Nathan –

A couple of things.

First, I don't know you but I have a tremendous amount of respect for your partner Mike and his wife Nanette.

Second, "negative on Detroit" is an understatement. I hate Detroit. And it comes from experience. You may not be aware of it but I own a 23 apartment building with some partners in what's considered one of the "best" neighborhoods in the city. It's done ok, but the problem is, we're five blocks from a war zone. And that's the problem with every one of the "good neighborhoods" in Detroit. Rosedale Park, Indian Village, the University district,and the rest are ALL only blocks away from war zones.

I'm sure you'll agree that being a long term property owner in Detroit, and dealing with the corrupt and incompetent government and courts, gives me a unique and direct perspective on the city. And that perspective is what has lead to my decision to never invest another dime there. Of mine, or from clients that are trusting me with their money.

Third, I can count on one hand the number of people that I know that actually own rental houses in Detroit. Only one is still buying – the rest are just trying to break even after getting hammered on property values and declining rents.

The others that I know who invest there are doing one of two things – either buying, rehabbing, and selling on land contracts to end buyers, or they're doing the turn key thing there. So in terms of Detroit being a good investment, it seems to be for the people selling turn key rentals. But I don't see any of the people doing turn key rentals there actually keeping and OWNING any rentals themselves, like I am in my area.

Like I mentioned before – I'm putting my money where my mouth is. I will not sell a property that I wouldn't want to own and keep myself.

Now let me ask you – how many single family rental houses do you own in Detroit? Not counting any turn key projects you have going.

Dennis Fassett
Suburban Turn Key
+1-248-971-0764
[email protected]

Honestly – I'm SO tired of hearing how wonderful Detroit property is.

First of all suggesting that over a five year period a rental house, even if it's "fully rehabbed", will have zero repairs and maintenance is ridiculous.

Of course something will happen that will need repairs. These are rentals – in DETROIT for God's sake. And probably Section 8 renters as well. And even if somehow the house escapes without needing repairs, a prudent owner will set aside an amount each month into a reserve fund. I own all of my properties in the suburbs and I do that. It's even more important to do that in Detroit.

This doesn't even consider the lunacy of spending $10-30k rehabbing a crappy house in Detroit and then putting a renter into it. Why not just flush the money down the toilet? All you're doing to the person that buys the house is guaranteeing a high rehab bill when the property turns over to bring it back into the same condition as when they bought it.

Not a good strategy.

Second, to suggest that a house over a five year period will have zero vacancy expense is also ridiculous – and misleading.

I mean, how does that work? Seriously?

I've owned suburban rental houses now for seven years. I've had section 8 tenants and I've had non-section 8 tenants. And my record tenant stay is four years. Not bad in my book. So my question is, what's your formula for getting all your Section 8s to stay for the five years you're projecting?

And there is no way you're going to convince me that you can turn properties so fast that you don't miss out on any rent.

Third – because of #1 and #2 the ROI estimate that you project does not reflect reality.

If you simply add $50-100 per month for repairs and maintenance and/or a reserve fund, and then accurately assess annual vacancies and add that in as a reserve as well every month, then the ROI for detroit rentals drops down into the 9-11% per year range.

Which is FAR below what the riskiness of the investment demands.

And that doesn't include these developments:

• the best property manager I know just pulled completely out of detroit. Because he was tired of having his rent collectors shot at. He personally was sick and tired of having to wear his kevlar vest every time he even had to briefly visit one of the properties he managed in the city. Because of this increased danger over the last 12 months, many property managers are increasing their rate in detroit from 10% per month to 15-20% per month. That's going to be a huge hit to the cash flow of those houses.

• the section 8 program is changing drastically – and not for the better. I used to be a fan, but I have stopped taking section 8 tenants 9 months ago. And so have just about every single one of my colleagues here in metro detroit. The only people that still seem hot on taking them are the people selling turn key properties to people from out of the area. I won't have them in my properties, so I won't sell a suburban property with one.

The fact is, properties in the suburbs make much better rentals over the long term than properties in Detroit. Suburban properties cost 15-20% more, but they generate 50% more cash flow.

You buy in SIGNIFICANTLY nicer areas
You buy SIGNIFICANTLY nicer houses
You can charge higher rents
Tenants stay longer
You have less vacancy time
You have less damage when tenants move

The result? More cash flow. Isn't that the name of the game?

As you might expect, I have a dog in this fight, as I sell SUBURBAN Turn Key properties in Metro Detroit. But instead of just being a salesman, I (and my partners) also own 19 properties ourselves in the areas we are recommending. So we're putting our money where our mouth is.

I created a free 6 Step Guide to Buying Turn Key Rentals in Metro Detroit to counter some of this misinformation.

If you'd like a copy, head over to Suburban Turn Key and grab a copy. Beware – I don't pull any punches. Owning in Detroit is not pretty.

Drop me a line if you'd like to discuss.

Dennis Fassett
Suburban Turn Key
+1-248-971-0764
[email protected]