All Forum Posts by: Tom A.

Take any financial projections you see on turnkey properties with a healthy dose of skepticism. Too often, even on this site, I see ROIs that were reversed engineered, meaning they started with the ROI they thought long-distance investors wanted to see, then backed out enough on the expense side of the ledger until they had boosted the ROI into the magic range. Maybe with a little exaggeration on the rental income side to help out.

No maintenance expenses? "The house is freshly rehabbed." "We buy you a home warranty (out of your purchase price)."

No accrual for capital items (roof, furnace)? "The house is freshly rehabbed."

No vacancy expense? "We guarantee your first year's rent (out of your purchase price)."

No bad debt/eviction costs? "We guarantee your first year's rent."

No inspection/certification/accounting/legal fees? <crickets> or "We pay your first year's inspection cost (out of your purchase price)."

The real return is what happens in Year 2, or Year 6.

How are you planning on selling the property? If it's on the MLS it has to be in line with what local investors will pay. That's always less than the turnkeys sell for. Do you have a way to market effectively to the out-of-state or foreign turnkey buyers? That's the only way you'll get the turnkey price. Some turnkey companies may be willing to help you sell it but they'll want a good portion of the spread between their cost to produce a turnkey and the retail turnkey price. Otherwise, why bother selling someone else's turnkey for a fraction of the profit of their own inventory.

If you want, send me address and I'll send you a quick report on recent sales in the area.

@Michael Wright, a few questions first. What will the money be used for - a flip, rental, wholesale double closing, cash purchase money to be replaced by permanent financing or ??? Are you going to be borrowing the money, or is your friend going to be a partner who is a partial owner in the property or the entity that owns the property? There's more, but this will help to get started.

Selling on land contract to an owner-occupant is covered under Dodd-Frank, SAFE Act and CFPB regs. Be sure that what you're doing is OK under the new laws and their corresponding rules released this year. Unfortunately, due to the potential pitfalls several investors I know have stopped doing land contracts. The risk is simply too high. It's too bad. The pendulum really swung in the opposite direction after the sub-prime crisis.

They also have an up-to-date web presence on facebook, at

http://www.facebook.com/DetroitInvestmentClub

I'll be there tonight, so if any of you go make sure to say "Hi". It's usually a relatively compact meeting (25 - 40 people) so it's not hard to meet people as you eat dinner or hang out afterward. There's a good mix of newbies and active, experienced investors, and it's a friendly group that doesn't allow any selling from the front of the room (no gurus).

I generally agree with the "buy what you need when you need it" crowd with the exception of a basic set of tools:

screwdrivers
crescent wrench
channel lock wrench
vice-grips
diagonal pliers
needle nose pliers
hammer
utility knife
chisel
etc. (I'm sure I'm leaving out a bunch)

Get a decent cordless drill and cordless impact driver. The impact driver makes it really easy to drive screws or lag bolts into wood. Get a set with lithium ion batteries, not Ni-Cad or NiMH. The Li batteries will last longer and discharge less sitting in the case for weeks or months at a time. For this "go to" tool, get better than Harbor Freight. Get at least Ryobi, or spend a bit more and get Makita, DeWalt, Hitachi, Ridgid or other premium brand that feels good in your hand. In my experience the Makitas have a slightly smaller handle which makes it easier for smaller hands to grip.

You should also have some common parts on hand. Check if your toilets can use the standard Fluidmaster rebuild kit. Keep a couple on hand. You will eventually use them and if you have it there you can easily fix a running/leaking toilet in less than 30 minutes. I'd also check to see what kind of supply lines you have running to the faucets and toilets from the shut off valves. Get some spares of those, or if the current ones look iffy, replace with the braided steel type. Also check the operation of all the water shutoff valves. If any don't operate smoothly, shut off the main water supply and replace with 1/4 turn ball valves. They make "Sharkbite" style ones that slip on over copper, PEX or CPVC piping so you don't have learn to sweat pipe or buy PEX tools.

There's a million other possibly needed tools and parts, so get to know your closest stores and their hours. Good luck.

These guys were on to his scam back in '07.

http://www.flipthislawsuit.com/2007/04/anyone-purchased-armando-montelongos-real-estate-package/

Over 2300 comments later, you still see the pattern of

1) newbies wanting to know if he's the real deal and if the expensive course/mentoring is worth it

2) investors who set them straight

3) Armando's paid shills trying to counter the onslaught of negative factual info

That thread started out exposing the fakeness of his flipping TV show, where houses were "sold" that he never owned, to "buyers" that, in one case, were his relatives. They unearthed lawsuits against him for non-payment of debts, foreclosures and other negative information. They looked and failed to find any substantiation of his early claims to have flipped "1000's" of homes in San Antonio. He left TX where he'd burned too many bridges and set up his "education" company in CA. Apparently he's succeeded as a scammer guru far beyond his failures as a real estate investor.

Welcome Jeff! Here's my opinion on a few of the local REIAs, for what it's worth. I've posted this a few times before, please excuse the cut-n-paste.


I'd recommend these three:

- Michigan Real Estate Investors - Great REIA run by Wendy Patton of Lease-Option fame, meets in Troy, http://www.michiganrealestateinvestors.com/

- Renegade Detroit Investors - Another great REIA, run by Jeremy Burgess. Smaller, no selling from front of the room allowed (no guru pitches). Meets in Berkley. http://www.facebook.com/DetroitInvestmentClub

- REIA of Oakland (County)- Grandaddy of local REIAs. Meets in Madison Heights. http://www.reiaofoakland.com

I'm a member of the first two and used to be a member of the third (a good group, more guru pitches than I like but worth checking out depending on the content).

Hope to see you around!

Hyperlinked...

Newspaper article
http://www.freep.com/article/20120803/NEWS04/308030121/2-buyers-purchase-all-627-of-tax-foreclosed-Macomb-County-properties-at-auction

Article with video
http://www.huffingtonpost.com/2012/08/03/bill-mcmachen-macomb-county_n_1739062.html

At the beginning of the auction there is an opportunity for a bulk bid. If no one buys them all then each is auctioned off individually. There are always properties that have little or no value, like landlocked swampy land and such, that don't sell. In a bulk sale the county gets the taxes paid off for everything. It is disappointing for the small investor however.

I'm not sure if Oakland County offers a bulk purchase or not, but I do know that there hasn't been a bulk purchase of all properties. Oakland county is an interesting place. You can call up the treasurer, Andy Meisner, and discuss buying properties directly. He'll sometimes even meet you at the house to discuss.

Newspaper article
http://www.freep.com/article/20120803/NEWS04/308030121/2-buyers-purchase-all-627-of-tax-foreclosed-Macomb-County-properties-at-auction

Article with video
http://www.huffingtonpost.com/2012/08/03/bill-mcmachen-macomb-county_n_1739062.html

Originally posted by Steven Johnson:

Detroit is going to be a very interesting case study. I'd like to compare that city with South Beach when it was rehabilitated by the likes of Carl G. Fisher.

A couple years ago there was an major investor out of NYC named Tony Goldman who was visiting Detroit and thought there was some potential. He was an early investor in SoHo and South Beach, buying dozens of buildings and helping those areas to take off. Unfortunately he passed away before making a move in Detroit. Right now Dan Gilbert is the main player in Detroit real estate. While it seems like he's buying a major building every month, it would be nice if he had some competition.