The first closing

Travis

We closed two days ago on the property I walked through the other week. I wasn’t sure we were for awhile. The closing documents credited a prorated June rent to us for the 28 days in June that we’d own the property. The assumption is that the landlord had collected June rent.

I knew they hadn’t. Heck, I knew they hadn’t collected May rent. So I was delighted that they were scheduled to pay us our prorated amount so I wouldn’t have to hassle the tenant for it.

They weren’t delighted.

In fact, they wanted that line item removed from the closing docs. When we said no they claimed they were collecting May rent “this week” and wanted to delay closing until they could collect June rent. We weren’t about to sit around waiting for them to collect rent from a tenant that’s chronically late, so we gave them 24 hours. They chose closed as scheduled on Monday.

The only thing the sellers provided us was an old lease signed in 2017. The tenants phone number of the lease was clearly no longer active. We had no keys, no email address for the tenant, no documentation on a lease renewal (the 2017 lease was for a year), nothing. Clearly the previous owner was running a tight ship.

I finally had the chance to drive down to the property last night. The freeways were a mess as we got pounded by a thunderstorm. In fact I should have been in a car wreck on my way back when I had to slam on the brakes, course corrected as I slid forward, then across two lanes miraculously making it to the shoulder without hitting anyone. That was fun.

But before that I was able to meet with the tenant. She’s super nice, and I’m excited for her that she has a new full-time job. We cleared everything up, got her phone number, email, etc. (I forgot to mention the keys), and we’re setting her up with online rent payments. There’s still a ton to do, but the first one seems to be in the bag.

Nah, you’re straight

Travis

I went to see another Detroit home Friday night before packing our bags and getting ready to spend the three-day weekend in Holland, Michigan. My agent arranged the walk through, and I clarified upfront who would be present. You guessed it… just the tenant and me. My agent wasn’t showing, the listing agent wasn’t going to be there. Just me.

Nobody cares to show up, and I get it. We’re talking about homes that are in the $40k-$50k range. That leaves little for a real estate agent to make on commission, so they’re just not interested in doing much. But it also sucks.

How things work when buying Detroit rental properties

Imagine making an offer on a house based on a few (usually unrepresentative) photos, an address, and either Google Streetview or a drive buy in your car (if you decide it’s worth the time). You can only go walk through the property once because there’s a tenant in place and the owners don’t like disturbing them any more than they have to.

That means you have to arrange for an inspection to be done generally on short notice (24 hours or less). But you don’t do that because you aren’t going to buy most of the houses you see anyway, and that ~$300 per inspection will add up quickly. So you you rely on what little real estate knowledge you have to conduct your own visual inspection while chatting up the tenant, trying to be respective, and handling any other distractions.

On Friday those distractions included three young children. They were the only ones present when I showed up at the home. The oldest (probably about twelve years old) answered the door after a handful of knocks and a younger kid peeking through the window announcing my presence. He explained to me that his mom wasn’t home yet but she was on her way; she knew I was coming.

Naturally, I asked him if it was ok if I came in and looked around or if he’d prefer I wait for his mom. He said I could come in, and when I double checked with him, explaining it was no problem to wait and I didn’t want to make him feel uncomfortable, he looked me up and down, flashed a slight grin and exclaimed, “Nah, you’re straight”.

Clearly this kid wasn’t the least bit threatened by a clean-cut white guy. I couldn’t help chuckling at his reaction as I entered the house. The boy retreated to one of the bedrooms, rejoining his video game as I began poking around.

After walking around the house and playing hide-and-seek with the four-year-old for about 20 minutes, the tenant (mom) showed up. I talked with her a bit about the house, some issues she’d been having with water backing up in the basement drain when she did laundry, and talking to her about her new job at MGM Grand Casino as a cocktail waitress.

I already knew she’d been notoriously late on rent so I prodded a bit there. Apparently, she’d lost her job after her employer lost their contract with another company. But she’d just gone through orientation at MGM Grand and was starting this weekend. She seemed excited. That was evident. One of the first things I’d noticed when stepping into the house was a framed certificate that said “Welcome to the Team”. It was from MGM Grand.

Overall the house was in good shape. There are a few issues that need to be addressed, but that’s always the case. I also love the location on Somerset Ave. in Morningside right near Mack Ave. It really feels like Mack Ave. could see some cool shops, restaurants, etc. move in and become pretty neat. So I like having some exposure there.

A tenant that’s notoriously late on rent definitely concerns me. Inheriting tenants comes with added risk, but I like the house enough to take it on. I’m hoping she can get back on track with the new job, but I also know she hasn’t even paid rent yet this month.

Every time I go see a house it’s a unique experience. And just about every time it’s uncomfortable for me, especially these ones where I’m flying completely solo. I am not a social person by nature. I dislike small talk and common pleasantries, but it’s something I’ve been forcing myself to work on. Getting out of my comfort zone has been healthy, and so far the experiences have been positive.

I also love real estate. Something about building and homes is fascinating to me, especially these older homes that are nearing 100 years old. The craziest part is seeing and evaluating the homes is likely the easiest part. It’s going to be a whole other ballgame when I start placing and dealing with tenants.

The ticket price indicator

Travis

Our house cleaner was here yesterday. She’s a young girl without kids, so that means she still has a life, and was talking about her plans to go to the Movement Music Festival in Detroit this weekend. It’s some kind of techno rave festival or something like that (am I sounding old yet?). Apparently she goes every year.

But she was griping about how the ticket prices continue to go up. She said just a few years ago weekend-long tickets were $70. This year they’re $200. Sure enough:

Detroit is becoming hip.

Kaitlin and I took Tucker to a Tiger’s game the other week. We hadn’t really been downtown Detroit since moving here. We were both taken back at how cool it was, and left talking about doing our next date night somewhere in Detroit instead of sticking close to home in the suburbs. We were chatting with some friends in our subdivision and they agreed… they “have a bunch of restaurants downtown” they want to check out. They noted how much it’s changed, saying five years ago you wouldn’t want to step foot down there.

People are clearly wanting to visit, hang out, and spend time in Detroit. In my opinion, it’s only a matter of time before people start willingly move into the city limits. There are a lot of factors at play that I believe will catalyze that sooner than later.

Driving Detroit and bankrupt on 8 mile

Travis

I spent four hours driving neighborhoods on the East side of Detroit last night. On my way there I was driving down 8 Mile and couldn’t help take a photo of this license plate:

There was just something about a Corvette with this license plate, driving down 8 Mile in Detroit that made me chuckle.

During my trip I saw two homes I was interested in potentially buying. The listing agent didn’t show up at the first one, which is apparently quite common, so the owner showed me around his house while his two young daughters watched TV in the bedroom.

I was in and out in ten minutes, deciding quickly that it wasn’t for me, and surviving the seemingly unfriendly trio of pit bulls that live next door. The photos made it look far better than it was (shocker!), and were clearly older.

My next stop was a duplex in north of East Warren Ave. I pretty much knew this deal wasn’t going to be a fit for me, but the guy trying to wholesale it wanted me to see it. And I don’t mind. I enjoy looking at homes and refining my eye, analyzing the scope of work that needs to be done, etc.

The house was a mess and needed a lot of work. And his asking price wasn’t reflecting that. I have all kinds of gripes when it comes to wholesalers, but that’s for another post.

After that I spent the next few hours driving to 14 different homes on my list and taking notes on each.

Notes on Detroit rental properties

And before you go making fun of my chicken scratch, I’d like to see how legible your handwriting is when you’re parked on the side of a residential street with gunshots in the background.

I kid. My handwriting just sucks.

The more I drive Detroit the more I find myself falling in love with the city. The architecture of these homes is incredible. It’s both inspiring and saddening to see how some look so incredible still while some are mere shells of their former glory.

There’s so much potential in Detroit, but clear that there are areas that won’t reach their potential for many years. It’s easier to see it coming for other parts. It’s also incredible how quickly you can travel that spectrum, literally within a few streets.

How soon we forget, and my wife is hardcore

Travis

Kaitlin and I were watching HGTV last night. We used to do this quite a lot, but since we renovated our house it was the absolute last thing we wanted to watch. But it’s been about a year since the DIY home renovation, and the PTSD has all but passed. That and we’ve finished “The Marvelous Mrs. Maisel” (highly recommended) and all caught up on GoT.

We generally favor the flipping shows, usually Flip or Flop, and while watching, Kaitlin announced, “I could do that again.”

I was shocked.

Kaitlin had always said that she would “NEVER” do it again. I’ve had a slightly more amenable attitude with a few stipulations. I wouldn’t do it again the way we did: A toddler, dog, pregnant wife, and living in it. It was challenging to say the least.

It’s amazing though how the brain the wired to forget the bad, or at least diminish its severity. I’m reminded of my days running cross country in high school and college. I would literally run myself into the ground, sometimes collapsing after races, often throwing up.

It was a terrible feeling. And every time I was in that moment, in that excruciating pain, I’d swear to myself that I was done; I wouldn’t do it again.

But how soon we forget.

The thing about Kaitlin though is she doesn’t forget. She has an incredible memory (unlike mine). She’s just that hardcore. During our renovation she was the one that kept pushing things forward. She was the one taking most of the initiative and inspiring me to keep going. It takes a special person and, I like to think, a special couple to be able to do something like that together and come out ok in the end.

If we ever find ourselves in a situation where it makes sense to do another live-in renovation, I’d jump at the chance to do it with Kaitlin again.

Monday’s are for making offers

Travis

I haven’t talked about this yet, but I’m frustrated with real estate agents. I’ve actually never had a great experience with one. But it’s even worse when working the investor side buying properties in Detroit.

I’ve been stalking a number of listings I’ve wanted to make offers on. And while I’d love to wait until I get my own license, I’d hate to see a deal I really love slip away. So my agent and I made five offers on different homes today.

Yup, five.

I don’t even have the money to close all these offers if they get accepted. But we had our home appraised on Friday to open a HELOC. So I’m partially banking on that finalizing before I have to close on any of these potentially accepted offers.

Aggressive? Yep. Stupid? Quite possibly.

We’ll see how it shakes out.

Flipping and wholesaling jump the shark

Travis

I caught some news last night that Zillow’s stock was popping some 20% after reporting earnings. But that’s not the interesting part. Zillow is doubling down on their “Zillow Offers” product, a service where they buy homes for cash, fix them up, and sell them.

Yep, Zillow is flipping houses just like you see on HGTV.

The company announced that they’ll be expanding from 9 markets to 20. I admittedly didn’t really know about this program, and definitely didn’t know about OpenDoor, a company that has been building their business around this model.

I see a couple implications for Zillow Offers and competitors like OpenDoor.

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I am not an expert

Travis

I hang out on the BiggerPockets forums when I have some spare time, and I enjoy chiming in on conversations surrounding the Detroit real estate market. The more I learn, the more I pipe up.

I admit I’m a quick study. I tend to throw myself into projects that interest me and devour information. In the last five weeks I’ve probably spent 100+ hours reading forums, articles, and books, listening to podcasts, networking online and in person at meetups, studying Detroit neighborhoods, pouring over real estate listings and analyzing deals, talking to lawyers, title companies, real estate agents, and other local investors. I’ve seen a couple dozen properties in Detroit in person and made offers on at least six homes.

But I am not an expert. Hell, I barely feel like I’m starting to feel confident about my market insights and knowledge.

Today an investor messaged me and recognized me as an “expert”. It’s flattering, and it feels good to be acknowledged as someone who knows what they’re talking about when it comes to the Detroit real estate market. But I still have a lot to learn, and I’m the first to admit that.

Counter, no counter

Travis

We heard back on our revised offer today. I was hoping it’d be sooner, but with the weekend and the seller being in France, this is about what I expected. I also expected they’d give us something, but they didn’t.

The seller stood firm on the initial $45k offer. Apparently they said they have other offers on the table, too. I didn’t like that. I want the house. Not because I’m not emotionally invested or feel like I’ve put too much time into this deal, but it makes sense.

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My first Detroit rental property walk through

Travis

Purchasing an investment property is nothing like buying your primary residence, at least that’s been my experience so far here in the Detroit investment market. For starters, there are generally very few photos of the property, often times no interior shots. Next, if the home is tenant occupied (often time it is), you’re generally required to have an accepted offer before seeing the property.

Having never purchased an investment property before, that last one was a head-scratcher… how am I supposed to put an offer in on a house if I’ve never even seen it? That’s crazy, right?!

Not entirely.

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