Michigan Real Estate - I'm getting in but need help

[mudman]

A partner and I have decided to get into a few properties together. We are looking at homes we can buy cash, put some work, cleaning, etc into and have rented out quickly. I'm a Jack-of-all-trades (except I actually know what I'm doing most of the time) and have plenty of 'spare' time (more if I can make this profitable). Finding the right houses isn't proving to be too difficult, but getting facts on rental laws, right/wrong way to formalize our partnership, right/wrong way to do business has been tough.

We're looking at cheap stuff all around Oakland County, some in Flint, too. There are some very solid homes going cheap right now. My partner (blood relative, very cool, no worries about not being fair) is fronting all the cash, I'm doing labor, management, maintenance etc. She is in WA, but lived in MI for a long time.

Give me anything you've got. Your BTDT stories, links to informative sites, tips on getting a CCW will all be helpful. We're working on a counter offer on one property now, and hope to have a few up and rented by winter.

Thanks!
-Jeremy

[Britwrench]

A friend of mine is in Michigan right now (Dearborn). Just wondering, bearing in mind the huge amount of lay-offs, business failures there right now, who will actually and can afford to rent?

[mudman]

In the areas we are considering that isn't too much of an immediate concern. Those layoffs, job cuts, general suckiness of things for the middle class are the reason I'm changing directions, though.

[NOH20]

My mother runs a title company and my sister is a realtor, both in Oakland county. Let me know if you need some help.

[fastfredracing]

Stay on top of them once they are rented, you would not believe the damage a single female with one child can do to your property. Get references , and call old landlords. There are a couple of really good books that I have read that helped tremendously . One is the section 8 Handbook, Geared more towards section 8, but tons of good info on how to set up your buisness entity, and stuff like that. I am also in with a partner, we set up our buisness as an LLC. and you only want to have maybe 3 houses under one llc, and then set up another. That way if something really bad happens to one of your units, ie fire/death, you cannot loose the rest of your properties. I am like you. I love fixing these old places up, but being a landlord can be a little challenging at some times. Good luck . I think for a person who is willing to put in a little, ( acutally a lot ) of sweat equity , this is a great buisness.

[mudman]

We are not overlooking the sect 8 renters, there are tons around here. I'll checkout that book (if my library can get it) or buy it, thanks. Good tip on the limited holdings for a LLC.

My Aunt is Sr. Regional VP (or something like that) for a big title co, and my wife worked with her for a few years, so we've got that covered.

How about a few tips for working with RE Agents? I've had bad experiences, but heard many others say 'make them work for you'. I know a few but don't know what I can/should expect to get out of one. How willing are they going to be about showing a guy a bunch of 10k-50k homes? Should I try to find one good one to build a good relationship with, or get several begging for my next buy?

[GDSOB]

You may end up hating people if you go the sec 8 route. All the bad stuff you see on the news will happen in your house. If you rent to low end tenants, even if you screen them thoroughly, you will still have the rest of their family, drug dealing boyfriends, and "visiting" animals in your house.

If you buy in a depressed area, be prepared to hold the property indefinitely. Not too much investment property financing now days. I would not recommend buying in a high rental area. If you want to sell, you have to sell to another investor, looking for cents on the dollar. Buy where people own their homes, at least you have a chance to sell to an owner occupant some day.

With partners, make sure everything is clearly spelled out in a legal contract. I've had one great partner, and a couple bad ones. Real estate seems to bring out the worst in people.

Work with a RE agent that does bank owned & fixers exclusively. Most agents are lost on investment property. Do your own due diligence and don't expect them to hold your hand with the cheap houses. They don't make much on each, but if you are serious about repeat business, they will do you right. I've been on both sides of the transaction, bought many through one agent and usually got first dibs on the new inventory. If you are a tire kicker, don't expect great service.

Don't expect your low $ properties to appreciate. The neighborhoods always set the value and some never appreciate. If you have good cash flow, pay it down and you will be in a good position.

Good luck. Keep your day job!

[turbo6bar]

At this point in time, finding the deals and fixing is not the problem. The issue is finding good renters. SOBman pretty much summed up my sentiment. You can buy the fixers in the depressed areas or solid blue-collar zones and you will have more problems with the renters. You appreciation rate won't be spectacular, but your cash flow and returns should be nice. In essence, you're trading a little more hassle for a little more return. You'll need to find the right balance, as it's all subjective.

Do not enter this field unless you have a long-term perspective. When you put in hundreds of man-hours for a payday spread out over years, you have to be thinking big picture.

Dabble at first until you find your comfort zone. Don't dive in headfirst and buy 15 properties in the first year. Buy a few, get experience, and then reevaluate. At that time, you might want to trade some less desirable properties for investments aligned with your goals.

If you buy right, and don't piss away your loot on lotto tickets, this is a sure-fire way to build massive wealth.

Jeremy, I strongly recommend you find an experienced agent that deals with investment properties. This is not the time to be training some greenhorn. You can do that after making your first million. jurgen

[Rex Karrs]

I've been trying to rent out my house in Oakland County since I moved here in 2006. Zip, zero, nothing, nada. Best of luck to you.

[SpartanToJo]

You asked about getting a CCW. In Michigan you will apply for a CPL, Concealed Pistol License. You take a one day, eight hours class. It's about 2/3 classroom and 1/3 range time. There's a guy named Jerry that teaches the course out of the Bass Pro store in Auburn Hills. He's pretty entertaining, and it is very convenient because you have classrooms, a range, and a place for lunch right there. He even provides a bunch af Springfield Armoury XD9's for the range time, no charge. you just buy ammo.

[lendaddy]

You're a brave man...rather the money guy is I guess.

I wouldn't recommend Michigan(ESPECIALLY the east side) to anyone for anything.

Good luck.

[mudman]

Sparty, do you know the cost of that course? I could call Bass Pro...

Rex, where in Oakland County? What type of house? Where have you advertised?

Jurgen, do you have any math/data that says a $15k house rented for $650/mo is less profitable than a $60k house rented for $750/mo? I won't expect the cheap property to appreciate and there will be more 'maintenance', but is that better than having $45k more into a house? There is some crazy upside potential in some properties around here, but they take more cash up front and we don't make much %wise until we sell, which all depends on things I can't predict.

We are definitely looking long term, but by my math this should turn a profit in a couple of years. We're not counting on resale profit, but rental revenue for profit. After we get a few homes going we'll consider some short term holds on pricier properties depending on market conditions. I have no idea what the future holds for this area but I know that there will be more people looking to rent for the next few years.

[ChemMan]

Just picked up the Flint Journal. The headline today is that the rent in Flint is the lowest in the nation.
Are you looking at houses on the North Side (of Flint)? Houses there have been on the very cheap side as long as I can remember. I lived there when I first came to the Flint area 20 years ago. The East Side is a bit safer. You might want to look at that area. Lived there for a few years too.
A friend of mine used to rent out houses in Flint. He got tired of renters not paying and got out of it.

I looked on the Journal's website but the article is not up yet. You might want to check in a couple of days. It will give you an idea of what people are expecting to pay in this area.

Good luck in you business venture.

[cgarr]

I always thought it was "Location Location Location" has that changed?

[kach22i]

A house went up for sale in the Cass lake/ Sylvan Lake area this summer (Oakland, county - Keego Harbor), little ranch went for back taxes of $7,000, lake access too. It did not need much work, and is already rented out.

Let me know if you need an architect, I'm hungry for work.

[HardDrive]

Michigan......Real Estate.

Let me say this: I feel this is a poor idea.

[mudman]

When we're talking about stuff like this:
http://www.realtor.com/search/listingdetail.aspx?sby=1&pgsz=3&loc=pontiac%2c+MI&ml=8&mxp=50000&typ=1D&sid=bcd4548650cd43889dfe39ff918e683a&pg=3&fhpg=1&lid=1104116842&lsn=118&srcnt=575
Do you think it'll get much worse?

I mean, people gotta live somewhere...

Or do you think there will be an exodus?

[mudman]

George, it is crazy how cheap some in that area and neighboring Waterford are being listed. Lots in good condition, too. I might have a project you would do just for fun:


We're putting an offer in on that one this week. Awesome structure.

[schamp]

I think the location is still key, and with that said, I prefer duplexes over single family. I have done both. Good luck.

[turbo6bar]

Originally Posted by mudman

Jurgen, do you have any math/data that says a $15k house rented for $650/mo is less profitable than a $60k house rented for $750/mo? I won't expect the cheap property to appreciate and there will be more 'maintenance', but is that better than having $45k more into a house? There is some crazy upside potential in some properties around here, but they take more cash up front and we don't make much %wise until we sell, which all depends on things I can't predict.

Rhetorical question it is?

Ask yourself this: If a person can afford $750/mo, would they choose the $60k in a presumably better neighborhood or the $650/mth property in a lower-end area? Your clientele will suffer if you carry the cheaper property, and it will cost you more dollars. Of course, your debt load is many times less (profits should be UP), so you have to ask yourself, "How many dolllars do I need to put up with the BS?" The answer to that question is purely subjective.

I hold the more expensive properties myself. I'm not arguing they are better. I still get some sucky tenants, but guarantee I put up with far less BS than the guy similar rent for a crapbox in the hood. I'm a passive person. I don't like to fight, so I have to pay more up front to hit that cash flow target. Different folks for different strokes. best luck to you, jurgen