Michigan 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:

1. Buy at the right time
2. Buy in the right location
3. Buy desirable properties
4. Buy at the right price
5. Buy for cash flow now
6. Buy properties in good condition
7. 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.”

Michigan investment properties

How to Buy Detroit Investment Properties Part 2

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.”

Michigan investment properties

How to Buy Detroit Investment Properties Part 1

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.”

Michigan investment properties

Buying Cheap Properties in Detroit

What Every Out-of-State Investor Needs to Know!

Detroit and Michigan have received a lot of press about buying cheap properties in Detroit. In fact, a recent article in the Oakland Press cited how many investors are purchasing properties for under $10,000.

To an outside investor, the idea of buying income property for under $10,000 sounds very appealing and has created a buzz around the country and beyond. I call this the “cheap-factor-fever.” It’s where an investor looks at only one thing when making a decision…price. I’ve seen investors ignore all other sound investing criteria simply because the property is cheap. I recently spoke to one such investor who said, “how can I go wrong, it’s so cheap!”

While I entirely agree that now is the time to buy and Michigan is an excellent market to buy and hold property, I also agree that it’s important to consider all factors when purchasing a property.

In my mind, there are 3 fundamental criteria that an investor must consider in order to be successful investing in Detroit.

Location:
There is usually a reason why a Detroit property is for sale for under $10,000 and it’s probably due to bad location and/or excessive repairs. The 2 go hand in hand but first we’ll discuss location. There are many areas in Detroit that are considered “war zones” and no matter what measures are taken, it will never be successful (unless the neighborhood conditions change). These areas have high crime, drugs and the calibre of tenant will always be very low. Evictions, break-ins, prostitution, theft, and non-payment will be the continual story. Of course there are better areas than others but Detroit is very tricky. You can have one street that is very desirable, the houses are kept up, rents are high, homeowners abound and then you can go the very next block over and be in a war zone. Out of state investors often overlook location when they’ve been stricken with “cheap-factor-fever.”

Renovations:
Many properties are prices very cheap because of the excessive repairs that need done. I am amazed how an investor won’t buy a property for $25k that needs $10k in work but he/she will buy, without hesitation, a property for $10k that needs $25k in repairs. Managing contractors is not an easy task, Ensuring timely, quality work for a fair price requires constant attention and many out-of-state investors are unable to successfully manage contractors long distance.

Furthermore, rehabbing in Detroit is not easy and requires a certain level of speciality. Theft is high in Detroit even in the good areas. Investors aren’t the only ones taking advantage of the housing market. Professional stealers rome the streets looking for investors who are sinking thousands into a home only to return that night and clean out the house stealing plumbing, electrical, furnaces, hot water heaters, kitchens, tools and doors and anything else that can be hacked on the streets. Usually once a house has been targeted, they keep coming back again and again.

Property Management:
Many out of state investors don’t understand how to successfully manage the tenant. Detroit rentals and any lower income rentals can be very successful if managed correctly. It is a very hands on approach and requires a PM that is experienced. An experienced PM’s get down and dirty and have a no tolerance policy to collect rents, often physically collect the rent, understand the section 8 process very well, have repair people on stand by, and are able to successfully determine if a perspective tenant qualifies.

Remember Smart Investing:
As I mentioned earlier, I believe now is the time to invest in Michigan. I believe investors who do it right, will reap the benefits in the years to come. Michigan is heading in the right direction by investing in businesses and fields that will make the state a leader in the country (i.e. alternative energy, bio tech, movie industry, etc.).I believe Michigan will turn around and investors who got in at the right time will make a fortune. I also believe an investor has to look past the “cheap” factor and make smart business decisions in order to be successful buying investment properties in Detroit.

Jerry Norton is co-owner of Equity Services, LLC. They provide investors with fully renovated, positive cash flowing investment properties for under $50,000.

To learn more about buying cheap properties in Detroit, visit our site and download our FREE worksheets “Rental Income and Expense Tracking worksheet” and “Financial Analysis Worksheet.”

Michigan investment properties

Why Invest in Michigan Real Estate? Opportunity Amongst Negativity

As we sometimes do, Jerry and I would like to post an article relevant to our industry and discuss the current issues. Since I (Joe) live in California and Jerry lives in Michigan, we decided to write our own perspectives on this topic.

Jerry here. We sometimes hear negative comments about investing in Michigan due to the depressed economy. Yes, Michigan is a depressed market, everybody has heard the negative news in the media. Job losses, plummeting real estate values, foreclosures, blah, blah, blah. To be honest, I’m sick to my stomach when I hear someone complain and I have decided to not focus any energy on it. Zig Ziglar once said (and I’m paraphrasing), that he’s noticed all throughout his life that when the economy is strong, there’s a bunch of folks going broke and when the economy is bad there’s a bunch of folks getting rich. The point…don’t pay any attention to the economy, find a niche and make things happen! I’d like to show that despite the bad economy in Michigan, there is a niche and those that take advantage of it will come out very wealthy.

Despite the suffering Michigan economy (or maybe because of it), the rental market is strong and thriving. Let’s examine why this has happened, why this is an opportunity and how to take advantage of it.

The strong rental market is strong due to a few factors.

Former home owners are now renters:

Many of our current tenants are former home owners whose adjustable rate mortgages came due and unable to make their payments, lost their homes to foreclosure. They are working people who are now forced to rent.

Lower income and lower middle income not as affected:

While it is true that the main reason for the declining Michigan economy is the struggling automotive industry and it is true that those jobs also affect other jobs, it is reasonable to assume that it is the middle class that has been affected the most. The lower class, lower middle class and the upper class are not as affected. Let me illustrate: Our properties typically rent for $750-850/mo. The general rule of thumb when qualifying a tenant is that his/her net income should be twice their rent (depending on his/her bills). For argument’s sake, let’s suppose that a tenant is approved for an $800/mo rental and his/her net income is $2,000/mo. Assuming a 40 hr work week, that equates to approximately $14.00/hr before taxes. As such, there has not been a big influx of people of this income level moving out of the state. We specialize in the lower and lower-middle class neighborhoods. These are properties that only a few short years ago were valued at $80-$120k. Today, we are selling fully renovated for $40-$50k!

Section 8:

The government continues to give section 8 vouchers to qualifying tenants. This has also kept the supply of renters high. All of our properties are section 8 ready and we fill close to half of our properties with section 8 tenants. (To learn more about section 8, refer to our article).

Top-Notch Rehabs:

All of our properties are fully renovated. We go above and beyond to ensure each property is mechanically and cosmetically above par. For example, each property has hard-wired smokes (even though this is not mandatory). Each property has 2 tone paint. We replace carpet, windows, roofs, plumbing, electrical, etc, etc. We have developed a reputation in the community as investors who provide very nice and clean housing. As a result, tenants chose our properties over any others on the market and gladly pay average or above average rents.

All and all, a strong rental market combined with Equity Services, LLC. equals big profits!

Here’s the formula:

+Down market

+Fully renovated house

+Extremely affordable ($45k for a house that was recently worth $90)

+Strong rental market

+Positive cash flow

+Turn key (renovated, management in place, etc)

=Big profits.

There is a catch…you must be willing to ride the storm and wait for the market to turn around (which it always does). No one knows how long it will take Michigan to stabilize and then appreciate but in the meantime. collect some positive cash flow. At any rate, rather than listening to the mainstream media (which love negativity), look a little closer at the good things going on (see below a list of links of positive things happening in Michigan).

This article was written by Jerry Norton of Equity Services, LLC

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Joe here. Warren Buffet said the following in an interview with Money Magazine in April of 2008. “You know, I always say you should get greedy when others are fearful and fearful when others are greedy.”

Following Buffet’s definition of greed, all of us “greedy” investors are buying up rental properties in places like Michigan and riding out the storm. With a little time and patience we will make a lot of money. While at the same time, the “fearful” are saying “Michigan is in trouble and the economy is depressed.” Like Jerry, I chose to see the opportunity and let’s face it, I’m a little “greedy” too.

I live in Southern California and it is interesting to see people’s perspective on the California real estate trends in relation to other parts of the country. Some think the decline in values here in CA has created a great opportunity to acquire property below value. For example, I recently spoke to someone who commented on the “great deal” he got on a property he bought for $700k that was recently valued at $1 mil in 2006. What he fails to realize is that same property was worth $400k in 1999. The price rose so fast only because of the demand and the demand was there only because of the loose mortgage terms (which we are finding out was not such a good thing). The lending industry has learned a HUGE lesson from this and it will NEVER be that loose again. Who’s to say that his $700k house won’t drop back to $400k?

Let’s look at this from a different perspective using square feet. An average 2500 sqft house for $400k equals $160/sqft. Just two years ago before the decline in Carlsbad Ca, you could buy a brand new house 5 minutes from the beach in the resort community of La Costa for $189.00 sqft. The point is places like CA that rose the fastest may also fall the fastest.

Michigan, on the other hand, never went through the huge appreciation like many other parts of the country. You can buy a completely rehabbed property from Equity Services LLC on average for $35-$45 a sft. Let me tell you something, you cannot build a house for less than $100.00 sqft. That is value!! How can you go wrong owning a fully renovated rental property purchased for $45k? I recently visited Michigan and was thrilled to see so many great things going on. For being such a “bad” economy, every upscale restaurant I went to was packed! Michigan has a lot of momentum in place to turn its economy around and create more jobs. Let all the bloggers keep talking negative while I’m laying the groundwork to be prepared for the turn-around.

I have listed several links below that will show you some of the things going on in Michigan to return it to the power house it once was.

This article was written by Joe Traficante of Equity Services, LLC

Click to see our list of available properties.

Informative links on rebuilding Michigan’s economy.

• $100M in hand, New Economy Initiative ready to invest. Full Story
• Congress is expected to act within the next few days on giving Detroit automakers $25 billion in loans to retool plants for alternative-fuel vehicles. Full Story
• A panel of the Michigan Economic Development Corp. was to consider tax incentives Tuesday morning for General Motors Corp. to support investment in existing facilities in Detroit, Warren, Bay City and Pontiac and a new $326 million engine plant in Flint. The projects total $838 million in total investment and would retain 3,723 jobs. Full Story
• Bank of America, which just recently finished its acquisition of LaSalle Bank in Michigan, is pledging $25 Billion in community development lending initiatives for Michigan. Although they have said that they will likely streamline LaSalle and lay off some of its workers, the CEO has made some strong statements about having a large new presence in downtown Detroit.
• Bank’s chief likes downtown
• Almost all of B of A’s regional offices are in downtowns around the country. I guess they see opportunity where others see despair. As one of the largest banks in the U.S. and possibly the world, it’s interesting to hear B of A’s take on Michigan. They don’t make stupid moves.

• Ford will invest 75-million dollars into the Michigan Truck Plant. Full Story

Michigan investment properties

Why Invest in Real Estate in Pontiac, Michigan?

We believe Pontiac, MI to be a gold mine for our investors holding property for long-term growth and appreciation. Pontiac has a population of 67,000 and is located in the heart of Oakland Co, which is one of the wealthiest counties in the country. Below is some information and website links about Pontiac:

Pontiac is a city experiencing a structural and cultural urban renaissance. The perfect blend of old and new, the city is attracting investment as new shops, restaurants, and a growing number of high tech Internet firms sit next to historic buildings that are as majestic and proud as the Native American chief for which the city was named.

Corporate expansion, a high-tech explosion, tightly knit business and a great quality of life complete with lakes, parks and other recreational activities make Pontiac a wonderful place to live.

Why Pontiac? - Business Advantages

The city of Pontiac has a Downtown Development Authority (DDA), Tax Increment Finance Authority (TIFA) and Economic Development Corporation (EDC). In 1997, Pontiac became the first city in Oakland County to establish a Brownfield Redevelopment Authority. These agencies are available to assist businesses interested in locating and/or expanding in the city of Pontiac.

Additionally, the quality of fiber optics has increased in Pontiac, especially around the areas of Woodward Avenue and North Saginaw Street. The infrastructure creates the perfect home for the kind of pre-IPO companies you read about in newspapers every day - highly successful, highly competitive, high-tech corporations poised on the edge of phenomenal growth. A Pontiac location can help these businesses succeed and contribute to future success in this fast-moving industry.

Pontiac in the news:

Pontiac wins big on NCAA contract

Exclusive three-week coverage timed perfectly for launch of new vehicles.

Links to interesting sites:

Best:

• Pontiac regional chamber good

Good:

• Council of Economic Development

• Downtown Development Authority Fair

Just ok

• City of Pontiac Site.

Basic Overview

• 
  Wikipedia

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