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GentleChief

Detroit Investment

Detroit Investment Property

Detroit Investment
GentleChief, 10th Feb, 2018
dereklotts likes this.
    • MTR
      Wow, care to share the numbers
    • GentleChief
      Sure @MTR,
      Address: 17395 Birwood St Detroit.
      Purchase Date: July 2016
      Price - 37,000
      Renovations - 7,000
      Rent - 850 per month (10,200 per annum)
      Tenancy - Section 8 (rent vouchers paid by the Govt)
      Summer & Winter Tax - 1650 p.a.
      Insurance - 38 per month (460 p.a)
      Karina and MTR like this.
    • GentleChief
      P.S - This house sold in 2004 for 114,000 USD
    • GentleChief
      And P.P.S - I will be able to list at 114,000 USD in 3-4 years time as Detroit rises..
    • C-mac
      Congrats on the buy, @GentleChief !

      I'm curious about some of the other costs:

      Property MGMT - what % do they charge of the rent? Or is it a flat-rate there?

      Summer and Winter tax - is this the county taxes (E.g. 'council' taxes here in Aus)? Or some other additional state tax? If so, what are the p.a. county taxes too?

      Lastly, is Detroit still as deflated as July 2016 or has it been incrementing up? I.e. would Zillow still put this house at $37K or is it more like 40's or 50's nowadays?

      Finally, did you purchase directly or through some kind of US company or US BA? Is it easy to set up an LLC to own these properties in, in the state of Michigan?
    • GentleChief
      Thank you @C-mac - Let me answer your questions individually:

      1) Property MGMT - what % do they charge of the rent? Or is it a flat-rate there?

      Most Property management companies charge 10% of the rent collected.
      One month's rent as Letting Fees when a tenant is placed.
      And $400 when the same tenant signs a new Lease at the end of their 1 year.

      2) Summer and Winter tax - is this the county taxes (E.g. 'council' taxes here in Aus)? Or some other additional state tax? If so, what are the p.a. county taxes too?

      Summer and Winter taxes is the exact same thing as Council here in Australia. Normally it is around $1500 to 2000 mark per annum per property as a general rule of thumb for our rentals. Could be more if you are buying a McMansion in an exclusive school district.

      3) Lastly, is Detroit still as deflated as July 2016 or has it been incrementing up? I.e. would Zillow still put this house at $37K or is it more like 40's or 50's nowadays?

      Detroit is gaining in strength and values over the last 18 months. I find myself in multiple Bid scenarios very often these days. And it goes to H&B and I find myself in "competition". Something I was not used to since 2015 when I first bought.

      Okay a word on Zillow zestimates. It is rather accurate when you have lots of sales data of neighboring properties in similar condition, size (sq footage) and similar Build age. Like I find Zestimate 'nearly' accurate in newer suburbs of Atlanta. Detroit not so much.

      4) Finally, did you purchase directly or through some kind of US company or US BA? Is it easy to set up an LLC to own these properties in, in the state of Michigan?

      I purchase directly.
      And manage the properties directly with our own Property managers in our Payroll. Plus a maintenance crew who work on daily rates.

      Regarding LLC setup, yes, it is easy to setup your LLC to own these properties in MI. You can do it yourself or use a registered agent to do that. You will need a Physical address (not a PO or a mailbox) as Registered Agent.

      Let me know if this helps you,
      MTR likes this.
    • Stu Lawson
    • MTR
    • Stu Lawson
      @GentleChief Congrats from me too, on your purchase...

      This post is great. You have piqued my interest in US re in general and i just spent the whole arvo clicking away at Zillow and Trulia... hehe...

      Questions on tenants, if you don't mind:
      1) How involved are you in selecting your tenants?
      2) From the little i know, this looks like a 'working class' area, how do you plan to manage delinquent tenants (non paying) and issue of evacuating them?

      Thanks.
    • GentleChief
      Thanks @Stu Lawson,
      Answering your questions individually:

      1) How involved are you in selecting your tenants?

      Very involved.
      Selecting the right tenants is finally going to make the difference if your property is +ve or -ve.
      On the day of listing the property manager is bound to get about 30 inquiries, on average.
      10 will request for a showing, 7-8 show up and you will have 4-5 applications.
      Again all averages.

      Of the 4-5 applicants, picking your best one is like a science of betting on the winner.
      I look for Income, no. of dependents, criminal records, bankruptcy, age demographics (under 30s will generally feel invincible and won't care to care for your property much) and also the social media profile. Plus last rental verification from previous land-lord.

      No drama tenants are what we prefer. And you will be able rule out the 'drama queens' in two or three interactions with them.

      2) From the little I know, this looks like a 'working class' area, how do you plan to manage delinquent tenants (non paying) and issue of evacuating them?

      True - Detroit as a whole is a working-class neighborhood.
      Let us just say a large (25-30%) percentage would be on minimum wages.
      So the first reason a tenant goes from "paying to non-paying" is many a time a property manager's own problem. They do not communicate and send a 'gentle' reminder on when the rent payment is due. Secondly, they are not there to collect it when the tenant says you can come home and pick up the rent at 5PM. Please note that Cash is still the king and people don't pay via direct debit (most of the time). We have a tenant who pays via Paypal! Reason: he can pay his rent using his credit card, Lol! So yeah, in all fairness, we work out a payment plan if a tenant falls behind. And Legal is the final option if the tenant falls behind by over 40 days. Fairly easy to evict. Set process and their Credit record gets a hit.

      We try and manage this process well and as tightly as we can - our collections are about 97-98% of all monies owed. Not a bad rate especially when we have 74 properties working. Of course your tenant going bankrupt is not in your control but managing that risk by screening and pro-active management helps imho!
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