Category: Detroit Real Estate Investing

It’s been a busy week. Kaitlin and I closed on three new houses. All of them need rehab work. One needs an insane amount, but it will be a fun project (I hope).

The crazier thing is that none of these houses were on our radar until last Wednesday, the 13th. I was driving back home after securing a house we’d taken back from an eviction (more on that in an upcoming post) when my phone rang. It was Dave, a realtor I worked with to buy one of our first Detroit rentals. We’ve taken some stabs at others since then, but haven’t been able to get an offer to land.

Dave had emailed me that morning about a house on Courville St. in Detroit’s 48224 zip code. He knows I’m looking for more over there, and I’d recently told him I’m hunting for a full rehab. This one fit the bill. It’s a 3 bed, 1 bath brick home, and a gorgeous old home on a very strong block. I know the area well and essentially committed to buying it as long as we could get it under $38k.

But that’s not what Dave was calling me about. An agent in his office was supposed to be closing on a home off Chandler Park Drive on Farmbrook St., also in the 48224 zip. The buyer did their final walk through the morning they were supposed to close and walked, leaving the owner occupied seller high and dry with their packed U-haul in the driveway.

The house had been listed at $20k and the buyer had talked them down to $14k. Dave said it was a good deal, and I believed him. I was ready to buy it on the spot but he wanted me to walk it first.

The next day, Thursday of last week, I drove down and walked Farmbrook. It’s another 3 bed, 1 bath, all brick house. It’s rough, but I like the location a lot. Comps fall in the $55k – $60k range and it needs probably $25k – $30k of work. Not incredible, but a solid buy-and-hold.

After that, I shot over to Courville with a friend and we managed to get into the house. I loved what I saw and texted Dave that I’d move on both.

A crazy quick close

The title work was already done on Farmbrook, seeing as they were supposed to close last Wednesday. So we closed that this Monday for $14k. The woman at the title company was actually working on Sunday, calling me, and getting it wrapped up for Monday. Impressive. It was by far the quickest I’ve seen a house and closed on it (just two business days).

There also happened to be a two-unit house up for auction on the Detroit Land Bank Monday night. The house is in the 48238 zip code, specifically in Russell Woods. It sits across the street and five houses down from one we already own. I knew it was coming up, but hadn’t decided if I’d stab at it. I figured after having bought Farmbrook and closing on Courville, I’d better pass.

But I didn’t.

We won the auction for $8,000. The jury is out on whether that’s going to be a smart buy or not. I’m hoping we can complete the rehab for <$70,000 but I’m not holding my breathe. I haven’t been inside the house yet, but the detailed photos clearly depict a house in far worse shape than I’ve ever tackled. That said, we’re hoping to spread it out over time. I wouldn’t be surprised if the rehab takes us 18 – 24 months.

Today we closed on Courville for $37k, making that the third house this week. We estimate it needs $40k – $50k in rehab. The one next door sold for $105k over the summer, and comps go as high as $125k. So that should be a nice win.

Lots of work ahead

I’d love to say I’m looking forward to a break, but that was the easy part! It’s been an even busier month and a half. We picked up two houses in mid October via the Detroit tax auction. So we’re now sitting on 9 total properties, two of which are duplexes, comprising 11 total doors.

Of those 11 doors, only 3 of them have tenants right now. And seeing as most of these have 5-6 months seasoning left before we can refinance, we’re going to have to pick and choose our battles. That said, two doors are already financed out and just need some relatively light work to get rented.

It should be an interesting 3 – 6 months! 🙂

The second phase of the Wayne County tax auction concluded yesterday. I wasn’t aware the auction was taking place until a friend mentioned it to me at a meetup early this month.

Registration opened on the 10th and the list of homes up for auction was available slightly before. It was a grueling process as there were some ~1,500 homes to sift through. I went through every single one and came up with a short list of 50 houses I was interested in.

I managed to narrow that list down to 35 homes, mostly based on second looks and weighing them all against different areas I know and like. I then used my weekends to drive every single one of those 35 homes, walking the outside of them, videotaping my thoughts and findings, and even getting into several of them either through an open door or broken window.

Here’s a shortened clip of me walking a property I bid on but ultimately didn’t end up getting.

No, most of the properties I was going for did NOT look like this. But this was a special circumstance, and I really wanted to tackle this project. Unfortunately, it went for more than I was willing to pay ($30,000).

Also note: I do not recommend entering abandoned/vacant properties alone like this. This was my first (I ended up getting in about 10 of them) and I was pretty nervous about the whole thing.

After walking the list of 35 I narrowed it to just 10 homes I wanted to bid on. Of those 10 I ranked them from “must buy”, “really want”, “would like”, and “OK losing”.

Ultimately I purchased one of my “must buys” and one of the “really wants”. I purchased one other house for a guy that grew up in it. His family lost it to taxes and he agreed to buy it from me on a land contract if I was able to win it in the auction. It’s a bit of a story, but I’ll write about that later.

Overall, this was a positive experience. I learned a lot about the tax auction process, found some new areas in Detroit that I like, and became increasingly familiar with the ones I already knew. It was fun, and I’m hoping the homes we purchased appraise high enough where we can pull all of our cash out. That’s the ultimate goal.

The fam and I were scheduled to head up north to Harbor Spring a week ago Wednesday and hang out with my Dad and step mom. The universe had other plans.

Not long after I woke up, my handyman was video calling me, walking me through one of our Detroit rental properties because it appeared to have been broken into.

It was. And the water heater and furnace were gone.

The incident was extremely disheartening, and so far it’s been my biggest setback in our rental property journey. We ended up boarding the house up, leaving on Thursday instead, and I mostly forgot about the incident while gone.

We had a lot of fun. Tucker enjoyed boating, riding grandpa’s tractor, cutting the grass with grandma on the zero-radius riding mower, hanging at the beach, hitting the farmer’s market, and plenty else.

Here’s a photo I took of a small, tucked away beach we hiked to.

Ryder had no fear of the water.

Tucker loved playing first mate and driving the boat.

Now that we’ve been home a couple days I’m nearly caught up on work stuff, but still figuring out how to proceed with our rental property. A lot needs to done yet to get a tenant in place.

The good news is I’ve had time to digest everything so I’m not nearly as stressed as I was. But we’re closing on another property tomorrow, and it feels like there’s a never ending list of things to do.

This past Saturday morning I did our final walk through for a home we’re purchasing in Detroit. This is actually the first house I ever walked through, the first one we put an offer through, but it will be the second to close. The sellers are from France, so we’ve had a heck of a time getting all the paperwork done to wrap it up. Apparently the Embassy is involved on the other end.

But I digress.

Since it’s been so long we wanted to walk through the house again to make sure nothing has changed. As my agent and I did checked out the home we noticed something we hadn’t before. The house had five bedrooms, not four.

It was listed on the MLS as having four bedrooms, and we hadn’t noticed previously that it had five. That may seem crazy, but again, this is a different ballgame.

When you walk through a $50,000 Detroit investment property it’s not about the bedrooms, the open floor plan, etc. You’re purely looking at the mechanics of the house to make sure there’s nothing substantially wrong with it.

The age of the furnace, water heater, signs of water damage, condition of the roof. These are the big ones because these are your large capital expenditure items.

When we walked through on Saturday we were already aware of those things. So we were exploring the house more than we did the first time, and sure enough there was an extra, legal bedroom.

How does a home get listed with one less bedroom than it actually has?

Simple. The listing agent likely never stepped foot in it. The owner also (definitely) never stepped foot in it. Somehow, at some point in time, this house was listed as a four bedroom and they just copied the data from the old listing.

It was a pleasant surprise, and it will add a good bit of value. We’d already gotten a very good deal on the house, and this is going to sweeten it further.

I love investing in Detroit.

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.

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.

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.

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.

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.

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.