All Forum Posts by: Richi Brown

 Thanks Bonnie! The words of encouragement is always appreciated! 

I think the furnishings ended up coming out really clean, we were thrifty with doing it but between that and the professional photos it made the property show really well. Its possible that I didnt have a strong enough description highlighting the different things prospective apps were looking for. Check out some of the photos and let me know what you think! Always open to more feedback! 

I really think the ball was dropped on the prospecting and operations side of the business on my end. Had I committed as little as 45-90 minutes every other day to filling the vacancy, I think this experiment likely could've had a very different outcome. 

Agreed! I fully expect an OOS STR will be much more leg work than an MTR, that was big part as to why we trialed the MTR in our backyard rather than going all out and jumping right into the OOS STR.

We definitely will approach it with the standpoint of needing a team in place and not DIY-ing our way through it. Luckily, the goal of these OOS STR's is solely for the purpose of having a vacation home that can sustain itself and not cost us money out of pocket each month. We do not need it to produce massive cashflow like many investors are after, because our LTR's produce enough cashflow to help float the portfolio.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $90,000
Cash invested: $35,982

This deal was a fun one to execute, Im a traditional LTR Buy & Hold investor and decided to try and hop onto the MTR hype train back in late 2022/early 2023. Ultimately, it didnt work out so well for me, because I did not give it the time and effort it needed to be successful. But the process of trying something new was fun and I would be lying if I said I didnt want to try my hand at it again!

What made you interested in investing in this type of deal?

We purchased this light sweat equity 2br/1bath located in Warren, Michigan with the full intent of making it an LTR! However, by the time we wrapped up the rehab it was practically the holiday season which is typically the "slow" period in Metro Detroit for both sales transactions and renting properties. In an effort to get creative and try our hands in a new strategy and gave MTR's a crack and pivoted the deal.

How did you find this deal and how did you negotiate it?

This came off the MLS. The market was still pretty hot, I went under contract on this right at the beginning of the rate hikes and at the time many houses were still selling for over asking with shortened contingencies. The house was fresh on market and I was able to act quickly on it and lock it up at list price before more competition hopped on it.

How did you finance this deal?

Traditional Bank financing

How did you add value to the deal?

Although it was a light cosmetic rehab, this really wasnt a "value add" play. At the time I arguably paid fair market value for a house that still needed some lipstick and work before it was ready to make money. I bought it because I love this city for cashflow and buy & hold investing, even at that price the deal and numbers still made sense, so I didnt care about getting it at a discount. We spent roughly 7k on the rehab of the property and approx. 3k on furnishing it!

What was the outcome?

Failed miserably! We learned that placing a tenant on an MTR is a much different process than it is on LTR's. We also learned that aside from rehabbing and furnishing the property, we really didnt care much for managing MTR's and the onboarding process.

Ultimately, we decided to pivot again and just rent it as a fully furnished LTR. We ended up finding a really solid tenant, got an additional $150/mo above market rent for the furnishings and the deal cashflows really strongly!

Lessons learned? Challenges?

My wife and I are likely looking at cracking into OOS investing in STR's in the next 12-24 months, and this was an awesome lesson for us that taught us that we will really need to be ready to build out a strong team to execute an OOS STR. We also learned how crucial pivoting is with investing. From closing to tenant move in, this deal took nearly 9 months to get up and running. In large part due to experimenting, but being flexible and ready to pivot at any moment really helped us get this done!

I did a 203k loan back in 2020, it was one of the toughest deals I closed because finding licensed contractors willing to take on the job was tough. That combined with the extra guidelines/pay schedule set by the bank made it less appealing for contractors to take on the job compared to other clients who were not using bank money to finance their rehab. 

Ultimately it worked out really well, I got the deal to close and I forced a good bit of equity on the front end. This deal was probably my favorite I have done despite the headache and frustration. Just wanted to send that encouragement and let you know that it may not be a quick and easy transaction but it is worth the hassle! 

Lastly, I ended up using Home Remodeling & Repair, I believe the owner's name is Chuck Donaldson. They were pretty slow and the rehab went over the original projected timeline (like most rehabs tend to do). But it was also my first deal, and there were supply chain issues. So, I have to take some ownership on that and cant blame it 100% on them. Given how unique of a loan product this is, I would certainly use them again on a 203k loan and recommend reaching out.

If you have any tactical questions on executing that loan, feel free to reach out whenever! 
 

Investment Info:

Single-family residence buy & hold investment in Clinton Twp.

Purchase price: $88,000
Cash invested: $11,000

Contributors:
Michael Helfant, Joe Hammel

Purchased a 3 bed 2 bath single family home in Clinton Twp, MI using a 203K loan. The property needed mostly cosmetic repairs, there was some mold in the attic and electrical work, but nothing too crazy. The house was in probate, so we had issues with closing due to the courts throwing different obstacles. Not to mention the added difficulties of satisfying the banks requirements for contractors, appraisals, and paperwork.

What made you interested in investing in this type of deal?

I wanted to get my first deal done, and figured using a 203K loan was a good way to force equity and put little money down.

How did you find this deal and how did you negotiate it?

On the MLS. We did not negotiate, there were multiple offers made on the house so we put in an offer a few thousand over asking price with a higher than normal percentage EMD.

How did you finance this deal?

I used bank financing with a 203K loan. Then for the down payment and closing costs I pulled from my 401K without penalty using the CARES Act.

What was the outcome?

The property is officially closed, next is getting the contractors to come in and complete the rehab. They are starting within the next few weeks and should be completed and have the house move in ready by mid-February. After the rehab I will have about $20,000 in equity in the property and paying a mortgage instead of renting will save me over $100 per month and I will be in a much nicer home.

Lessons learned? Challenges?

"Two is one, and one is none."

The biggest issue I faced was finding reliable contractors in an extremely hot market. Using bank financing had my hands tied. I had to find contractors that were willing to deal with more administrative headaches, have more skin in the game, and meet stricter requirements for a job that was fairly small. Contractors had so much work that they were able to pick and choose what jobs they would take on and given my situation, I wasnt their first choice.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Joe Hammel & Mike Helfant were the two agents that kept this deal moving forward! This deal went on for about 6 months and there were multiple times where I was ready to walk away and cut ties from the deal, but Joe was able to rerun me through the numbers and talk sense back into me. Mike was present for every contractor that walked through the property and was very flexible around my work schedule to get it done! Both agents were well connected and knew the right people to call to get answers

Join all of the local real estate facebook groups. Take good pictures and post on there!

Whats Up Terrance?

Its good youre getting started early. Learning how to be a good wholesaler will allow you to learn how to put good deals together and build a network. Im still early in my investing, but I focused on the education portion first. If you can listen to the bp podcasts religiously, then you will be on the right path. You will hear the same 5-10 books repeated by each guest each week and they are great for getting that starting foundation. Personally, I liked Rich Dad Poor Dad to get the investor mindset. David Greenes BRRRR book and Flipping Houses For Dummies were both great books that walked through the entire process of buying and fixing properties. I know you dont plan on flipping or renting right away, but it is important you understand what your buyers approach is so that way you can better structure your wholesaling deals! Im investing in Macomb County, so if you ever want to talk real estate hit me up!

I am looking for some referrals for a licensed and insured general contractor in Metro Detroit. The property is in Clinton Twp. A quick rundown of what is needed is: Window replacement, concrete work in the drive way, floor joist repair in the crawl space, drywall, flooring in bedrooms, shower diverter replacement, replace toilet, replace stairs on patio, and install railing on porch. 

If you know any contractors that can handle this load, then let me know! 

@Eddie Jones I cant point you to any Probate Attorney’s, but Im in two facebook groups with plenty of investors in the metro detroit area, Im sure one of them will be able to help you out. Check out “Michigan Real Estate Investor Network” and “Metro Detroit Real Estate Investors Group”. Hopefully that gets you in the right direction! My inbox is always open if you want to talk real estate!

@Richard McCaig II

Like Drew said, it really depends on your endgame. I wouldnt say that cheaper means less risk necessarily. Because one could argue that even though the property costs less, the fact that it is in a worse neighborhood with potentially worse tenants could subject you to more and worse problems. Which would greatly raise the risk factor.

Which markets do you know best? If you know within the City and what neighborhoods are smart to invest in then by all means go for it! But if not, then there are plenty of suburbs around the city that meet the 1% rule that can still cashflow, and are selling for half of the price that you mentioned. Personally I am focusing on Macomb County, if you are in that area or just want to talk real estate feel free to message me whenever!