All Forum Posts by: Ryan Tongue

Quote from @Nicholas L.:

@Ryan Tongue

just curious - house hacking in UT is out of the question?

I've looked into it, but with price-to-rent ratios in Salt Lake City being so high I'm having a difficult time finding options that even come close to cash flowing, in fact far from it (unless I were to put more cash into the property than I can afford). I admit, however, that I have very limited experience finding deals and could very well be missing opportunities.

I'm also fairly limited as to where I can search simply due to how close I need to be to my day-to-day work. House-hacking farther out in surround areas and commuting isn't really an option for me.

Quote from @Skip Reath:

Hey Ryan. Not saying I haven't had success in GR I do have 2 SFH rentals in GR that are doing just fine. But overall just more opportunities in Metro Detroit in my experience. A lot of that depends on your price point and what you're looking for.

 Skip, thanks for the heads up, I'll definitely be expanding my search towards Metro Detroit. You're not the first to mention to me the opportunity there.

Quote from @Joe Hammel:

I've seen quite a few investors achieve FIRE through REI. REI is by far the best vehicle to do so.

Personally, my portfolio here is to that point..making over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity. It statistically has the best price/rent ratios in the country...so it's arguably the "easiest" place to execute FIRE.

Some people don't like Detroit.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s statistically the best market in the country for cash flow.

$100k a year and also built a lot of equity which opens up a lot of doors as well.

Here is the primary target...

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

Detroit has the the highest rent to price ratio in the country…and we focus on the best balance of price/location within the area.

You may have noticed our name is literally FIRE lol.

Questions:

1) Best price/rent in the county. Easily beats the 1% rule and cash flows

2) Taxes pencil out fine and deals cash flow

3) Michigan is considered a swing state..Detroit isn't notably hard on landlords. No rent control, you can evict as needed. It's likely not an easy thing to do anywhere, but can be done.

4) No notable natural Disasters

5) A dozen fortune 500 companies. See notes above

6) We target $80k-$130k (for SFH)

Here is a picture of my portfolio...

Hi Joel, I'm just starting out as well. I live in Utah but have connections in West Michigan, so I'm thinking I'd love buy my first property in Michigan. I hear a lot of hype around metro-Detroit, and I'm wondering if you have an opinion on investing in Grand Rapids and surrounding areas, particularly Muskegon which seems to be on the rise. Would love your input.

Quote from @Andrew Postell:

@James Wangthanks for the post. I moved to Texas from New York...a world of difference in home affordability. The general metric we use when investing in single family homes is a 3BR/2BA home that is at 60% (or so) of the market's "median price point". In most markets, that gets us into a good rental property.

So, which market to choose from? The answer to that is with another question - where do you have trustworthy people? Since I lived in NYC, I couldn't invest there. I had to invest elsewhere. I choose, Jacksonville, Florida. Why Jacksonville? Because I knew good people there. This is coming as a 15 year, out-of-state investor - my recommendation is to ALWAYS choose whatever city you have the most trustworthy contacts in. Keep in mind that you may never see your asset. That's an ENOURMOUS amount of trust/money to put into a stranger's hands. What I mean here is that if you know someone in a different city...but that city may not have as good as numbers as this other city...then stick with the city where you know people. One wrong move, one wrong contractor, one wrong vendor…will erase any "benefit" one city has over another. Your network is the most important piece for any potential returns when you invest out of state.

Hope all of that makes sense.

Andrew, I'm in a similar boat as James. I'm looking to purchase my first property though the market around me in Utah is out of my price point. I've decided to look in Michigan where I have family and a network that I trust. That being said, I'd also like to force some appreciation on my first property by undertaking a rehab project. I've received feedback on other forums saying that managing a rehab from out-of-state should be avoided as it is very difficult. I'm wondering if you manage any rehab projects when you first invested in Florida from afar, and if so, do you have any advice on the subject.

Hi Amanda, I'm in a similar boat as you. I'm looking to purchase my first property, though I'm not able to afford homes around where I live, forcing me to look out-of-state. While I don't have any advice to you when it comes to what you should do, I might recommend that you check out Long-DIstance Real Estate Investing by David Greene, the host of BP podcast. It's helped me get over some of my fears when it comes to investing afar. I've posted a link to the book below. Good luck!

https://www.amazon.com/s?k=long+distance+real+estate+investi...

Quote from @Skip Reath:

Hi Ryan. I have a few commercial buildings in GR but have found more success in SFHs in the Detroit Metro area. Although starting out you might want to get into a duplex and house hack wherever you end up living after school, if you want to do a value add project. I can tell you it is hard to manage rehab projects remotely. Good luck in your RE journey!

Hi Skip, thanks for the response. Why do you think you haven't found success with SFHs in Grand Rapids and surrounding areas? I'd be very curious to hear your opinion. Thanks again.

Quote from @Albert Bui:

Quote from @Matthew Kwan:

HI Ryan, 

Happy for you on starting your Real Estate journey! You can always start off on house hacking a multifamily in MI 1-4 units with min 5% down or 3.5% down for FHA. This will allow you to acquire more rental units and also being able to use the vacated unit rents at 75% to help your debt to income ratio DTI.

Happy to help and address any scenarios that you may have!

@Albert Bui @Carlos Valencia

Just careful on the 3-4 unit FHA properties that we'll be subject to self sufficiency rule however FHA is a good option to finance with on 1-2 unit owner occupied properties.

SS Rule is not easy to meet when dealing with expensive west and east coast or urban area 3-4 unit properties. However in the midwest it is typical to be able to "meet the self sufficiency rule for FHA."

@Matthew Kwan

@Carlos Valencia

Thanks for the idea, and I'd love to start with an FHA here in Michigan on a multi-unit property, though doesn't an FHA loan require the property to be my primary residence? If so, then I don't think I'll be able to pursue this option as I'll be living in Utah for the next 18 months at least. I'd love to get my first property underway sooner if I can. Any other ideas?

Quote from @Ash Hegde:

Nice job saving up 50k to get started! You can BRRRR without conventional financing or having all cash. For the purchase and rehab, you would start with a hard money loan, which generally requires 15% down. After that's finished and it's ready to rent, you would move to a DSCR loan for your long term financing. Neither of these consider your personal income, though they will consider your credit, so make sure that is in good shape.

Hi Ash, thanks for the idea. My understanding is that a hard money loan is an umbrella term used to describe any short term loan from an individual/company rather than a bank, is that right? If so, how does an investor typically find hard-money lenders in his/her local area? Also, when you say that I could move to a DSCR loan for long-term financing, do you mean that once I've acquired the property and it's cash flowing properly, I would then qualify for a DSCR loan (depending on my credit) that I could use to pay off my hard money loan? Thanks for the tip!

Quote from @Logan Laperriere:

Hi Ryan, I was in your shoes about 10 years ago when I graduated college. West Michigan is a great place to invest in rental properties. I personally own properties in Grand Rapids and Kalamazoo. I also own some commercial properties in Metro Detroit. I would be happy to talk with you some time about investing. Have you ever considered a DSCR loan? that may be a good option for your situation.

Hi Logan, thanks so much for responding. I'd love to set up a time to talk. What's the best way for me to contact you outside of this forum? I'm also not very familiar with a DSCR loan, though my understanding (which I'm sure is flawed) is that a lender evaluates a property's cash flow rather than my income when deciding whether I qualify for a loan. Is this possible for a property I do not yet own? Thanks again.

Hi all!

My name is Ryan Tongue, and I’m rookie investor looking to purchase my first property! I’ve been stuck in the analysis paralysis phase for a while and have never posted before. But enough of that, let’s get going! I apologize for the long post, though I’m looking to be as clear as possible for you guys.

A little bit about me: I’m from West Michigan, and I’m currently living in Salt Lake City pursuing an undergraduate degree in mechanical engineering at the U of U. I’m 22 and I have about 18 months until I graduate. During the summers, I’ve been working as a door-to-door salesman in SC, TX, and UT, saving as much cash as I can to put towards my first rental property.

My goal is to build a portfolio of long-term rental properties in West Michigan and surrounding areas. I've read David Greene's Long-Distance REI, among other books, and understand that a good investor shouldn't limit his or herself to their own backyard, though between the network I have in West Michigan and my basic understanding of which areas are good/bad/on-the-rise, I want to get started there.

I’ve reached a point where I feel I have a thorough understanding of the principles behind the various strategies that a person might utilize when investing in real estate, and I’ve also saved up a sum of cash that I believe to be enough to get started. However, there are several barriers I’m finding difficult to hurdle due to my lack of experience. What I’m looking for now is a mentor or even just advice.

To give you an idea of what I'm hoping to find guidance in, the investment plan I had in mind is to find properties that need work or are owned by motivated sellers that I can purchase for 80 cents on the dollar, or as close to as possible. I'd like to add value to the property through a rehab project, and then rent it out long-term. My hope is that after buying the property under market-value and forcing appreciation through rehabbing, I'll have significant equity in the property that I can leverage through a HELOC or something similar to recycle my capital and repeat the process with more homes. Essentially, I'm looking to BRRRR, though I won't be able to start with an all-cash offer as I only have around 50K to work with. I'd also like to do aspects of the rehab myself, and I know contractors in my circle that would be willing to help me learn how.

The biggest issue I face is that I don't qualify for conventional financing since I'm still in school and don't have consistent income, so I'll need to find a qualifying partner or pursue creative financing which is something I'm not sure how to accomplish. I'm also limited in the amount of time I will physically be in West Michigan prior to when I graduate in May of 2025, which makes applying for an FHA and house-hacking difficult. I've thought about house-hacking in Utah while still in school, but the price-to-rent ratios seems so high around me that it would be difficult to cash flow. Aside from these concerns, I'm not confident in my ability to assess rehab costs, or what a property's ARV might be. I've reached a point where I feel that I should be asking "who" knows these things and can help, rather than "how" I can learn everything myself.

I realize there are gaps in my understanding of what I’d like to accomplish, and that today’s market is a controversial one to invest in. I’m desperate to move this forward, however, even if it means being a fly on the wall for someone doing what I’d like to do if I’m not at a point to be able to invest myself. If you’re an investor in Michigan that is willing to let me shadow you on a deal, I’d love to provide value to you in any way I can. To all others reading, advice on what you think I should do would be greatly appreciated!

Often when I express my dreams to others, I’m met with responses along the lines of what I can’t do. If there’s a platform that exists that will instead view my barriers as puzzles to be solved, I believe it’s this one.

Thanks for reading,

Ryan