All Forum Posts by: Tom A.

@Michael Dundon, the teacher that bores the kids probably. You said the same thing that I did but you did so more succinctly. For the win.

@Jal Singh, the property tax figures on the MLS listing are probably "correct", but may not be applicable to you.

Typically when an agent inputs the data for a listing, the property tax amounts are automatically filled in with data from the county public records. That data should be correct in that it accurately reflects what the seller or previous owner paid for taxes. It isn't necessarily what a buyer will be paying however.

First, the previous taxes may be calculated as homestead (owner-occupied) tax rates rather than non-homestead (investor, or 2nd home) tax rates. In Ferndale, for homes in the Ferndale school district, the homestead millage rate is 53.59 and the non-homestead millage rate is 71.77, or 34% higher. As a rental house you'll need to use the non-homestead rate in your calculations.

Second, if the previous owner had been in the home for a long time there's also the possibility that the taxes shown on the MLS are based on a capped, lower Taxable Value. Since property tax increases are limited to the lower of inflation or 5% it's possible for the taxes for a long-time owner to be well below what a new buyer would pay since the taxes "uncap" upon sale. They may have uncapped due to the tax auction sale but the new higher taxes won't be reflected in the public records until the next tax cycle.

To determine what you'll be paying, check to see what the SEV of the property is. Your agent can get this for you or you can call the city or county. Then go to the State of Michigan online property tax calculator at https://treas-secure.state.mi.us/ptestimator/ptestimator.asp and input the SEV, county, city and school district. It will give you your property taxes for both homestead and non-homestead classifications.

Mike's your guy for Ferndale, it's literally his backyard. I'd give him a call.

So the seller didn't do a quiet title action after buying the property at the tax auction? If the title company can get the title issues cleared up I'd hold on to the deal. That's a pretty good price, even for south Ferndale.

I'd echo Mike, are you sure only $1500 in rehab? You did say you had an inspection, do you have confidence that the inspector was thorough? The other number that stuck out to to me was the tax number of $109/month. That seems low relative to other Ferndale properties I've looked at. Ferndale has a pretty high millage rate, especially for non-homestead. Might want to double check what the SEV is for the property and use the State of Michigan property tax calculator to verify. It could be correct, but I've seen 2 bedrooms with annual taxes over $4K in south Ferndale.

Welcome @Ian Coleman! This is a great place to launch your RE investing business.

We're a friendly and helpful bunch, both online and in person. @Aaron Yates and I have organized a local BP Meetup, and the next one is tomorrow evening at Bahama Breeze in Livonia. It's just a casual gathering of current and future real estate investors. Full info at https://www.facebook.com/events/535074366590057/

You, and anyone else are cordially invited to come out and meet people who are investing in the Metro Detroit area. We've only been doing this for a few months but I've already seen deals being put together and relationships being built.

I'd also recommend you check out a few local REIA groups. Let me know if you want suggestions.

Good luck with your RE investing!

@Thomas I., welcome to BP! @Aaron Yates and I co-host the monthly meetups. We announce the meetup each month (they change locations and days of the week to help folks with pre-existing commitments) here on BP and on FB. I link to the event on my FB page (see my sig below) and I think Aaron does as well.

We've also been putting together an email list of attendees who want to be notified of future events. If you want to be on that send me a private message with your email address and you'll get an email every month.

Hey @Brandon Gentile , we haven't talked in a while, we ought to meet up soon. Maybe at the BP Meetup? :-)

I checked it out on the MLS (you gave a lot of clues) and it certainly seems overpriced based on current rents. A big question is what should rents be? That will drive your valuation calculations. What rents currently are, assuming they are low, is best thought of as the seller's problem. Often sellers will say rents can be raised and attempt to capture the assumed value of the property as if it had higher rents. They don't deserve that, they haven't created that incremental value. When you raise rents, assuming you can, you may lose tenants and have vacancy and rehab expenses.

When calculating a maximum offer price, use their verifiable rents. And keep in mind that this 4-unit has been on the market since August at this price. Everyone except perhaps the seller realizes it's overpriced. Don't hesitate to make a realistic "low" offer. And then wait after they reject it. It takes some sellers years to come to terms with the fact that their property isn't worth what they think it is.

The school district is a plus. The small lake is a nice feature. One of the photos showed a kinda funky heater, you should look carefully at the HVAC situation. I saw a well, I assume its on a septic system. Part of your due diligence should be testing/inspecting the well and septic. Those can be big dollar items.

It looks like it's owned free and clear. That means the seller can go down in price, but it also means they may not be in any rush to sell. Figure out what it's worth to you and stick to your numbers. Don't let the plusses of the property overly influence your numbers. Let me know if you want to chat. Good luck.

If you want to have glass windows, 3M makes a variety of clear window security films that are applied to the inside of the window and keep the window pieces "glued" together during an attempted B&E. Combined with a structural silicon adhesive that joins the reinforced window to the entire perimeter of the frame you have a normal looking window that's difficult to penetrate. The window pieces stay together due to the film, and the structural adhesive prevents the entire window from being kicked in at once.

Youtube video of someone trying to get in. It takes over 90 seconds. Most thieves won't stick around that long. Actually, watching the guy in the video try to kick the window in for 90 seconds I bet most thieves won't have the stamina to kick for that long. https://www.youtube.com/watch?v=96x2tO9Xuxw

Link to 3M window security film products http://solutions.3m.com/wps/portal/3M/en_US/Window_Film/Solutions/Markets-Products/Residential/Safety-Security_Window_Films/

Link to Dow Corning structural sealant http://www.amazon.com/gp/product/B000KZYJ8E/ref=pd_lpo_k2_dp_sr_1/183-2382486-2564242?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=lpo-top-stripe-1&pf_rd_r=1NVFQ2SWMQ6C44ZV4X1M&pf_rd_t=201&pf_rd_p=486539851&pf_rd_i=B000L00N0Q

Shhhhh!!!!

For info on why land contracts are basically dead in Michigan, search BP for Dodd-Frank, SAFE Act and land contracts. Bottom line, legislation has been passed that makes it way too risky and onerous to do one to an owner-occupant.

Or, if you are willing to invest 1.5 hours of your time you can get a very thorough briefing on the financing situation in Michigan by a true expert on the subject, Allan Daniels. This Youtube video http://www.youtube.com/watch?v=a3Uw8UNGRzc is from the one of the local REIA's monthly meeting. Getting this kind of knowledge directly from someone who knows the matter inside and out is just one of the benefits of regularly attending REIA meetings.

At that price point you'll have to find cash buyers. Many banks won't do, or make it prohibitively expensive to do mortgages that low. Land contracts from investors to owner-occupants are basically dead in Michigan.

The good news is that a lot of buyers in today's market are flush with cash. The bad news is those that have $29K cash aren't looking to buy a $29K house. The cheapest flip I'd do in metro Detroit would be in the $100+K range.

You'll be stuck with these as rentals, for yourself or as turnkeys. Not that that's a bad idea, but don't look at this as a standard flip strategy.