US Detroit - turning the bend

So 45% of the rent goes where? Taxes?

 

What sort of service is the LL expected/required to make? Is it a German style - just provide a shell type deal or is it similar to Australia?

The USA has lower labour costs than us, but $5k is quickly eaten up with replacement carpet, ovens, kitchens, painting, plumbing, water heating, heating, cooling, etc.

 

Typical numbers of a property are (for e.g. on 12650 Grandmont Ave, Detroit, MI)

Purchase - 37,000
Rents - 750 pm (9000 per annum)
Property management - 900
City Tax - 1400
Insurance - 450
Maintenance - 500 (American Home Shield Warranty)
Profits - 5750 (Rent - Expenses)

So 45% of the rent goes towards the above running costs.

 

Thanks.
What does the "American Home Shield Warranty" cover? Is it a type of insurance?

It's a tidy LITTLE house, but i'm a bit concerned about the neighbours.
Google Maps

Google Maps

 

Hi Ed,

A home warranty is typically a one-year renewable service contract designed to protect your rental property from unexpected, costly repairs on home systems and appliances. Items covered under a Home warranty include:

• Air Conditioning w/Ductwork
• Heating w/Ductwork
• Electrical
• Doorbells
• Smoke Detectors
• Ceiling Fans
• Plumbing incl. stoppages
• Water Heaters
• Garbage Disposals
• Instant Hot/Cold Water Disp.
• Central Vacuums
• Refrigerators
• Ranges/Ovens/Cooktops
• Clothes Washers
• Clothes Dryers
• Dishwashers
• Built-in Microwave Ovens
• Trash Compactors
• Free-standing Ice Makers
• Septic Pump
• Garage Door Openers

Home warranties protect many of the home systems and appliances that you rely on daily. When these systems and appliances inevitably fail over time due to normal wear and tear, a home warranty will pay to repair or replace them. You will pay a service fee each time you request service, which ranges from $50 - $100.

On the other hand, a Home insurance protects the structure of your home against risks such as damage from severe weather and theft, Fire damages, secondary damages resulting from some system and appliance failures, as well as protecting you personally from liability in the event that someone is accidentally injured on your property.

 

Sounds like a scam. The likelihood of more than one of these appliances needing replacing in a year is very low. None of them would cost more than the premium + excess.

Insuring low cost items is never worth it. I know that the above list will require one replacement a year. I'll cut out the insurance company, thanks.

Hang on, I misunderstood - the liability and building cover makes it worth it.

So what about the neighbourhood? That apartment block at the end of the street is a bit unsightly. Has the house that had a fire been repaired? What about the boarded up windows? - I didn't think Michigan got cyclones.

 

Sorry that you initially thought so and then changed your mind.

This is a National Insurer - American Home shield warranty.
The Nation's Leading Home Warranty Provider.

The Home Warranty Leader | American Home Shield

They have been in business since 1971 - and I trust them.

 

So what about the neighbourhood? That apartment block at the end of the street is a bit unsightly. Has the house that had a fire been repaired? What about the boarded up windows? - I didn't think Michigan got cyclones.

 

Can I Invest | 12650 Grandmont Ave, Detroit, MI

Ed - 12650 property sold last week.

It is just an example.

 

All Neighborhoods in Detroit, barring none, if you went a few streets you will find blighted properties. The City is bull-dozing them one block at a time.

I have a map of every street I drive within a target location and mark it as either:
Red - no Buy
Amber - Can buy, but very selectively pockets
Green - buy
Solid Green - Strong Buy

Properties will be boarded up even during rehabs.
Or before being razed. Just the nature of transaction here.
This is Detroit mate! Investors are quick to adapt and profit.

My agent was telling me today that an investor from Miami was coming in on Saturday wanting to buy 30-35 houses under 30K and does not even want to look at any.
That is how Hot the market is here.

Three years back I was buy at will no multiple offer scenarios.

Investors from Israel, Argentina, France & Belgium I have already met, putting in offers on everything that even resembles a house.

So, yeah, the motto here is - you snooze you lose.

----

 

I have been investing in the US market since 2010 and read lots of articles and listen to podcasts regularly about different markets within the US.
Sentiment on Detroit is changing. There are billions of dollars being invested in the city of detroit.
If you google "Dan Gilbert, detroit" you can read about how money is being poured into this city. Detroit has some of the lowest priced real estate in the country coupled with a healthy demand for rentals which happen to deliver a very high rate of return. Higher risk tenants than other cities I would agree however the risk/reward is substantial when you look at the numbers. This does involve strategies to manage the tenant pool to optimum level which @GentleChief has mastered. You don't buy over 35 properties in a market like Detroit as he has if you don't believe in the opportunity, could be closer to 40 by now! I think this city is due for some improvement and is worth a look. Am looking at a few new markets at the moment with Detroit being one of them.

Having been in the US game now for years and assisted many investors through acquisitions in Atlanta I have dealt with all types of investors. What I will say is that some people don't seem to deal well with very basic issues, like a maintenance issue or tenant turn over or a small bump in the road which personally does not faze me at all in my investing. Some more experienced investors handle issues like just part of business and I think its that attitude that you need to take if you are going to invest in a city like Detroit. Its not for the faint hearted and you have to expect that you will get some bumps in the road from time to time but the overall reward and upside is there for those that can see the bigger picture.

The upside, well you can buy a house for 35k and rent it out for 700+ a month. Lets say you manage to get a decent tenant, how many years would it take for your capital to be repaid in full where you have none of your own money left in the deal? You still own the asset and continue to get the cashflow and have all your money back. Capital Growth, well quite possibly although the cashflow alone is attractive enough to make the investment worth considering.


Just a few articles of interest on Dan Gilbert and the changes he is making in Detroit.
Billionaire Dan Gilbert's mission to rebuild Detroit as a hub of 'muscles and brains'

Gilbertville: A Billionaire's Drive To Rebuild The Motor City

Dan Gilbert announces plan to bring 24,000 jobs to Detroit

 

Based on what I've seen of the neighbours so far I wouldn't want to look at any either.

 

Spot on.
Only mature investors can grasp this concept!!
Very well said @Karina

 

... and I get this.

I know many will compare this market to small towns in Australia, no real idea on the size, population etc. and the money being pumped into this market

Had this conversation many times, about Atlanta, comparing Atlanta with 6 million population and I believe 7000 people moving in each month to a country hick town. Largest airport traffic in the world.
Just shows its a perception thing. Its quite mind blowing when you are on the ground



MTR

 

that's the owner of cleveland cavaliers - dan gilbert. he might bring lebron to the pistons.

 

Good - Horses for courses,

Or whatever floats your boat...

And let us compare "Performance" notes on the investment journey - in just 6 months.

Or even over 5 years, if you would like.

I can bet my bottom dollar, you can follow mine and my fellow investor's journey.

And we WILL be ahead by 70-80+ % if not more, in every time scale ladder, humbly.

Mature investors understand and know how markets move when there is interest in a segment.

And what the key drivers are.

Paralysis by analysis is the biggest curtain leading to missed ops.

I speak to investors day in and out. Everyone is sorry about how they 'missed' something good in the past only because of xyz. something as small as "I was not told about that! "
Wow... they are 300K down now because of a $300 carpet tuck. Simple as that.

Because, Foresight sees what's around the corner... and not necessarily the tuckpoint under the feet (again, a very modest opinion)....

------

 

English please.

 

The architecture of the old houses there is beautiful, and the land is so cheap.

I'm sure you can make heaps of money, but just don't collect the rent yourself... remember back in 2012

- US lotto winner 'killed Aussie landlord' - news.com.au

 

May I ask the following questions:

• Do you own all houses that you are selling on your website?
• How many clients do you have?
• How many houses have you sold?
• How many years in the US market have you got?
• Can people see reviews from your clients about your services? I couldn't see any on the website!
• How can people make sure this (your company or LLC) is a serious respectable business (no scam)? no offences but property investing is a delicate business where people invest their life savings!
• What is your selection criteria in Detroit?
• Are all the tenants 8-section-tenants?
• How easy is to evict a bad tenant under US law?
• Are all houses turnkey properties?

 

What arm of govt provides this hand out? How much is it?