Forum Replies Created
All,
I have to respectfully ask (and I have been nothing but respectful) that if you want to discuss this, contact me in person. I'm not going to be attacked on a forum for something that I know works very well for my investors, and for many other investors as well. Negativity gets you nowhere in business, and I refuse to acknowledge negativity on a forum. Contact me personally, then I have no problem discussing my business, how I do it, and how I make the claim of no vacancies, no major repairs, etc. No one has even bothered to ask how I actually do it, so at this point, I'm walking away from this discussion. I have no time for this.
<moderator: delete language> I stand by what I have said.
I will not be responding to posts on here any longer, as I have much better things to do than to argue with a bunch of people who are nothing but negative. If you want to discuss this further, send me a private message and I will be glad to do so on a personal level.
Dennis,
None. But that is not my business. You may be in this for the cash flow, and that's great. I don't have any interest in being a landlord, honestly. Again, nothing but respect for you and your experience. We just disagree on this, and that's fine. A disagreement doesn't mean that we can't have a drink, and talk about business anyways, and maybe one day we'll have the ability to do so.
I wish you much success with your turn key properties in the suburbs. I'm always open to having our buyers look at properties in the suburbs. In fact, I'd love to talk with you about that as I have people interested from all over the world, and if the numbers are better in the suburbs over all, perhaps we can do business together. ROI is ROI, and if your numbers above are accurate, it seems like a potentially great fit for the people we are working with.
Do you partner with others who have buyers to sell your turn-key properties to? What cities do you work in mostly? What is the average acquisition cost, and how do the numbers play out there? Fill me in and maybe we can work together.
If nothing else, I do appreciate your honesty.
One thing that I tell every client who purchases a house in Detroit is to have a reserve account. So please don't get me wrong here. I am more than up front with buyers, and I go out of my way to make them happy. If I have to replace a tenant because of a bum deal on the one that was placed there, I have no problem doing it at no cost. You seem to have misunderstood me and how I operate, and that's understandable given the market I work in. I am extremely client focused. I am a long-term thinker. I'd rather make a lot over a long time than almost a lot quickly. That is my view on all of my businesses. You build a good reputation, you do things the right way, you build a solid foundation, and you grow both your business, and your reputation. I have no doubt that is exactly what you have done, and I applaud you for it.
Again, I recommend a reserve to every client. It just makes sense in any investment, and it's the single biggest error I see made in Detroit real estate investing (and investing everywhere, I would assume).
I stand by my numbers, and stand by the city of Detroit as a good opportunity. As I said before, I do though understand why you do not like it. So much of any investment comes down to working with the right people though, and that is what we focus on. Take good care of people, and in the long run, they will take good care of you. Good words to live by, and what I intend to continue building my reputation on.
Have a good evening.
dennisfassett wrote: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 moveThe 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]Dennis,
I know you well. I've read your blog. I've read your posts on Bigger Pockets. I'm aware of what you have done with Great Lakes Investment Fund. I also know many people who also know you.
I know you are extremely negative about Detroit, and about Section 8, and that's fine. I think you might be surprised however how many people you might respect believe that this is a good investment.
Also, I never said that over 5 years there would be no repairs. That would be silly. I simply said I'm giving the numbers based on what I know. Repairs are necessary. But they are nowhere near as common as you think they are.
I have also placed many tenants myself. I have worked my tail off to make sure that there was not a situation where a tenant moved out and we missed a month. Does it happen? Sure. However not very often when you have things set up the right way, and work your systems properly.
Gentleman, every business is built of processes. Detroit real estate investing is no different. If you don't believe that it can work, that's fine. But again, I respectfully disagree, and wish you well in your endeavors.
I respect your opinion, and have respect for your experience, and I understand why you feel the way that you do. You did however answer my question. You do not currently own anything, and are not currently involved with the Detroit, MI USA market. I understand why you left. Many people did for that very reason. That's also a big reason why are having the success that we are. In every bad situation, there are always good things that come from them. Companies like mine are one of a kind in Detroit, and I know that. But, again, I won't be able to sell you on Detroit, and I have no interest in trying to.
What I will tell you is that I don't buy properties from HUD, I almost never buy properties from an asset manager, and our properties do perform as I say they do.
I said it before and I'll say it again…. if you really want to see what our process is like, what our returns are like, and how we take care of our clients, buy a property from me and I will show you. Otherwise, we'll agree to disagree.
Have a great week.
1) I will say it again, we do not have vacancy issues. Ever. Period.
2) I will say it again, we do not charge "letting fees". They are included in the purchase price.
3) When I buy a property, the copper is usually gone already. We replace it with PEX. Problem solved. All we do is buy and rehab properties in the CITY OF DETROIT. We've seen it all as far as theft, and have gotten pretty good at keeping that low. We also don't sell the property to an investor until the rehab is complete anyways, meaning an investor doesn't pay for that kind of thing anyways.
4) All of our properties are sold via WARRANTY DEED. There are no issues with tax liens whatsoever including water bills. Period. End of story. If you purchased properties and got stuck, you obviously don't know how to buy well and do good research about the properties you are purchasing in the city of Detroit. There is a strict process for how to do this correctly.How many properties do you currently own in Detroit? If the answer is "none" than with all due respect, please don't comment on what is realistic and what is not. Are there issues? Yes of course. You are heavily exaggerating them though. This market comes down to two things: 1) Buying in the right neighborhoods. 2) Having the experience to know how to rehab without theft, how to rent quickly, how to consistently have a new tenant flow coming in, and how to manage properties effectively. We have over 25 years of experience on our team doing exactly that in DETROIT ALONE. I'm pretty sure we know what we are doing.
Lastly, yes, we do achieve these numbers. If you don't believe me, buy a property from me and I'll prove it to you.
Enjoy your day.
These homes have all been rehabbed to "like new" status. Very few require any major repairs whatsoever, particularly in year one. There are currently 8,000 families in Michigan approved for Section 8 housing (rents paid for by the government) who do not have Section 8 approved homes to move in to. All of our homes are Section 8 approved. Quite frankly, our clients homes do not ever have a problem sitting vacant. If a tenant moves, they give us 30 days, and they are usually replaced within 1 week.
As far as letting fees, they are included in the purchase price.
I could make projections about $XX is how much will be needed for repairs, but I prefer to just give actual numbers. If a home requires a repair, since most have new furnaces, new roofs, new hot water heaters, etc, they are generally small things that are less than $100.00. It would take an awful lot of small repairs to eat into $8195 NET annually to make this not worth it. Even if something major happened, and you had a $4,000 expense, you are still ending up at 10% NET at the end of the year.
Again, that is worst case scenario, and I haven't seen that happen yet. Also again, I prefer to just stick with the numbers that I can accurately predict, which are the ones above.
Richard,
We only deal with cash purchases, so the Lvr doesn't come into play with us. Out of curiosity, what is the average entry price in the UK?
Nathan
