All Forum Posts by: Peter VanWesep

Hey there Andrew!

My initial thought here is that having expected rents of just over 1% of the purchase price is usually a good sign if you are willing to self-manage, but the fact that this home is in a less than stellar neighborhood could make the deal less than optimal. I'll usually run numbers on anything over 1% though, so let's take a look.

So for any deal that you are looking to analyze, you should be able to follow pretty similar steps. These have been outlined in a number of posts here and on many BP podcasts, but to summarize, you need to first determine the cash you expect to have coming in (rent, pet rent, laundry, etc) and the cash you expect to have going out (PITI, utilities, garbage, maintenance, capex, vacancies, property mgmt).

PITI, utilities and garbage can be considered "fixed" expenses that can be accurately determined ahead of time. Maintenance, capex, vacancies and prop mgmt are "variable" expenses that you will need to account for by putting aside a percentage of your income every month. When I'm doing a back of the envelope analysis, I'll usually just figure 5% of gross rents each (aside from prop mgmt which is a huge cost at around 10%). This usually ends up on the conservative side in my experience. However, in a lower income neighborhood, you might find that these are more accurate.

There are obviously other factors you can consider here, but this is the quick/dirty version.

Looking at the numbers, I am also surprised to see that you would need to pay $3,200 on a $105,000 property but I will take your word for it.

Here are the monthly numbers I would estimate for this property. I haven't read into what utilities/garbage might cost (I assume a lot in the winter!). You can optionally push the cost of utilities onto your future tenants, given that this isn't a multi-family with shared metering.

Monthly Balance Sheet

Income

• Rent: $1,200

Costs

• Principal/Interest (assuming 20% down, no PMI): $532
• Insurance (estimating $1,500/yr): $125
• Taxes: $266.66
• Electric/Gas: $75 (if paying)
• Water: $25 (via: https://www.warrenwater.com/20...)
• Garbage: $25
• Repairs, Capex, Vacancies (assuming self-managed): 180
• Total Estimated Monthly Costs: $1,228.66

So after all of that, assuming you start with 20% down on the property you will net about -1.64% COCR. So, not as great a deal as it seemed at first.

Is there a way you could add value? I will generally seek out properties that are distressed so that I can add some value immediately after purchase and then rent out before refinancing (aka BRRRR). If there isn't any way to add value, it is difficult to make a deal work unless you are counting on appreciation (don't) or you are able to also offset some of your own living costs (aka house hacking).

Good luck in your search!

Welcome to GR, @Isaiah Burnside! I spend most of my time out in California, but will be back home to Michigan in another couple of months. Sounds like @Account Closed -- Welcome to BP! Look forward to meeting up next time I'm in town. 

Hello again Grand Rapids investors!

It's Christmas time and I'm excited to be making another trip back to Michigan to visit my extended family (and to check out some real estate!)

If you too are interested in West Michigan investment properties, come on down to the Reservoir Lounge at 1418 Plainfield Ave NE between 4 - 6pm this Saturday (12/23). 

Grab a beer, a soda, some fries and come ready to learn. There are so many investment opportunities right here West Michigan, and in Grand Rapids in particular. Let's open doors for each other and find some new project to work on!

@Derek Drushel - Welcome to GR! I'd love to hear how you've been enjoying it so far.

@Charles Kao - Would love to chat about the bay area and hear your thoughts on local wholesales 

@Cal Hemmeke - Hope you're able to make it in from my old hometown!

@Mark Krier - Come on out to your old stomping grounds?

@Jim D. - Look forward to checking out your new place!

@Nick Watkins - Please lend us your investing experience!

@JS Berkenkamp - I'm curious to hear about how the Baxter rehab went for you

@Meghan McCallum- I imagine you'll be in Chicagoland but you know you're always welcome!

Thanks for the response @Randy Charboneau. I recently read through those Planning Commission Notes, which is actually part of what got me interested in Muskegon in the first place. I would definitely like to take a look around next time I'm back in West Michigan, which will probably be mid-December, but could be interested in buying before then if a good deal comes up.

Let's set up a time to chat soon. I'll PM you.

No love for the OP? ☹️

Hi there!

I'm an investor living Oakland, CA where I own 2-3BR units and am originally from Grand Rapids, MI where I recently purchased a studio/3BR duplex.

I'm excited to be investing my money back home, but the huge influx of cash buyers here and the quickly saturating market has made finding quality buy and hold deals in GR a difficult prospect. I am lucky to have found the duplex I just bought, but I'm not expecting to see many more like it.

That being said, I've decided to branch out in my search and take a look at Muskegon. I grew up coming to Muskegon to visit my aunt and uncle and remember how pocket-y the city has always been. The neighborhood they lived in was A/B near Mona Shores, but I remember how someone could walk just a couple blocks in the wrong direction and end up in what might be described as "desolated suburban wasteland" :(

My questions for those who are active or are considering becoming active investors in the Muskegon area:

1) Why should a real estate investor like myself take a bet on Muskegon right now? The mills and the factories have long since closed their doors, and in my (admittedly cursory) research I haven't seen any plans for industry to return. There will always be people paying to live close to the lake, but what about the homes in the rest of the city? What might bring some life back there?

2) Which neighborhoods have you focused on? I know enough to stay out of the Heights, but are there other places where people are flocking to (or away) from?

About me: My strategy is for B/Hs with 15%+ COCR and I don't mind if a property requires some work to get there. I don't want to wait on the phantom of appreciation to make my money.

Definitely, Mark! It was a pretty small turnout, but that just gave us a better chance to get to know each other. I'll be setting one of these up every time i'm out to visit. Next one should be in a few months . Hope to see you then!

Thanks everyone for coming out! I had a great time meeting you all and hearing about the projects and investments you have going on. Can't wait to chat more and meet more BPers next time I'm out! Happy BRRRRing (or whatever you're up to!)

Lookin forward to seeing everyone tonight! I'll be the guy with the curly hair in the red/gray button up. See you in a bit!

Hey there Mark! Congratulations on your purchase. I just entered into a somewhat similar situation myself a couple weeks ago when I purchased a duplex and found that one of the tenants in the downstairs unit (which needs moderate rehab and who had supposedly been evicted) was still living in the unit. My approach was first to talk with him on the phone (less intimate/emotional than an in-person meeting) and offered him the equivalent of ~80% of a month's rent to vacate the property. I was firm in my offer and assured him that this was something that needed to happen "one way or another". On the same day that I spoke to him, I sent a 30-day notice to vacate along with a contract outlining the cash for keys terms, which I asked him to sign and return to me. This contract is certainly not necessary, but I felt it made the process feel more formal and gave him greater confidence that he would be paid after moving. YMMV. I will be visiting the house this weekend and from what I understand, he has mostly moved out at this point. We'll see what the reality is. I think the most effective pieces of this process were having some prepared remarks for my initial phone call with the tenant, being understanding that this is a difficult process for them, and maintaining firmness that the unit needs to be vacated and that it would be unfortunate (but a certainty if he doesn't vacate) for both of us to have to go through a lawsuit.