buy Detroit investment properties
How to Buy Detroit Investment Properties Part 3
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 (timing, location). In Part 2 we discussed keys 3-5 (desirable, price, cash flow). In this final part 3 we’ll discuss the last 2 keys to successfully investing in Detroit real estate.
6). Condition:
Successfully owning investment property requires the property to be in good condition and as maintenance free as possible. The problem is many of these properties that investors are buying in Detroit are in disrepair and some are in major disrepair. Deciding what repairs to do is often a difficult and puzzling decision for many investors. Click here to see a video of items to repair on an investment property. There is a fine line between not doing enough and doing too much. Most investors do either of the 2 extremes. My strategy is to take care of all capital improvements initially so that over the life of owning the property I won’t have to worry about it. For example here are some major items to repair:
- Roof: replace it has 10 years or less life expectancy
- Windows: replace metal or wood with vinyl
- Siding/facia/soffit/gutters: Make sure any damaged siding, facia, soffit and gutters are repaired, water tight and working properly
- Plumbing: replace all galvanized pipes with new copper or Pex pipes
- Electrical: hard wires smoke detector, replace nob and tube electrical boxes, new plugs/switches, and GFI’s to code.
- Mechanical: replace old, inefficient furnaces with newer forced air
- Flooring: ceramic tile in kitchen and bath, chocolate brown carpet (hides stains)
- Kitchen: repair/replace cabinets, paint.
If the above items are all taken care of initially then the only repairs over time will be carpet/paint-type repairs. When doing initial renovations, I ask myself, “what do I need to do so that I don’t have to repair this item for another 10 years?” I also recommend making each property comply with local and state code as well as section 8. Once you learn what they like to see, make each property meet their requirements. For example, section 8 is really big on screens and sidewalks. Most municipalities are very concerned with handrails.
7). Property Management:
Owning investment property should be as passive as possible. If you want to buy Detroit Investment properties, plan on hiring a good property manager (PM). A good PM will advertise, screen tenants, sign leases, make sure utilities are switched in the tenants name before moving in, conduct property inspections, fill out legal paperwork such as lead-paint disclosures, collect rent, field calls, coordinate routine repairs, file evictions, register rental with local city, hold deposits, and much, much more. Most PMs charge up to 10% of rent and/or a placement fee. this is money well spent and should be factored in when determining the cash flow before investing. I recommend working with with a PM that has experience in your area. He/she will know the rental prices and will keep you aware of what’s going on locally. Also, choose a PM that has experience working with non-local investors. Many of these PMs we direct deposit rent proceeds into the investors bank account.
In conclusion, there are seven keys to successfully investing in Detroit real estate. If you are considering investing and want to buy Detroit investment properties, be sure to:
- Buy at the right time
- Buy in the right location
- Buy desirable properties
- Buy at the right price
- Buy for cash flow now
- Buy properties in good condition
- Use a property manager
And remember: it you want to buy Detroit investment properties, it will require some commitment and long-term vision but if you follow these seven keys to success, you will prosper!
Be sure to read, How to Buy Detroit Investment Properties Part 1 and Part 2
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.”
buy Detroit investment properties
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.”
buy Detroit investment properties
How to Buy Detroit Investment Properties Part 1
March 19, 2009 by Jerry · 2 Comments
7 Keys to Successfully Investing in Detroit Real Estate
Many out-of-state and even foreign investors are attracted to the Detroit real estate market due to the unprecedented low-priced foreclosures. Detroit has recently been in the spotlight as a place where investors can purchase properties for under $10,000!
Many of these investors are following the buy-low-sell-high strategy and intend to buy Detroit investment properties for under $10,000, make the necessary repairs, rent out the property for cash flow and hold onto the properties until the market turns around at which time, they will cash out for big bucks. While buying and holding real estate is one of the surest ways to become wealthy, there are 7 keys to success. Let’s discuss 2 of those keys in part 1:
1). Timing:
Timing is everything. I am amazed at how many real estate investors have gotten out of the game because of the depressed real estate market we’re in. The truth is, never in the history of real estate has there been a better time than now to buy! I love what Donald Trump recently said in an interview with Good Morning America,
“This is a great time to buy. Now is the time to start looking, and start buying. Over the course of the next year, this is going to be the time to buy. If you don’t do it, you are going to be very, very disappointed in the years to come. This is the bottom of the market. It may go down a little, or it may not, but this is about the bottom of the market.”
The real estate market is always cyclical. Those of us who have the foresight to buy now will become very wealthy in the years to come when the markets rebound.
2). Location:
We’ve all heard it before: Location, location, location. The single most important factor when investing n real estate is finding the right location where it is possible to conservatively predict potential growth. This is why savvy investors want to buy Detroit investment properties in Michigan. Currently, with automotive and manufacturing layoffs, high foreclosures and high unemployment, Michigan is a struggling market, to say the least. As a result, real estate is at all time lows. However, Michigan has a great future. It is heavily investing in industries and businesses that will enable MI to be an economic leader in the future. Industries such as alternative energy, bio technology and the movie industry. In fact, recently, MI instituted a film incentive giving the most aggressive in the country with a 42% tax credit for film makers to come to MI. Recently on 2/03 it was released that Motown Motion pictures, LLC plans to invest about $70 million in a 600,000 square-foot development in Pontiac and is expected to bring in more than 5,130 jobs. Several other movie production companies have announced a relocation to MI as well. As these new industries emerge and Michigan’s economy recovers, real estate will rebound. Remember, if you buy real estate in the path of growth and hang on to it, you will prosper!
On a more micro level, it’s important to invest in cities and neighborhoods that are positioned for growth and appreciation. One such area in Michigan is the city of Pontiac. Pontiac is a blue collar city of approximately 66,000 residents located in the heart of Oakland County, which is one of the top 5 wealthiest counties in the U.S. Given it’s location of being situated in a very affluent county, Pontiac is positioned for excellent long-term appreciation making Pontiac investment properties desirable.
Furthermore, if you intent to buy Detroit investment properties in the city of Detroit, be sure to learn and understand which neighborhoods are best to invest in. Many investors are attracted to the cheap prices and overlook the neighborhood locations. Some neighborhoods are in very poor condition and may never rebound. Consult with an expert in the area to make sure of the location before buying.
Be sure to read, How to Buy Detroit Investment Properties Part 2 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.
