pretty good shape for how old it is. What we are planning on doing is converting it from a duplex to a monster single family house. This seems to be all the rave in our area right now. We found this deal threw the MLS and had help from a local contractor that we know that has lived down there his whole life to give us insight on where we should buy. The demo will be starting this week, and after the demo we should have are electrical, pluming and HVAC down.

Just want to say thank you to BP community these forums and the podcasts and the people here. This place has helped push me to do better in my life and for my family. 

If you would be happy to talk to anyone especially in Michigan and in the Detroit area about there journey and any deals they are working on. I am also willing to explain more about the flip we are doing if your interested.

You are worried about the wrong thing, when you are playing at the end of the market you are...

You want to minimize risk (theft), and generate cash.  If they want $50K offer $40K, spend $12-15K get the property together.  2 bed rents for $800/mo thats $1600 for two units on a cake walk.  Which means you are putting $1100/mo in your pocket every month.  Thats $13K a year in your pocket.  Then you cash out the stabilized asset in 3-4 years for $80K-$90K because there is enough meat on the bone for a turnkey investor. If values improve great borrow against the asset.

The methodology you are attempting to apply you will struggle finding a deal. Not to mention, banks are not kind in Detroit regarding appraisals.

Attempting to create capital via debt is a tough strategy in Metro Detroit. its hard in Detroit. Its even harder on the low end of the market. All these courses and blogs talk BRRRR and do in in under 6 months. It just doesn't happen that way in reality. Maybe 18-24 months. For instance last year from March to October lending was effectively shutdown for the types of properties you are talking about

The only way for you to make money on a purchase is buying a distressed asset or purchasing from a buyer who has little to no knowledge of market conditions.

You want a property, where you throw some paint on the wall, put in some stock Home Depot Cabinets, replace a HWT or Furnace and start renting.  Esp on your first go around.  This platform is littered with people who believed they could do this textbook play.  it can be done, but extend your horizon to two years for the cashout.  This region doesn't appreciate like that historically.

Hey! I am new on BP. I've been watching the YT channel forever. Just watched Ashley show and it was great. I just finished a real estate couse with a group in IL. I am not horribly interested in using the IL team of lawyers, accountants, hard money lenders, etc., but would rather buy in MI. I've been getting MLS alerts for multi family homes under 100k in certain areas of Detroit. I'm checking the comps and what I think the ARV could be. I could really use a Detroit expert to help me not overpay. I have a good amount of capital to start but may need some additional help with financing. I am all ears to anyone in the area. Thanks! This home really peaks my interest. https://matrix.realcomponline....