All Forum Posts by: Tom A.

Looking at doing my first infill new construction project. I just nailed down the acquisition of the existing house today in an area that has seen a real upsurge in infill development in the last 18 months.

Tucker Merrihew, your podcast comes at a very timely juncture. I'll be cueing it up shortly. BTW, I lived in Portland for a short time about 25 years ago in the apartments on the river between the Steel and Broadway bridges. Nice city.

Steve Might, I've had similar discussions with the board members I know. Apparently it's just how they do things. Some meetings have been great and some I felt like I should be getting paid to listen to the commercial, not the other way around.

David Beard, I don't have first-hand knowledge regarding the unhappy investors in the thread you referenced, nor do I have Jeremy's take on it. I do know how he runs his REIA, and I know several local investors that have done business with him.

His REIA focuses on education and networking. No national gurus, no sales from the front of the room. Vendor sponsors are only people he's done business with (insurance, locksmith, appraiser) and they're all very well-regarded by other investors who have used them.

The investors who are unhappy sound like they have a right to be, but I don't know the other side of the story. I can tell you that I wouldn't recommend his REIA to people if I thought ill of him, and I have a very low tolerance for the scammers and BS artists that abound in RE investing. He's helped a lot of local investors begin or accelerate their investing careers within and outside the REIA.

Welcome!

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 speaker).

Hope to see you around...

John Thedford, you are very welcome. If you end up using the service, I'd love to hear how it works for you.

I'm not actively investing in the city of Detroit so I won't pretend to be an expert in that market on a block-by-block basis which is what's necessary. There are several challenges to becoming expert in the Detroit market.

One, the city is very large. In terms of area, Detroit is larger than San Francisco, Boston and Manhattan combined. Imagine trying to be an expert regarding real estate values in all three cities simultaneously.

Two, many areas are in transition, some upward but most downward. Detroit's population dropped from 870K to 711K from 2000 to 2010. The majority of that was in the second half of last decade. There are areas that declined rapidly in just a few years. There are areas right now that are seeing abandonment.

Three, the future is uncertain due to Detroit's financial condition and the presence of an Emergency Manager. Detroit's Mayor Bing has talked about plans to consolidate city services in certain areas resulting in more-favored areas and less-favored areas. The plan was never approved or implemented, which areas are which is obviously a huge political football which, if a similar plan is enacted, will be subject to contentious political fights. However, Mayor Bing has no power under the Emergency Manager. We don't know what the Emergency Manager, Kevyn Orr, will do with regard to this plan or anything else, aside from the fact that the city's creditors and bondholders will be taking a huge haircut. It's rumored that they'll be getting less than 10 cents on the dollar.

Four, which areas would be "best" for you depends on your tolerance for risk, desired return and frankly, how much "crap" you can handle. There are up and coming areas with high demand, low vacancy and momentum, like Midtown, Downtown, Corktown, Woodbridge and others but your return will be very different from that available in stable or semi-stable residential neighborhoods, or in war zones. Most people want to invest in Detroit because they see huge ROI projections from the turnkey folks. Those properties are not in the up and coming areas.

Fifth, your final sentence, "I know it will be a good investments if I get sound info and pick my spots right!" isn't how investors think or talk. There's no guarantee that Detroit's population won't bottom out around 600K and your properties won't be located in soon-to-be-abandoned neighborhoods, trashed, scrapped, gutted and burned. Detroit was a city of 2.0 million and over time 1.3 million left. What's the value of their abandoned real estate, much of which are now dirt lots surrounded by other dirt lots?

Finally, understand I say all this as someone who actually likes/loves much about the city. I'll defend it against ignorant generalizations and trash talking but I'll also call it as I see it. Investing in Detroit is for the advanced investor. Feeling lucky or hopeful isn't enough.

Those of us who are locals offer sage advice. Those who won't listen are free to do as they choose. It might be instructive however to notice that the most enthusiastic advice to buy comes from those with a financial interest in selling, while the more temperate advice comes from those without a financial stake in the matter.

My fellow local investors joke that there will be another wave of low-priced properties available, from all the disheartened buyers of turnkey properties who find their "investments" perform far worse than promised. In fact, I know one local investor who just bought a former turnkey from an out-of-area investor for less than 1/3 of what the investor paid a couple years ago.

As someone who has lived and worked in the city of Detroit, and follows the city and local real estate on a daily basis, I wouldn't recommend investing in the city unless you've done your own independent in-depth analysis, and spent time here. Go the REIAs, ask about your potential partners (not all reviews will be rosy), meet with current and former clients, other local investors, and then determine if you think you can make a fortune here from 1000 miles away.

Welcome!

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).

Hope to see you...

Detroit's an interesting market. Local knowledge is critically important when it comes to investing. The city of Detroit has huge problems. There is a financial manager that has been brought in to stabilize it financially which is something that many have thought is long overdue. He has the power to make radical changes that the mayor and council frankly weren't up to. So that's probably a good thing, though it may be very contentious if big changes are implemented.

The city of Detroit is not monolithic. It's 139 square miles (equal to SF, Boston and Manhattan combined). Many neighborhoods are blown out, abandoned and crime-ridden. Some are full of historic homes from the glory days -- opulent Tudors, restored Victorians and Craftsman styles from 1000 to 10,000 sqft. There's an exceptional modernist neighborhood designed by architect Mies Van der Rohe. Woe to the investor who buys without knowing what's what, whether local or out-of-area. Some have invested foolishly and lost everything.

Yet there is opportunity. Homes in Woodbridge and Corktown are selling in the first week on market. The residential occupancy rate Downtown is 97%. New developments and restorations are leased up immediately. There are numerous multifamily new-build and loft conversions in the Midtown area, home to Wayne State University, the medical center complex and the museums, aimed at filling increased demand (low single-digit vacancy rates here as well).

Then there are the suburbs where crime, schools and population decline are not issues. Rents that are 2% - 3% of asset value are still not that hard to find in lower-middle class areas, despite being a seller's market in most areas. This is where long-distance investors ought to be looking, not in the city. The returns are slightly less (still good) but the headaches are much reduced. For some reason though, the turnkey guys seem to concentrate on Detroit. Probably because that's what out-of-area investors hear about, and that's where the turnkeys can pickup houses dirt cheap in bad areas.

We don't have much interest from the hedge funds. That cuts both ways. They're not buying up all the inventory which makes it easier to invest as a little guy, but the reason they're not buying here is because they seek areas with higher predicted job growth. Forecasts for SE Michigan are pretty flat. The auto industry is booming, and the companies are making a bunch of money due to their lower cost structure, but they're doing it with fewer people, both on the white-collar and blue-collar side.

Bottom line, there's opportunity here but it requires some intelligent decision-making.