This episode I speak about a client and how the city of Detroit gave me incorrect tax information.

Link to Free Press Article

This episode I speak about my experience with multi family units in the city of Detroit.

This episode is the start of a new series of Detroit Investor TV about Why NOT Detroit? I will cover the changes that have happened over the last six years and where Detroit will be 15 years from now. In this episode I cover what happened in Detroit from 2001 to present, why values dropped, why it’s different than most of America and why it will recover first with most of it’s former value.

This episode is the start of a new series of Detroit Investor TV about Why NOT Detroit? I will cover the changes that have happened over the last six years and where Detroit will be 15 years from now.

While I have never been to the original TED (I keep applying, some day I will get in) I was fortunate enough to have attended both TedxDetroit events. This years event was even better and bigger than last with some amazing speakers.

Why this is so exciting, besides the fact that it is TED for Detroit, is that it proves there are great minds in Detroit working hard to solve problems and share ideas. One of the big differences between TedxDetroit and the original TED is that TedxDetroit is heavily represented by entrepreneurs. Detroit is ground zero for some amazing new businesses in the tech arena as well as established businesses growing like crazy.

For Detroit to have successfully sponsored two Tedx events is an great sign for the city. The quality of the speakers were second to none and I met some great people while attending and volunteering. To see and meet so many people actively making Detroit a better place to live, start a business, and invest was something really special.

My favorite quote of the day was from Dan Gilbert (owner of the Cleveland Cavaliers as well as Quicken Loans, basically a serial entrepreneur),”If you like to buy low and sell high, I suggest you get on the bandwagon, soon!” Dan went on to say that he couldn’t believe how cheap real estate was here and he was actively buying as much as he could.

I highly recommend that next year you apply and attend TedxDetroit. You won’t regret it.

I must give a shout out to a few of the players that made TedxDetroit possible. Charlie Wolborg of Curve Detroit (follow @charliecurve), Wayne State University, Dan Gilbert and of course the TedxDetroit board. Thank you for working so hard to make this happen and thank you for making this years TedxDetroit bigger and better than last years! I’m really looking forward to 2011 TedxDetroit!

Make your life uncomfortable,
Jeremy Burgess
The Detroit Market Expert

P.S. Check out some pretty cool pics of TedxDetroit. http://www.flickr.com/groups/tedxdetroit/

This episode covers some of the rehab items that tenants love and look for. Follow these and your property will rent quicker, stay nicer, and rent for a higher rate.

This episode covers some of the issues we are having with section 8 in Detroit with our and our clients Detroit forclosures.

Let me take that back. All of the investors that purchase our Detroit wholesale properties leverage our experience and success by using our proven systems and on the ground team of contractors, property managers, inspectors, insurance agents, mortgage brokers, property security, and other professionals. These are the same people that we have used and proven on our individual projects over our investment careers.

Who would benefit from leveraging the experience and team that two successful real estate investors have built? Well, if you’re investing in Detroit rental properties and foreclosures, or you want to, then that’s you. We specialize in creating successful out of state and out of country investors in Detroit when they otherwise would struggle to finish projects or would just plain fail. We take first time real estate investors and make them Detroit Real Estate Moguls. We also take successful investors from other markets and provide them with the tools they need to dominate the Detroit market.

We have a different perspective on customers here at Urban Detroit Wholesalers and that sets us apart from every other investment company in our market. We realize that by making a new or experienced investor successful on their first couple of investment properties in Detroit, we are creating long-term investor that will continue to invest in Detroit. That’s what we have created and in a continuing effort to make that happen, we are rolling out an update to our customer service with each Detroit property.

When you’re investing from out of state, or especially from out of the country, there are challenges in coordinating rehabs. There are time zone changes, differences in Detroit norms, your job, family, and just other things going on. We understand this and we won’t let this hold you back from being a successful investor. Starting today, we will make being a successful Detroit real estate investor one step closer by managing the entire rehabilitation process for you.

You will still have the final say and total control over the process but we will remove the day to day phone calls and check-ups out of it for you. Instead, you will review weekly progress reports, estimates, and pictures from your project. You will contact one number to ask questions, make changes or inquire about anything else that you need instead of multiple numbers. You will save time, money, and headaches. You will be successful. This service is included in each Detroit investment property purchase at NO ADDITIONAL CHARGE.

So let me ask you again, would you rather be a Busy or Successful Detroit Real Estate Investor? The choice is yours.

Successfully Yours,
Jared Pomranky
Detroit Market Expert

Detroit foreclosure search
Free Report on Detroit real estate “how to”

Here is a deal you can do in Detroit right now all day long:

• Purchase/Rehab: $35,000
• Profit: $5,000
• Turnaround time: 90 days
• Cash on Cash Return: 14.3%
• Annual Yield: 57%

Now, let’s look at an opportunity in California. I know a few guys doing this right now.

• Purchase/Rehab: $300,000
• Profit: $30,000
• Turnaround time: 90 days
• Cash on Cash Return: 10%
• Annual Yield: 40%

Without looking at the numbers, I know many of you would rather go with the California deal. Now that you have had a chance to really look at the numbers, which deal is the better investment? Of course the Detroit deal is.

Now let’s talk exit strategy. What if something goes wrong? You finish your rehab and you are ready to flip and now the President of the United States outlaws flipping for 2 years. Now what do you do? (This might seem a little ridiculous however we should always plan for the worst case scenario.) Now it’s time to refinance your cash out of the property and rent it out until you can flip it. Time to take a look at cash flow!

Real cash flow calculations take into account 10% maintenance, 10% vacancy, and 10% property management. I did this for Detroit. For California I reduced it to 7% to try and be a little bit more fair.

Detroit Deal

• Mortgage: $40,000
• Interest Rate: 7%
• Mortgage Payment: $266 a month
• Monthly Rent: $850
• Taxes Annual: $2,000
• Insurance Annual: $800
• Vacancy/Maint/Prop Mgmt Fee: $255 a month

Your Monthly Cash Flow: $95.66

California Deal

• Mortgage: $310,000
• Interest Rate: 7%
• Mortgage Payment: $1996 a month
• Monthly Rent: $2,000
• Taxes Annual: $2,000
• Insurance Annual: $1200
• Vacancy/Maint/Prop Mgmt Fee: $ 419 a month

Your Monthly Cash Flow: -$881.67

How do you like that California deal now?! The point I’m making in this week’s blog is ACT like a professional real estate investor. This means REALLY looking at the numbers and also planning for a worst case scenario. This is what makes us professionals.

If you haven’t already, go and downloaded our cash flow calculator to determine “REAL” cash flow.

Jeremy Burgess
Detroit Market Expert

Detroit investment properties
Free Report on Detroit foreclosure investing “how to”

This seems pretty intuitive because rents in hot areas in California, like San Diego, don’t move on a linear path with the value of the home. In other words, the value or price of the home goes up much more than the increases in rent can cover. Many people find they’re in a negative cash flow situation in these areas but they have significant equity that they can realize so it’s a good investment.

In areas like Detroit, the rents cover much more than the low price points that you can buy houses at so you experience something hard to find on the coasts, monthly cash flow. Now you will hear people tell you that you can’t buy for cash flow in California or you never buy for equity in Detroit. Not only should you not listen to people that give you a definitive statement like always, can’t, or never but you should also look to see what everyone else is passing by. I’m now going to show you how you buy for equity in Detroit, how you buy for cash flow in Detroit, and why you should be investing in both.

Cash Flow
Investing for cash flow is the most basic form of investing for most people. You buy it cheap, fix it up, then rent it out for more than your expenses (Principal, Interest, Taxes, Insurance (PITI), management, vacancy, maintenance) and get your $200-$300/mo. cash flow. It has been proven time and time again that cash flowing rentals are the way to true wealth and Detroit is bursting at the seams with these types of opportunities. When we’re investing for cash flow we’re talking strictly numbers.

In fact, I don’t even want to see the house. I want my contractor to tell me how much it costs to fix it up and I want my property manager to tell me how much it can rent for and if it an be rented out easily. Besides the numbers, that’s ALL I want to know. Don’t let emotions get tied up with a cash flowing properties because it’s all the numbers. Is it not as sexy as what you want? It doesn’t matter because you know how much it costs to fix and your property manager says they can rent it out. Some of my best cash flowing properties are sleepers in my portfolio. You might look at the house and tell me how ugly it is or how plain looking it is but all I see is how it always stays rented and how I’m stuffing hundred dollar bills in my pocket each month.

On cash flow properties, you need to be especially aware of the taxes and purchase price. Your taxes are too high or you’re all in at over $40,000 and you’re going to have a tough time getting cash flow (counting all expenses including PITI, management, vacancy, and maintenance).

Equity and Future Growth
I like to call these properties my early retirement pay checks. Like we talked about before, when you’re investing in Detroit, you’re always looking for some cash flow but how much? Is it always the $200-$300 a month? I say no. What if I told you there was a beautiful brick colonial built for the upper class that you can purchase, renovate, and rent out for a little cash flow each month (less than our cash flow properties)? Well, that alone doesn’t sound like a good deal but what if I told you that the current conservative appraisal value of the house was a good $40,000 to $60,000 higher right now and that you have the best chance of future growth on this type of property? It’s sounding a little more interesting isn’t it?

While these properties have higher taxes and price points right now, they also are in demand for renting and will mean big paychecks in the long run. Making these investments a part of your portfolio mean that when equity becomes easily realized in Detroit and we, dare I say, see modest appreciation gains, you will cash in big on these types of properties. While you shouldn’t completely disregard taxes, your taxes will be higher, which will eat into cash flow. Plan on this. The main points to consider on these houses are the aesthetics of the house, the demand for the area, and the possibilities for future growth for the area.

You may be sitting there thinking, “I want to invest in cash flow properties so I build up a great passive income and get that steady monthly paycheck” or you may be thinking, “I want to invest in equity and future growth properties so I can cash big checks in the future for my retirement.” but why not do both? I have to tell you, I love my cash flow properties. The monthly passive income in the form of checks in my mail, the tax benefits of depreciation and passive income, and the low price points but my portfolio doesn’t fully consist of these and I don’t recommend you only having these. The passive income is great because it will keep going and only get better as your tenants pay off your mortgage but shouldn’t you capitalize on some future growth as well? Most definitely. Passive income is great but so are large chunks of money. We have the opportunity to buy houses cheaper than they have ever been and cheaper than they will most likely ever be.

Buying for equity and future growth (as long as the numbers work now), is a great way to give you big pay checks in the future. I like to see a 75% to 25% ratio on cash flow to equity and future growth properties for a strong portfolio but it all depends on your needs. I have clients that like to make it a more 50/50 split. This is something for you to decide. The main point of this is to get you thinking about that ratio, different ways of investing in Detroit, and getting you away from the 100/0 or 0/100 type of split.

Remember, you don’t have to know all of this information down pat on areas, types of houses, and viability of neighborhoods. Talk to the investors that have been doing what you want to do in Detroit and that have the knowledge. We’re the Detroit Experts because Detroit Investing is what we successfully do day in and day out. We’re always available for questions.

Jared Pomranky
Detroit Market Expert

Detroit investment properties
Free Report on Detroit foreclosure investing “how to”