All Forum Posts by: Todd Brittingham

Anthony, great question. Mark's comments are absolutely correct that money is being made on these proeprties with the sale and management.

In our case, we are leveraging the opportunity to put the turnkey rental properties together as a way to increase our holdings. We think it's an excellent buying opportunity here in Michigan and we would love to keep every property we're putting together, but obviously there are always limitations with capital. So, as we sell each turnkey property we are re-investing the capital into our holdings, and building our portfolio in that manner.

To us, it's a great way to build our portfolio, and help a number of investors like yourself build theirs as well. As you stated, properties don't cash flow in your area so it makes sense to be looking into areas where cash flow is abundant.

Thanks for sharing Josh. I'm sure there are a bunch of gold nuggets contained in this guide...

I agree with David...this looks very high, but it depends on the location of the property. Multiple quotes is a good thing...

Phil,

These properties are not surrounded by ghetto...you need to get that out of your head. In fact, that's the main reason I like Pontiac, because when you invest on the fringes, you're surrounded by homes in Bloomfield Township, Auburn Hills, Lake Orion and Keego Harbor. These are all very nice areas in oakland county, and again, very far from what you describe as the ghetto.

I think the other key point you're missing is that we're not selling properties...we're selling turnkey investments. There is difference, and for an out of state investor, there is substantial value in what we're offering beyond the value of the property. Our properties are bought, renovated, and tenanted with a property manager installed. These are truly turnkey properties that will begin collecting cash flow immediately upon purchase.

The properties you showed are not renovated, not tenanted, and do not have competent property management installed...so you're not comparing apples to apples. The properties you showed are both listed right around $12k. By the time you make repairs (likely $10k - $15k) add up your holding costs and closing costs, you will easily have $25k - $30k in to the property. Now if you plan to sell this as a turnkey property you will also have to install a tenant and a property management compnay. Add in your profit, and the property will likely sell in the same $35k - $40k range that we're dealing in.

Phil,

With all due respect I stand by what I said. I've driven every street in Pontiac…are there bad areas? Absolutely, but we're not buying in those areas. To say that the entire city is a drug infested, gang ridden, ghetto is not at all correct. I send my wife and daughter out on a daily basis to look at properties in Pontiac, and if I thought it was as unsafe as you paint the picture to be, there's no way I would be doing this.

I've looked at the properties you showed, and they're not bad. I'm sure Wayne is a great area to be investing in as well, but quite frankly I'm finding very similar if not better properties in Pontiac, and the rental market is very strong there. I'm not familiar with Wayne's rental market so I cannot comment on it.

As to your question why Pontiac, here are just a few reasons…

First off, the stigma of Pontiac holds prices down making investments in the city very reasonable.
Taxes are very reasonable on a 3 bed/1 bath 1000 sq ft home
The rental demand in Pontiac is very high. We have had no trouble finding paying good quality tenants. In fact right now our occupancy is at 100% on the 8 properties we are currently holding (with paying tenants I might add)
Lastly there are a number of great things happening in Pontiac right now:

-52 new businesses have gone in downtown with the rise of the Phoenix project
-General Motors has a stamping plant and their Powertrain Engineering within the City, and they have their Lake Orion assembly plant within a 10 minute drive.
-Hewlett Packard just announced a new facility coming to Pontiac which will add 250 new tech jobs.
-Pontiac has just announced $13.9 million will be spent renovating 31 homes and adding major developments in the downtown area.
All of this is not to mention that Pontiac sits right in the center of Oakland County which is a big bonus compared with Wayne County if for nothing else because of the unemployment rate.

I can go on and on about the city of Pontiac…and I'm sure you can go on and on about the gangs, drugs and violence. Again, I extend the invitation to show you some of the neighborhoods we're investing in. You can come meet the neighbors, see the people out walking their dogs, and see the sense of community. Again, this is a far cry from the picture you have painted.

Jay,

I'm sorry you've had a bad experience with Detroit, but I've seen a number of investors just like you who have had a very bad experience. I've also seen a lot of investors who have had a lot of success.

In the end, it always comes down to mistakes that are made with the investment. The big ones I see are neighborhoods where you are buying, hiring competent management companies, propertly screening your tenants, and keeping the properties maintained properly.

If you don't hit on these critical items, you are going to have trouble, there's no doubt in my mind.

I've seen so many investors be drawn to Detroit thinking they can't lose because the prices are so cheap...well there's a reason that house is $10,000...nobody wants to live there, and the people that do, are the exact types that don't pay and won't respect your property. This is not the path to success in Detroit...

Phil, I disagree with your stance on Pontiac. Like many urban areas across the country, Pontiac has its problems, but there are also very nice areas of Pontiac which make excellent opportunites for rental properties. I'd be happy to bring you on a tour of some of the stuff we're putting together and show you where we're investing in Pontiac. You'd probably be surprised, just like most folks who have the same initial reaction.

I have the same feelings towards Detroit...I know less about the Flint market, but I suspect you might find similar opportunities. There are some very good areas to be investing in Detroit. But there are a lot of crappy areas. You have to know the market, and it's this knowledge that generates the returns you desire.

To simply write off an area based upon what you think is the case is naive, and in many cases you'll be missing out on a very big opportunity.

Mark, I agree 100% that turnkey companies are not right for everyone. We're finding that we're most helpful to investors who want to invest for cash flow, but cannot do so in the area where they live. We work mainly with out of state and international investors who find themselves in this very situation.

The main thing a turnkey company brings to the table is an in-depth knowledge of the market and an established team of professionals (property managers, contractors, inspectors, etc.) that will allow you to begin investing from day 1. You can work to study the market and build your team over time yourself, but this scenario presents a number of challenges doing so from a remote location.

No matter what, you should spend time getting familiar with those who you will be doing business with before deciding to invest with a turnkey company.

Steve,

I think I can offer some insight regarding the offering of turnkey rental properties as our company specializes in setting these types of properties up here in Michigan.

First off I would recommend you do a background check on the turnkey company you are dealing with. Start with a simple internet search, ask around on forums like this one, and engage in conversation with the company. Ask for references as well. You can tell a lot from a company or an individual by engaging them in conversation.

Next, as I tell all of my investors, it really makes sense to take a trip to meet with the company you will be investing with. This will be an opportunity for you to evaluate the people who will manage your investment, and you can also see the properties and the areas you will be purchasing in.

Regarding deposits...we do not accept the deposits from our investors. All of our deposits are placed into escrow with a title company and an escrow agreement is setup. If you are not being offered this service, I would be very weary. Furthermore, we do not take request deposits until a property is located...the deposit goes against the property, not for the service of finding a property.

If you have more questions on the turnkey process I'd be happy to help. Good luck in your search!

Steve,

We are currently setting up a number of turnkey properties just north of Detroit in Pontiac Michigan. We won't even look at the properties you're talking about because they are nothing but trouble. The bottom line is that properties in this price range are in war zones and people don't want to live there. I cannot tell you how many investors have come to me after "taking a gamble" on properties like these and now have nothing but losses to show for their efforts. They're looking for help, but there's really not much that can be done with these properties.

A much better strategy which we employ is to increase your price point a bit and buy properties in good areas where people actually want to live. We're doing this with a lot of success. Our properties are in the range between $35k - $45k and are renting for between $750 - $900 per month. The vacancy rates are lower, the properties are in nice neighborhoods making them very easy to rent, and at this price you can have a fully rehabbed property.