Investor Blog Articles
How to Buy Detroit Investment Properties Part 2
March 19, 2009 by Jerry · 2 Comments
7 Keys to Successfully Investing in Detroit Real Estate
In “How to Buy Detroit Investment Properties Part 1″ we discussed the first two keys to successfully investing in Detroit real estate. In part 2, we’ll discuss keys 3-5:
3). Desirable
When choosing real estate, consider what type of property will be easiest to rent and eventually sell. Many investors want multi-units. I personally prefer single family homes because they are more desirable and always in demand. People would rather rent a home with a yard. They are easier to acquire, finance and sell when the time is right.
The property must be attractive to not only a tenant but eventually a home owner. Avoid properties that have unusual floor plans such as small kitchens, or walk-through bedrooms. A walk-through bedroom is a bedroom that can only be accessed by walking through another bedroom. As a rule of thumb, never invest in 1-2 bedroom single family homes. A two bedroom home rents for less and does not re-sell as well. I also avoid properties that are less than 900 sqft. Again, a small home will not rent or re-sell as well. Ideally garages and basements are preferable as well.
4). Price:
Buying at the right price is essential. This goes along with timing and is the number one reason why so many non-local investors want to buy Detroit investment properties. Currently in Detroit, properties are selling for a fraction of what they sold for just a few years ago. It is only a matter of time before values will go back up. Like I often tell my customers, “if it was worth $90k once, you better believe it will be worth $90k again.” I can’t say it enough, “those that buy at the right time and at the right price will become wealthy in the years to come.” This has been proven time and time again throughout history. Most real estate investors become wealthy from buying low and holding for 10, 20, 30 years or longer.
5). Cash Flow:
My philosophy, and it has served me well, is to never invest in real estate that does not provide immediate positive cash flow. Nothing is more detrimental than owning real estate that bleeds every month. This gives some cushion and allows the property to stand alone while waiting for appreciation. I created a FREE simple financial analysis spreadsheet that quickly analyzes all of the key financial indicators (principal and interest, property management, property taxes, insurance, vacancy, as well as return on investment, debt-to-income, net ash flow, etc.) to determine if a property is a good deal. Make sure you understand actual market rents as well as all the costs associated when calculating cash flow.
Be sure to read, How to Buy Detroit Investment Properties Part 1 and Part 3
Jerry Norton is co-owner of Equity Services, LLC. His company provides investors with fully renovated, positive cash flowing investment properties for under $50,000.
To learn more about how to buy Detroit investment properties, visit our site and download our FREE worksheets “Rental Income and Expense Tracking worksheet” and “Financial Analysis Worksheet.”
Equity Services, LLC acquires distressed properties, fully renovates the properties, puts renters and property management in place and sells them for under $50,000 to investors who are looking for turn-key, positive cash flowing rental properties with equity.
Rental Property Income/Expense Tracking Tool - easily keep track of your rent income and expenses.
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[...] the first two keys to successfully investing in Detroit real estate (timing, location). In Part 2 we discussed keys 3-5 (desirable, price, cash flow). In this final part 3 we’ll discuss the last [...]