Writings

The Moldy McCarty House

Travis

Since winning a few houses in the Detroit tax auction, we’ve been working through the legal process to vacate the current occupants. It’s not quick.

Before filing a 30-day notice to vacate we had to wait for the deed. That took about a month in itself. Then we had to wait the full 30-days before filing with the court (nobody leaves the house during or after the 30-day notice). At that point, you wait for a court date, wait another couple weeks for the date the court orders the occupant to be out, and then cross your fingers they actually leave so you don’t have to file an actual eviction and have a bailiff out.

Basically, it’s the same process as a standard eviction. The only difference between vacating an occupied auction purchase and a rental tenant is you don’t have to file a 7-day pay or quit notice. You also generally don’t have a line of communication to the tenant.

In this case, we did have the latter. The week after the auction I left a note at the home, including my contact info. Ms. McCarty (she never gave me her first name, but we did later find it on a piece of mail) contacted me and I actually visited her at the home, and talked to her about potentially signing a lease agreement.

After several weeks of the eviction process coming to a head, and excuses from Ms. McCarty on why she wasn’t quite ready to leave the house and needed just a LITTLE more time, we finally took possession today without having to bring a bailiff out.

Ms. McCarty confirmed, over text, that she was fully moved out of the house and anything left was trash.

So I entered the house today with my friend and a locksmith. It wasn’t difficult given the doors weren’t locked. I went in the back door which opens to the kitchen, the gas stove directly in front of me had all four burners on high.

The power was out, and DTE has clearly removed and locked the electric meter. Someone was still living in the house, heating it with the stove. The house was trashed with enough stuff left behind to rival the abandoned property in our first eviction house.

Worse though… the mold. It’s everywhere!

Here’s a photo of one of baseboards in one of the corners of the living room:

The basement, once clearly beautifully finished, is a moldy mess. Ms. McCarty had previously informed me that water backs up every time they do the laundry. They never resolved the issue, and it’d been going on for at least 9 months. As a result, the basement is completely destroyed with water and mold having traveled several feet up the drywall. Don’t worry, I’ll have more photos in a future post.

As it sits right now, it feels like this house was a poor buy. I purchased it thinking it was a 3 bedroom, 1 bathroom home, but it’s actually a 2 bed/1 bath. I’m going to take some time to wrap my head around this mess and figure out how we’ll proceed.

Luckily it’s in an area I really like and believe in. Now I have to go to a six-year-old birthday party at BounceU and drive to Pennsylvania.

What a way to start a weekend!

Backfire Damage

Travis

I tend to be overly sympathetic. My wife calls it having too big of a heart. Often times she’s able to reel me in and keep me from allowing myself to be taken advantage of, but not always. And while most times it backfires on me, I still maintain that I’d rather have a big heart than not.

In mid-October I managed to let my sympathy blind my judgement. A guy in a Facebook real estate investors group I’m part of, whom I’d never met, asked for help purchasing his childhood home from the Detroit tax auction.

To make a bit of a story short, I agreed to purchase the home and sell it back to him on a land contract. I won the auction for the house, paying $10,032 and about $1,100 in back taxes. I received the deed about a month after the auction (late November) and I hashed out the details of the land contract with the guy, we’ll call him Jeff, that included a $2,500 down payment.

Well, Jeff still hasn’t been able to come up with the down payment, and today I decided to go see what I own. I’d never been in the house or even driven by it. Jeff had told me there was some fire damage from his cousin (I think?) but it had been “contained to one room”.

On StreetView the house was clearly boarded up. But when we arrived the front door board was completely ripped off. The fire itself clearly was contained to the living room, but soot had traveled to other parts of the house.

  • Notice the melted TV.
  • No real damage to the living room, but heavy soot.
  • Lots of garbage in the kitchen.
  • And lots of soot yet, too.
    And lots of soot yet, too.
  • The bathroom isn't in bad shape!
    The bathroom isn’t in bad shape!
  • The house was wide open. It's pretty cute, too!
    The house was wide open. It’s pretty cute, too!

The house, done up well, might be able to fetch between $50,000 and $60,000. But it’s likely going to take $30,000 to get there. That doesn’t include the opportunity cost of the money or my time. And of course, there’s always the risk that I’m unable to sell it for a profit.

No big deal right? Just hold it as a rental.

That’d definitely be my plan, but the house simply isn’t located in an area I’m interested in holding long term. It’s not a terrible area, just not one I’m focused on. I never planned to own this house myself… perhaps that was a mistake on my part.

So I’m now left trying to sell the house as-is to someone that is willing to put the time, money, and work into it. Wish me luck!

What areas to focus on for Detroit real estate investing

Travis

Every week, multiple times a week, I get asked the same question, “what neighborhoods or areas should I focus on for Detroit rental properties?”. I’m usually pretty frustrated with this question because I have spent literally hundreds of hours of my time driving, walking, researching, and getting my ass kicked throughout my Detroit real estate journey.

In short, it’s cost me a lot of time and money to discover the areas that I really like, the ones that work for my goals (more on that below). Like it or not, there’s just no incentive for me to give that information out left and right. It blows my mind how many people get offended that I’m not jumping at the chance to give away my hard work for free.

But at the same time… I get it.

I had the same challenge when I was getting started last April. In fact, I got really frustrated with the agent I started working with because he wasn’t directing me anywhere.

Detroit is vast both in size and extremes of the market. There’s a lot to figure out, and it’s pretty overwhelming at first. It took me awhile to truly understand that nobody can tell you what areas to focus on, because your goals, strategy, comfort level, etc. are going to be different than the person you’re talking to.

You can go downtown, buy an apartment, and likely have little to no cash flow but play the Detroit comeback, hoping for appreciation.

You can go super low end and play the slumlord game, buying homes for <$20k and doing little to nothing to fix them up but renting them out and banking the cash. If this is you, please never talk to me. I already hate you.

You can go to super hot neighborhoods like Cork Town or some of the not as hot (but still hot) ones like Bagley, University District, and East English Village.

Or you could go down the commercial real estate route. There’s plenty to choose from!

Beyond these choices you could flip, buy and hold relatively turnkey stuff, or go the BRRR route.

When you consider all of these options and strategies, the combinations really are endless.

But let’s say our goals, strategy, and philosophies are a perfect match. I’m still not going to tell you where I’m focusing my efforts. I’m all for helping folks out, but I’m not about hand outs.

So if you want to partner and figure out something mutually beneficial… I’m open to listening.

But if you’re looking to go it alone, please don’t expect me to do the work for you. I’m happy to help with specific questions, but asking “what areas of Detroit should I focus on?” is not at all specific.

If you have a tricky situation you’re in, a specific house you’re considering, etc. I help with those situations all the time, and I’m happy to do so.

Do the work, put in the time, or be ready to work with someone who already has. That doesn’t have to be me. I’m not even sure I’m ready to partner with anyone yet. But I can always help point you in the right direction if you tell me what you’re looking to accomplish and do.

The Great Greydale

Travis

It’s been a bit more than three months since I wrote about our first “full circle” Detroit rental property. We now have four that have gone full circle, that’s to say purchased and refinanced (technically delayed financing). But I’ve been waiting to write about each one until they are stabilized with a solid tenant. That usually takes a few months.

Our property on Greydale Ave. was the first house we offered on way back on April 19th of this year, but it didn’t close until July 11th! The closing was delayed multiple times because the seller lives in France and there was a lot of work to do getting documents through the Embassy.

But the house was worth the wait. It’s a beautiful 1,800 sq. ft., brick Tudor that ended up having one more bedroom than we thought it had. I love the house and the location. It’s a stone’s through from a newer Meijer, a lot of other conveniences, and one of the Detroit police stations. There’s a community center and park half a block away, and the house is in fantastic shape.

That said, it does need a roof in the next 1-2 years and the windows will need replacing eventually. Those are some hefty expenses. But there was also a clear value add here. Let’s take a look at the data:

By the numbers

The house was initially listed for $55,000 on the MLS. We offered $45,000 and it was accepted almost immediately. That made me nervous. Knowing what I know now, I’d have happily paid more for the house. But back then, this being our first purchase and first home we’d ever looked at, I really wasn’t sure if it was a great buy or not.

Here’s how the final numbers broke out:

  • Initial purchase price: $44,000
  • Closing costs: $803.00
  • Property taxes: $1,106.56
  • Closing credits (prorated rent & security deposit): $1,224.52
  • Initial cash invested: $44,685.04

You’ll notice the purchase price listed here is $44,000 rather than the $45,000 our offer was accepted at. We asked for a $1,000 credit for the delay in closing and received it without issue.

The home appraised for $48,000 which was lower than I’d expected. But seeing as it was still higher than we paid for it I wasn’t too disappointed.

We were able to take out 75% of that value immediately, up to our total purchase price plus closing costs on a 30-year mortgage at 4.99% interest. Here are the quick numbers on the mortgage:

  • Loan amount: $36,000
  • Closing costs: -$2,035.75
  • Other costs: -$618.35
  • Payoffs and payments: -$137.10
  • Closing costs financed into the loan: +$1,083.40
  • Total cash received at closing: $34,292.20

So all said and done we were left with $10,392.84 in the deal. But that doesn’t include the rent we’ve collected since then, rehab expenses or mortgage payments.

Here are those numbers:

  • Rent collected: +$4,160
  • Total rehab expenses: -$300
  • Mortgage payments: $386.08

So as of today we have a total of $6,918.92 in cash tied up in this deal. Here’s a look at all the above data in chart form:

Raising rent

You’ll recall the tenant was paying $730/month when we purchased the home. This is pretty low for the area, especially considering the size of the house. I knew we’d be able to raise it.

The existing tenant is section 8, and we almost immediately put in a request to have it raised. They require 60-days notice. Our request was approved for $900/month which did up the tenant’s portion from $166/mo to $321/mo but I spoke to her beforehand, and she said she’d be comfortable with it still. That was important to me because she kept the house clean and tidy. I didn’t want to lose her.

So we collected two months of rent at the $730/mo rate and the last three have all come like clockwork at $900/mo. Our tenant hasn’t ever been late with her portion. She’s fantastic.

Not really rehab, rehab

As previously mentioned, the house really didn’t need any immediate work. That said, I noticed the tenant did not have a washer and dryer. She’d been living there a couple years, too. I saw this as a great opportunity for some good will, especially with the rent hike.

When I asked the tenant if that was something she’d like, she was super excited. It cost us $300 for a used set, delivered, and installed. That’s a win-win in my opinion.

Mortgage and monthly expenses

Our monthly mortgage payment is a whopping $193.04. I’m pretty sure I could go panhandle for that if it came down to it.

Now, that does not include our property taxes, because we don’t escrow that. But that’s only a little over $100/month on average.

We also have property insurance which runs $45.70/month. That puts our grand total for fixed expenses at about $350/month. That leaves $550/month to set aside for repairs, capex, and cash in our pocket. Not bad.

Most folks I talk to that don’t own property in Detroit site the “extremely high” taxes and insurance. They’re surprised when I share mine with them. As a percentage of the home’s value, taxes are high, sure. But as a percentage of monthly rent, it’s not at all bad.

Conclusion

Knowing what I know now, I’m extremely happy I ended up following through with this purchase. Again, it was our first, so I didn’t yet know what I didn’t know.

I don’t expect us to truly start turning a profit from this house for 2-3 years due to the roof and windows that will need updating. But that’s really true for all the houses we’re buying.

Houses in Detroit have been neglected for years, if not decades. There’s a ton of delayed capex that needs to be addressed with almost any purchase. I’m well aware of that and have a long-term mindset. So it doesn’t bother me. And I still firmly believe it’s a great time to be bullish Detroit. We’re going to look back in 5-10 years and wonder how we bought such great houses for so cheap.

The first eviction experience

Travis

Kaitlin and I have been busy with our real estate endeavor. Perhaps too busy (more on that another time). There have been a lot of positive experiences, but there’s also been some tough lessons. This is the latter.

I recently wrote about our first “full circle” Detroit rental property. We purchased this home with an existing tenant, and if you read both of those posts I was hopeful that we could get the tenants back on track. They had a history of late rent payments and, I’d later find out, illegal water usage and possibly (I’m still figuring this one out) illegal gas usage, too.

We managed to collect two months of rent, but only after having to send a 7-day “pay or quit” notice. We weren’t so lucky the third time after some text back-and-forth with the tenants resulted in them replying “OK” after I finally stated we’d have to start the eviction process.

What followed was a nearly 2.5 month process of getting the tenants out of the property. For all you hopeful landlords out there, here’s the timeline of events:

  • September 6th: 7-day Pay or Quit notice sent to tenant after failing to pay rent by their grace period (the 5th)
  • September 13th: Tenant did not pay or move out. We hired a lawyer to send a Termination of Tenancy Notice, giving them until October 15th to move out. The cost for this was $75.
  • October 16th: Tenant still hadn’t moved, and we filed a court case to have them evicted.
  • October 23rd: We were given a court date for October 30th.
  • October 30th: The tenant appeared in court, and we received a judgement. The tenant agreed to move out by the end of November 12th.
  • November 13th: I showed up with a locksmith to regain possession of the house.

Now, that was our timeline and order of main events for this eviction. But they’re all different. There were a lot of juicy details that went on between these bullet points.

Early attempts at re-possession

Initially, I was trying to coax the tenant to move out early. The woman called me on September 30th, crying uncontrollably. She didn’t ask for anything beyond another week to move out. It was easy enough to grant, considering we had zero power at this point beyond waiting for the legal process to take root. But I played it off as if there was something imminent that would force them out of the home, and told her that I could wait one more week as long as she kept me updated. She promised she would.

It later became pretty clear this was all an act, and she was working with her husband (who was always much more aggressive but also wasn’t on the original lease) behind the scenes. I was texting back-and-forth with the tenant that same day (Sept. 30th) when her husband called me to say,

“One more comment from you and I’ll burn the mother fucker down.”

He was clearly referring to the house, and hung up before I could get a word in.

The tenant texted me on October 8th, saying they had no place to go. I sent her a list of shelters in the area. Her husband almost immediately started texting me telling me he, “I go to shelters you will see it on the news” and declaring that I need my “ass whipped” and that I should “come by and get one”.

I didn’t respond.

An attempt to stall

It was another ten days until I heard anything from the occupants. The husband texted me on October 18th saying, “Did you put in for the eviction yet, if not I can give you a date on when she will be out”. When I replied that the wheels were already in motion he simply said, “ok see you in court”. I gave him the thumbs up emoji 🙂

This was clearly a ploy to try and stall the legal process so they’d get more time to freeload in the home. Although this is our first rodeo, we’re not that dumb.

A guessing game

Once the court gave the November 12th deadline for the tenants to vacate, it became a bit nerve wracking. Clearly, the tenants weren’t very response or helpful. It’s not like they were going to keep us abreast on their progress (or lack thereof). So I started driving by the house to try and get an idea of whether or not they were still living there.

The problem is, if there’s any evidence that the tenants are still in the home, we’d have had to proceed with the final step of the eviction process: having a bailiff come out and forcibly remove them from the property. This is apparently very expensive. Friends have told me it can be between $2,000 and $4,000. Obviously, it’s something you want to avoid.

So I drove by the home on two different occasions: once in the afternoon and once at 9pm at night. I didn’t feel comfortable getting out and poking around the house due to the aggression the tenants had displayed. Instead I looked for things like lights on, activity around the house, or a car in the driveway (it was always there any time I’d been there previously). There was no evidence of any of this stuff.

Kaitlin drove by one morning at 9am and even got out of her car, prepared with a back story on why she had the wrong house if someone happened to open the door. She peeked through the windows and could see furniture, their dining table, etc.

That’s what really got me anxious. Our lawyer told us that if there’s anything left in the house we’d have to proceed with eviction unless the tenants confirmed they were out and the remaining contents were garbage.

Making contact

On November 8th, just four days before the court ordered deadline, I texted the husband asking if he had his wife’s current phone number. It changed constantly. No response.

I texted the next day, this time from my personal cell number (I used an app with a local Detroit number for all my tenant correspondence). But I used a different tactic. I told him that I still had their security deposit (true) that I’d like to return (not at all true) “once we have possession of the house”.

An hour later, after no response, I tried calling him from my Detroit phone number. I was shocked when he picked up. But I was even more floored that he was calm, level headed, and said they’d be out by the 12th. I wouldn’t have believed him if he hadn’t quickly said, “or else the bailiff will be out and nobody wants that”.

Later that night he responded to the text on my personal cell, asking when a good time to meet would be. He wanted that security deposit! I kindly told him there’s no need to meet, and I’d forward it to him after I took possession of the house on the 13th and he sent me an address to mail it to. “OK”, he said.

Getting the house back

On the morning of November 13th I showed up with a locksmith to change the locks. We entered the house, and made sure it was empty. I then texted the tenant, asking him to confirm he’d moved out and the remaining stuff (there was a lot of it!) was garbage.

He confirmed all the above, and sent me a forwarding address. Somehow he thinks he’s actually getting that security deposit back!

Now we’re left cleaning up the house, doing some updates, and finding a new tenant. Here are some photos of the condition of the house when we got in:

Fortunately, you aren’t able to smell the terrible odors. There was animal (we think cat) feces in a number of rooms and a stench of urine. Food was left in the refrigerator and freezer, but the power had been out… likely for weeks. We’re pretty sure they’d been out of the house for awhile and simply didn’t feel like letting us know.

There are plenty of more pictures, none of which truly due the situation justice. But you can see them here if you’d like. Luckily, we had a great crew help us get everything out and to the dump. We also demo’d the kitchen and bathroom floors. Total cost to have all that done was $1,112.40 — ouch.

Here’s what the house looked like fully cleaned out.

The takeaway

Beyond learning about the eviction process, our biggest takeaway from this is simple: If you purchase a home with a questionable tenant in it (most inherited ones are), start the process of getting them out of there immediately!

I naively thought we could get the tenant back on track and paying rent on time. Too often I give people the benefit of the doubt. In the end it didn’t really cost us much more money (we would have gone through the same timeline regardless), but we’re now dealing with turning over a home during winter. That’s not ideal.

Next steps

Now that the house is cleaned out we’re having it deep cleaned. The house is still extremely gross and needs some love before we can even think about painting, etc. That’s going to cost us another $400 and is scheduled for Wednesday.

Next, we’ll be tiling the kitchen and bathroom floors. Once done we’ll be getting the bathroom tile and tub re-glazed, refinishing the hardwood, painting, and knocking out a few small items around the house (hanging doors, securing handrails, replacing a downspout, etc.).

I wouldn’t be surprised if it’s another month before the house is fully ready. The good news is we expect to bump the rent a fair bit from what the previous tenant was wasn’t paying.

We’re looking forward to picking our own tenants and hopefully not dealing with this situation for a good while.

Thankful for evictions

Travis

Late yesterday afternoon I received a call from an eviction attorney we work with. They’d received “four messages in the last 24 hours” from a lawyer representing a client that occupies a home we purchased in last month’s Detroit tax auction. I left a note at the house just after we won the auction. I simply stated I was the new owner and would be happy to try and work something out for them to stay if they wished. My name and phone number were included.

I didn’t hear anything for two weeks, so we filed a 30-day termination of tenancy giving the occupants 30-days to move out before court action. That 30-day period expires on December 2nd.

I didn’t hear anything… until yesterday.

The lawyer had a sob story about how the occupants have lived there for 39 years, went through divorce, got scammed by someone claiming to help her purchase the home at auction, etc. While I sympathize, I ultimately don’t care anymore. Everyone has a story.

Still, I was willing to work with them. The lawyer asked if we’d be willing to sell the house back to her. That’s a hard no, because we purchased the house with the intent of keeping it for at least 10 years (likely longer). I told her we’d consider signing a lease and allowing the occupant to rent, but I quickly realized that was likely not going to happen when she asked if we’d consider “$400 or $450” for rent.

I literally laughed out loud.

I told her we’d consider it at $800. But the reality is this person hadn’t paid her property taxes for years. I don’t know how long Detroit let’s people go without paying, but I know it’s 3+ years. How would she afford to rent the house if she wasn’t paying her ~$1,000/year in property tax?

The lawyer said she’d “call me right back” because the occupant was blowing up her phone. It was hours later before I heard from her again, and she simply said she felt that this was outside her expertise and she was terminating her representation of the occupant.

Yes, it’s Thanksgiving. Yes, it sucks to be getting kicked out of your house this time of year, especially after living there for 39 years. And I almost feel bad. But I remind myself that I didn’t put the current occupant in this position, and I made every effort to try and work with her.

It hasn’t been 6-7 weeks (when I first wrote my note) that they were aware they were losing their house. They’ve known this day was coming for at least a year, but really more.

It seems every day is an adventure in the real estate business, and I love that about it.

Happy Thanksgiving.

LightStream crushes hard money

Travis

Back in June I wrote about how Stripe is out competing PayPal in just about every way imaginable. But the post primarily focused on their new “Advance” product which is now re-branded as “Capital”. It’s a fantastically competitive offering for businesses looking to borrow money.

Turns out, LightStream is similarly competitive in the world of personal loans.

After my most recent rental property buying spree, I found myself a bit low on cash. We had enough in the bank to do some cosmetic improvements on maybe one house, but that’d leave five properties that I wouldn’t be able to rehab any time soon unless I did one of two things:

My first thought was to get a private loan from what is referred to as a “hard money” lender. This is essentially just a person that has extra capital to loan to flippers. These loans are short-term in nature, usually only 6-12 months because the idea is that you use the money to rehab the property and then either sell it or refinance out of it, paying back the loan when the transaction completes.

The problem is these loans are very expensive, usually 12% – 15% interest or higher. I spoke with a fellow investor that also loans, and he actually suggested I do not take hard money for several reasons. He cited the high cost and the added pressure of getting a rehab done quickly when I was also attempting to juggle so many others.

Going the delayed financing route

So I considered my second option. The five houses that need significant rehab were all purchased in the last five weeks. To get a conventional loan that allows me to pull out maximum value I’d need to wait a six-month seasoning period. But if I wanted to put a loan on any of the properties now, I could. I’d simply be restricted to a loan that is equal to the purchase price plus closing costs (assuming it appraised for enough to do that). This is referred to as delayed financing.

It’s easier to see as an example.

Let’s say I purchased a home for $37,000. I know if I put $45,000 into rehabbing it it’d be worth $115,000. So I decide to do just that, and I complete my rehab in two-months.

Great! Now let’s get a mortgage on it and get that cash out.

The house appraises as expected and I’d get a loan for $86,250… $4,250 more than I put into the house. Fantastic!

The only problem here is that I’d need to wait four more months to do this. It’s simply the regulations tied to conventional loans. And remember, if I’m using hard money to get this done I’m paying an extremely high interest rate while I wait, eating into my profits.

But let’s say I decide I don’t want to wait six months. I could take the loan right after rehabbing it and pull out my initial purchase price of $37,000. This is called delayed financing, and it’s not ideal in a situation where you put a bunch of money into rehab.

That said, it could be advantageous in my current situation. Let’s say I do absolutely nothing to this house and it appraises for $50,000. This isn’t out of the question considering I purchased it off-market and surrounding homes have sold for $110k – $125k. A bank would loan 75% of that value, or $37,500, but I’d only be able to pull out $37,000 because that was my initial purchase price.

The problem here is I’d still be left having to rehab the house, sinking another $45,000 into it that I wouldn’t be able to get out for six-months (assuming it’s worth the cost to refi it again). But it would give me some working capital to get to the rehab on the other four properties.

Exploring a personal loan

But there was potentially one more option: a personal loan through a more traditional lender. A friend had just told me about requesting a $25,000 loan from LightStream to put toward renovation expenses on a fourplex he recently purchased. They actually approved him for $50,000 at a 6.89% interest rate on a 144 month term. That’s fantastic.

So I figured I’d give it a shot. The application was insanely quick, taking me just a few minutes. The next day they sent a request for some documents via email. I uploaded them in another few minutes and waited. I had an answer that same day… the exact same terms my friend was granted.

It’s hard to say no to terms like that. When the next best alternative is a sacrificial delayed financing on one of the properties or an expensive hard money loan, it becomes extremely attractive.

It will be interesting to see if more real estate investors start leaning on LightStream (or similar products) for short term funding. The terms are hard to match. LightStream is apparently a division of SunTrust Bank, but something tells me the product was likely acquired rather than built internally. But I haven’t dug into that.

Regardless, props to a bank (I hate banks) for making a move into this space and creating such a seamless experience. I never even had to speak with a human, and that’s always a plus in my book 🙂

Three houses, one week

Travis

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! 🙂

Buying houses in the Detroit tax auction

Travis

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.

A Puddle of Piss and Kicking Soda

Travis

My oldest son, Tucker, has been potty trained since he was twenty-two months old. We read a potty training book and set off on our mission. It was an intense week and a half, but he’s had very few accidents since. I can’t even recall the last one. He turned three in June, so he’s officially nearly been potty trained longer than he hasn’t.

Except when he’s sleeping.

If/when he naps we always put a diaper on him. This is sheer laziness on our part. We could have “night trained” him while we were doing his potty training. We could have done it any time in the last eighteen months.

I told myself (and Kaitlin) several times that I’d have no problem waking up in the middle of the night, taking him to the bathroom, and pushing the wake-up times back a little bit each night until he learned to hold it. But once your second kid starts sleeping through the night, it’s hard to give up those precious full nights of sleep.

It’s been 109 days since I’ve had a soda.

I’m not a coffee person; I never have been. I don’t need a jolt of caffeine to get me going in the morning. But it wasn’t too long ago that we weren’t getting anything close to a full night’s sleep. It took its toll, and I started finding myself feeling drowsy mid-day.

While we don’t own a coffee maker, Kaitlin has always enjoyed soda so it’s usually around the house. She generally used it to perk up, but sometimes she just craved it. I followed suit, and before I knew it I was drinking a soda every day, sometimes two.

It got the point where even if I wasn’t drowsy I’d start to crave it. Some days I was drinking it simply for the taste(!), choosing it over water because I wanted “something with flavor”.

I kicked this habit, cold-turkey, 109 days ago. I didn’t quit because soda is loaded with chemicals and terrible for my body, even though I knew so and wanted to. I didn’t quit because I wanted to lose weight. We’ve always ever drank the zero-calorie stuff, and if anything I could afford a few extra pounds. I quit because I realized I didn’t need it, and I was using it as a crutch.

If I’m drowsy during the day, I should be getting more sleep. Drinking caffeine is treating the symptom, not the problem. If I wanted something with flavor I should find a healthier option. I now treat myself to a kombucha every other day or so (GT’s is the best).

I used to beg Kaitlin to give up her soda addiction and stop buying it. I figured if it wasn’t in the house I’d be able to quit. Oddly enough, in the last couple months we’ve hardly had any soda in the house. Kaitlin has drastically curbed her consumption.

It wasn’t long ago that we’d have a couple twelve packs of soda in the garage, waiting to be consumed. Our bad habits were fueling one another’s. Every time Kaitlin would go to the garage to get one she’d ask if I wanted one (and vice versa). Good luck turning it down!

Tucker came downstairs a few days ago after his “nap”. He didn’t sleep at all, and he admitted to doing so. That’s fine, Kaitlin and I needed a break regardless.

Tucker stood in the kitchen with his legs spread wide, donning just a diaper and said, “DADDY LOOK!!!”. He began to jostle his body up and down in an effort to make his (very wet) diaper pull away from him and spring right back up into position, pull away, spring back, pull away…

He giggled with pride while I chuckled in amusement. But later I realized, HE’S DRINKING THE SODA FOR THE TASTE!!!!!

He didn’t sleep during his nap. He peed in his diaper because he’s used to it and was too lazy to take it off, leave his room, and go to the bathroom. We decided then that Tucker was going to kick his diaper habit cold-turkey.

The last couple days we’ve been preparing. We picked up a couple extra sets of bed sheets, prepped Tucker on what was going to happen, and last night we put him to bed sans diaper. We knew he’d be waking up in a puddle of piss. But that’s ok. His body will adjust; he’ll figure it out with some help from us.

I’ve been thinking about these two things a lot lately (soda and diapers… what a combo!) and how these situations likely apply to other unhealthy or unnecessary habits. Things we do out of seemingly necessity that eventually turn in to actions of convenience.

I’ve also found that it’s far easier for me to break a bad habit (e.g. stop drinking soda) than it is to form a completely new, good habit (e.g. workout 3x/week). And I wonder if that’s simply because I have too many bad habits crowding out the potential for good ones, but that’s for another post.

For now I’m happy conquering my soda addiction, and I think I’ll stop counting the days. After all, I’m not still keeping a tally of how long it’s been since I’ve wet the bed now am I?