If you missed the inaugural meeting of TEDxDetroit, you missed something big. It was a meeting of minds from Michigan that talked about positive change, innovation in business, and good things going on in our state. Know what was missing from the meeting? Negativity, doom and gloom or any talk about something not happening. We need more positive ideas and people from Detroit and Michigan!
Our state and city have been through some challenging times and I know it’s not always easy to see past that. Dwelling on negativity, however, will just perpetuate a down economy and bad things. Focusing on positive change and what we can do to make a difference in our city and state will create the positive change that we need. I’m not talking about just saying that we’re in the best economy ever and that everyone can be millionaires just by saying that they are, I’m talking about actually focusing on positive change that you can create.
What about Dawn White, co-founder and President of Accio Energy (a Michigan based company that has multiple patents for wind energy) and her invention of wind energy without the blades (i.e. not a traditional wind turbine with loud moving blades)
TEDxDetroit wasn’t only about business and entrepreneur speakers; it was also about local performances. My absolute favorite was this poem (and I wasn’t a fan of spoken poetry) written and performed by D Blair “Detroit, While I was away” (found on Positive Detroit)
As Ghandi so eloquently put it, “Be the change you want to see in the world”. Michigan needs positive ideas and positive people, is that you?
Investors in Detroit have noticed for a couple of years European investors coming to the market for great bargains on investment real estate. It seems that 2009 is no exception as we have seen more European investors than ever purchasing cash flow investment properties. Whenever I tell someone this they invariably ask me why because many of them aren’t involved in real estate at all or they pretty much think that investing in real estate is the same here as everywhere.
Detroit real estate offers excellent bargains that are very difficult to find in the rest of the world. Our price points are very low (around $40,000 for purchase and rehab) and these properties still rent out for $850-$950 a month. It doesn’t take a genius to figure out that’s good for cash flow. If you add into that the weak dollar, which gives European investors another discount when purchasing our properties with the conversion from Euros.
Most of the European investors we talk to are investing for the cash on cash return and for the long term prospects of the investment. Unlike many U.S. investors, they aren’t looking for the “get rich quick” investment and are willing to invest in a solid property for the long term. This is going back to the way real estate investing used to be and I think it’s a great model. With Detroit foreclosures you get the best of both worlds. Monthly cash flow for a good cash on cash return and purchasing at 50% of the actual value of the house, which means great long term (10 years) prospects for value.
While there are some exception, for the most part European investor are finding successful real estate investors from Detroit so they can leverage their experience on how to create successful investment properties. Real estate investing is different than it is in Europe and Detroit is different than the rest of the United States or even Michigan. There are specifics in Detroit properties to watch out for like water, taxes, neighborhoods, specific streets, City requirements, ordinances, and other items. Working with a reputable Detroit real estate company will ensure that you know how to navigate through these. A good place for foreign investors to get more information is at our Detroit Real Estate International Questions page.
Our experience has been that more and more investors are coming to Detroit as it’s a great return on investment that doesn’t require a million dollars of investment capital. We have sold properties and made successful investors of European investors from England, Ireland, Scotland, Germany, France, and many other European countries. If you’re interested in investing check out our Detroit Real Estate site or leave a comment.
Detroit has great price points, excellent cash flow, and a tremendous return on your investment if you know what you’re doing. Too many times I see investors rushing into Detroit real estate because of prices without any knowledge of what they’re doing. They don’t work with anyone that has knowledge of the area and they don’t have any good contacts. They just figure that the prices are so cheap, it has to work. Well, I’m here to tell you that this just isn’t true.
The $1,000 Detroit House This is the single most frequent request I hear from investors. “I want to buy the $1,000 house that I heard on the news”. No you don’t and here’s why. Detroit has great prices but it has it’s limits. The $1,000 house is that price and still for sale for a reason. Here’s what I’ve seen with the $1,000 or for that matter the houses that are more than $1,000 but still cheaper than you usually see in Detroit:
They are in bad neighborhoods that are hard to rent, have very low rents, and have a high probability of vandalism and theft to the house.
They require so much rehab work you will end up spending as much as the other houses after fixing it up.
They usually have high taxes, back taxes or both.
I have seen people that invest in areas with some amount of success but for the most part I have seen them doing most of the work themselves, not fixing up the house to code, renting to anyone that walks by, knocking on the doors to collect rent, going to court often for evictions, and living close to the area. They may end up getting a good cash on cash return but they are spending a lot of time to get it.
The Great Looking House in a Bad Neighborhood I see houses come across my desk every day that don’t need much work, have reasonable taxes, and have reasonable prices. That is until you look at the location. Location is key in Detroit! You can have the best house but if it’s not in a good neighborhood, you will not be successful. Bad neighborhoods will leave you with a house that isn’t rented and will quite possibly be broken into and vandalized. This happens very rarely in the good neighborhoods. See our report on Detroit Investment Secrets for more on good neighborhoods.
The Great Neighborhood and Great House with No Contacts You must have great on the group contacts or be working with a company that has great contacts in order to be successful in Detroit real estate. Contacts like contractors, property managers, property security companies, mortgage brokers, insurance agents, and other critical contacts are a must. Make sure that anyone you’re working with has long standing relationships, documented processes, and a lot of experience working with everyone.
The Great House with High Taxes Taxes vary greatly from house to house, in the same neighborhood or even on the same street in Detroit. If you’re not checking taxes or taking them into account, you’re gambling with your investment. Taxes are our biggest qualifying factor after location. Taxes and location make or break a deal.
At Urban Detroit Wholesalers we take into account these factors and more in providing great deals to you. Don’t just take our word for it as we post all of the due diligence that you need to know on each of our houses. View our Detroit Foreclosures to see contractor estimates, a rehab checklist, public records, appraisals, pictures, video walk throughs and everything else you need to know to make a buying decision.
If you’re new to investing in Detroit, I suggest reading our Detroit FAQ (Frequently Asked Questions). If you’re investing from out of the country, we have created many successful investors from a wide variety of countries. Our processes and contacts insure that you will be successful investing from abroad. Read our International Detroit Investing FAQ.
Here you are on a real estate blog and you see a post about small business technology. If you’ve been investing in real estate for awhile, you’re anxious to see what I have to say. If you’re new, you might be wondering what I’m doing. When you’re starting out in real estate, and many experienced investors for that matter, you must treat your real estate investing like a business and not a hobby. To that point, I’ll dive right in.
Technology is critical for small businesses. You don’t want to go overboard with it and you don’t want to spend a lot of money. I’m going to show you a couple of products that are going to help in both of these areas. I might not get to everything in this blog so subscribe to our blog and check out the other suggestions coming soon.
Google Apps Standard Edition I’ll admit that I’m a little late to the game on this but I was waiting for it to hit the critical mass. A year or more before and Google Apps was not something that would have worked for what we needed. What I’ve seen lately, especially with releases this year, is that Google has a focus on organizations and enterprise software. While you might not be a 2,000 employee shop, what it means is that Google is taking what they’ve learned from focusing on the individual to their enterprise software. That’s good for small and large businesses.
Google Apps Admin Panel What you find signing up for Google Apps Standard Edition is that it’s free! You get to add up to 50 users to your organization through and administration panel. This is much more than we need but it’s nice to know we can still grow. The administration panel is a big differentiating factor from regular Gmail and Google Apps. As an administrator, I can actually manage the accounts and settings for each user.
Gmail Alright, this isn’t your grandma’s Gmail. This is email hosting to replace Exchange hosting, which is exactly what my organization did. You get 7gb of storage for the Standard Edition and up to 25gb for the Premier Edition (cost of $50/user per year). 7gb of storage is much more than you’re going to find at any exchange hosting companies, especially for the price. I was a bit skeptical at first but I’m sold on everything now.
For a small business, the switch to Gmail should come with more options, not less. You can configure this to work with your domain so instead of CoolREICompany@gmail.com or “sent on behalf of jared@CoolREICompany.com” you can work just like you do in Exchange as jared@CoolREICompany.com.
Gmail is an amazing tool. They do provide tools for you to sync your calendar with Gmail so you can continue to use a desktop email product like Outlook or Thunderbird but after I got it all setup to sync, I ended up just using Gmail. Gmail is such a great interface with so many features (far too many to list here) that it’s all I use now. It’s easier to use and easier to manage a high email workload with their archiving feature, easy use of labels, and their grouping of emails in threads (this one is the space saver). If I have a single email sent out to multiple people that we then reply back and forth on it 10 times, it shows up as one email instead of 10 in my inbox. I can easily open it up to see everything else. This is a huge productivity builder!
Google Docs This part of Google Apps replaces your Microsoft Word suite (Word and Excel) and puts it all online. You may wonder how these apps work online and I was definitely skeptical. Google delivers here with very stable apps that auto-save, which negates any Internet connection issues. This is definitely what you need for collaboration within or outside your company. Nothing else comes as close to making it easy to share and collaborate with others.
Some cool features include the ability to share any documents in a folder (new feature) with anyone or even make it public and the ability to make your spreadsheet easy to fill by your users. Do you make the spreadsheet easy to use by just sharing it? Well, I’m sure you know that spreadsheets aren’t always easy to fill by non-spreadsheet users. That’s why Google offers a very easy to create form that integrates with your spreadsheet automatically. You can literally have the form created with a website address for users to submit their answers to the spreadsheet easily in 10 minutes. This is great for an event sign-up or a questionnaire.
Google Calendar This calendar does a great job of making it easy to use, some cool new features, and the look and feel of a calendar that everyone can instantly use. This is great for events as you can chose to have people share comments and see who else has accepted. In this one way they’ve done a better job than online invitation companies like eVite who have been doing just that for 10 years. Google calendar has all the options you need.
Google Contacts Although this is still listed in Beta, it functions very well. You can upload your existing contacts, create groups, and this all integrates with your calendar, mail, and Google Talk.
Google Talk When I was an IT/Business Consultant, I used chat all the time for quick questions/answers. Lately I tried using Skype but it was using up all the resources on my computer, which made it pretty unusable. I just recently installed Google Talk and I have to say, this is the best chat software I have used! It’s fast, uses almost no resources, and it’s intuitive. I can video chat, call people, send voice mails, and even send SMS messages. This all integrates with my Contacts so it already has all the information.
If it sounds like I’m a salesman for Google Apps, I’m not but I easily could be. What makes a great salesman is when they are selling something that they truly believe in and I truly believe in Google Apps as a solid product. They provide the most intuitive interfaces that I’ve ever worked with, the performance is great, and they provide everything I need for free. This is definitely a good base to build your real estate empire!
Do you have a sense of urgency with your investments or are you taking the lackadaisical approach that most people take with them? Well, I think I looked at my 401k last year and it was down. FAIL. If you haven’t been around, the days of not actively creating or seeking out new investments and methods is gone. Your 401k will NOT be all you need for retirement. Our last meeting had a great speaker and topic on the Infinite Banking Method. Does anyone think that Scott is sitting back and letting someone else manage his retirement? I think not.
Be active in your investments and take action on them right now. Be accountable to yourself. There are great investments everywhere right now and most people are just sitting on cash because they’re scared of losing it. Well, sitting on anything that’s not making at least 6% (conservative) right now is a losing proposition with inflation. Add into that your opportunity cost and you’re losing thousands of dollars each month on your money. You can’t afford to sit on your hands right now.
Where do I invest my money? Well, I did say a sense of urgency, not mass hysteria. Don’t just go plop your money down on the first investment that comes your way. Do your due diligence. Make sure you’re working with reputable company that has experience, can provide references, and has a clear path to returning your principal and interest. There are many conservative investments in real estate and other businesses right now that will leave you well protected with assets. There’s no need for speculation.
Talk to someone that is making money investing and find out what they’re doing. Do you need help? Jeremy, Jeanna, Drew, and myself are currently investing and making money. We will help you with getting started investing and will even partner on deals with you if that’s what it takes to get you going.
You now have no excuse. Create that sense of urgency with your investments and get started. I’m holding you responsible right now! Serious, post a comment and let me know what you’re doing today to make this happen.
Currently the deadline for a buyer to qualify for the first time home buyer credit (maximum of $8,000) is November 30th. This means that closing has to occur before December 1st with the title dated before that date. Anything later and the buyer is out of luck. There has been a lot of speculation that the first time home buyer program would be extended but this WSJ article brings to light quite a few things that tell us otherwise.
The issue comes not with the first time home buyer program but with FHA backed mortgages. The FHA guarantees loans with as little as 3.5% down and with falling prices in many areas, that leads to them insuring properties that are upside down on the mortgage. With FHA loans in default at a record 7.5%, that leaves the FHA with prospect of dwindling reserves and an increased liability for the future. The FHA has a government mandated minimum reserve and if it doesn’t have that reserve, drastic measures could be taken.
Officials worry that the resulting losses will help push the FHA’s reserves below the level required by Congress. The value of those reserves will be revealed in the agency’s annual review due Sept. 30. If they have fallen below the minimum, that could prompt a new round of questions about the role government should play in stabilizing the housing market.
With the prospects of the FHA falling below their minimum reserve amount and mounting pressure from lawmakers to not only have the FHA meet that reserve but decrease spending, it looks like the first time home buyer credit is an easy target for the chopping block. It’s the easiest and most likely as law makers will just have to do nothing with it (i.e. it would have to come up for a new vote to get extended).
What I think about the first time home buyer credit Overall I feel that the government should not be giving money to people for specialized programs and that less government spending is better. At first this is how I felt with the first time home buyer program but a recent conversation has me thinking the tax payer isn’t getting such a bad deal with this program compared to the millions of other tax payer dollars that are spent each day.
The first time home buyer credit equals more house sales. Increased house sales means more jobs for local regions but that isn’t enough to make it worth while. Increased house sales in an area like Detroit means that there are more foreclosures that are going from vacant non-performing assets to fixed up, lived in houses with people that are paying property taxes and everything else that a person pays for owning a house. There are many dollars that are invested in local regions and governments with this program.
What this means to you is that you have a limited time to let your buyers take advantage of this tax credit. Whether you want to invest in a house and resell it our invest in our program. Our First Time Home Buyer Program helps the buyer utilize the tax credit to use as a down payment by reducing their principal owed. What this means is that you get more money up front on the program. It’s an excellent program to use in Detroit or anywhere in Michigan without the tax credit but it’s a no-brainer with it. Contact us for more information on it so we can get everything closed by November 30th!
We’re officially rolling out our first time home buyer program to our investors. I know. I know. Many of you have already been working with us on the first time home buyer program but this is the official roll-out!
In addition to our traditional program where you purchase the house from us and we manage the whole process, we are also making the program available to any property YOU own in Michigan! (ask us for details)
What do you need to get started? For our traditional program you will need a $45,000 investment and for our new program where you bring your own house, you just pay for licensing the program (rehabilitation of your property and rehab management are also available)
We have brought together the best brains in the business to not only give you the most profitable first time home buyer program but also the most secure and legal program. Visit First Time Home Buyer Program & Tax Credit Information for more information
Successfully Yours, Jared Pomranky Detroit Market Expert
What’s the one thing you can do for your business today that will have a huge impact on your business? I know, you’re busy. You’re working hard every day but are you focusing on what needs to be completed or are you just completing what comes your way? I could spend the whole day responding to e-mail and doing other low value activities that may add some value to my company but really don’t.
Identifying the high-value activities in your business and completing them is crucial to becoming very successful and moving your business on to the next level. So I ask you again, what is the one activity or project you could start or complete today that would have a huge impact on your business? This is probably a project or activity that you’ve been pushing off because you don’t ever seem to find the time or you always get interrupted with less value adding activities. This is the project that would hands down leave you with a better more well functioning business. You know what I’m talking about.
When looking at projects that are going to make the biggest impact on your business, look at the ones that are going to increase sales, increase your exposure, decrease expenses, decrease your time involved in the business or all four. Make it a point to tackle this project at the beginning of the day and don’t stop until it’s completed. Do you need to check e-mail or make phone calls? Setup two times to check your e-mail and voice mails at 11:00 and at 4:00. Outside of those times you don’t check them and you don’t surf the Internet. Focus.
I know that if you focus on high value projects for your company and don’t spend as much time on the fluff, you’re going to see dramatic results. It may not be easy at first but focus and be determined!
If you were at our last meeting, you heard me talk about the upcoming flood of foreclosures in Metro-Detroit and the tremendous opportunity that is coming for investors. What have you done since that last meeting? Have you taken steps to invest and better your life or are you still on the sidelines? I know there are many people that have decided to move ahead because they’ve told me about the deals they’re doing or they’ve called me up to see what they should do.
Investing in real estate is easy for someone that’s been doing it for a long time but we tend to forget all of the real estate jargon, techniques, and contacts that took us years to build. As a beginner or an intermediate investor, it can still be daunting. I’m here to tell you that it doesn’t have to be. You don’t have to be the lone wolf investor that figures everything out for yourself and doesn’t work with anyone else. Those investors exist but they are usually not as successful as they could be.
There are experienced investors that would be more than happy to help you learn the things you need to learn. Ask an investor if you can tag along while they look at a house or help them out with some other aspect of their business. You can help them out and they can teach you what they’re doing. Also, almost all investors eat food so why not invite them out for lunch? They have to eat and all you have to do is pay for their lunch to get a captive audience for your questions.
Talk to investors that are doing what you want to do and ask them how you could get into a deal with them. Do you need to bring money, a deal or sweat equity? Find out what they need and how you can get involved on their next deal. You can not only get a piece of the action on a deal, you can also learn how it’s all put together. Sounds like a good deal to me.
Basically I’m saying to talk to investors, network, and see how you can get involved. You can read all of the books and listen to all of the CDs on real estate and you’re still going to be behind someone that has the real world experience. If you can leverage that real world experience of someone that’s investing in the areas you want to invest in and doing the deals that you want to do, you have just sky-rocketed your real estate investing to the next level!
In Detroit real estate right now we’re seeing reduced inventories of foreclosed properties, increased bidding on the remaining foreclosure properties, and an increased price paid for these houses. That sounds like a turnaround to me, doesn’t it? We’ve hit bottom and we’re moving ahead. Expect housing prices to increase and for Detroit real estate to be getting better now. or… should we actually look at what might have caused this?
There are actually a couple of key events that happened in February 2009 and they both have to do with bad policy. In Detroit we had Sheriff Evans institute a foreclosure moratorium for Wayne County and we also had all of the large mortgage lenders including Fannie Mae and Freddie Mac agree to suspend foreclosures. On the surface these seemed like very reasonable and humane acts. If you dig further, you’ll find that all it did was give false hope and will probably lead to a longer down market.
I have a significant amount of experience with short sales and loan modifications and it has been my experience that most people are not capable of making any considerable payments towards their mortgage. Most people have had something catastrophic happen that stopped them from being able to pay their mortgage. There is no loan modification program in the world that fixes a lost job, divorce, or death in the family. Often their debt to income ratio is so poor that a foreclosure now is better than a loan modification that ends up in foreclosure in the near future.
Furthermore,
If we stop foreclosing on houses and we know that most of the loan modifications will be unsuccessful resulting in more foreclosures; we in essence dammed a river. When the moratorium is over, we will have a flood of foreclosures further wiping out property values and creating even more problems.
This is no longer speculation, it is fact. We have seen foreclosures go down and we have seen prices increase on these foreclosures. But wait. Look at the graph below from RealtyTrac. It shows foreclosure filings decreasing quite a bit until May of 2009. What happened in April to make foreclosure filings spike so high in May? Yes, both the national and local foreclosure moratoriums were lifted.
You might ask why we’re still seeing a decrease of foreclosure inventory and an increase in prices. In Michigan we have a 6 month right of redemption on houses. What that means is that once a mortgage company has foreclosed on a house, the lender has to wait 6 months before they can take ownership of the house, put it on their books, and get it listed with an REO agent. Given that it takes the lender a month to foreclose on the property after the filing, we’re looking at a minimum time of 7 months until they can get the property listed. In all reality, we’re probably looking more like 8-9 months for a bank in Michigan from foreclosure filing to being listed.
When lenders decided in April to lift the foreclosure moratorium and start foreclosing again, they had a huge back log of foreclosure filings that they had put on hold and every other property that had come along since then that needed to be foreclosed on. That’s when the time line started. Looking out 7-9 months from that date and we’re looking at November 2009 to January 2010 for the flood of foreclosures coming on the market. Right during the slowest time of year for real estate in Michigan.
What this is going to do is flood the market with an oversupply of foreclosure properties. Using simple supply and demand rules, if demand stays the same and supply increases, prices will fall. Is this all bad? Definitely not. It’s a necessary correction in the market from the false bottom that was created. It also brings a tremendous opportunity for those that are ready to take advantage of it. I have been buying houses in Detroit steadily this year and I will continue even though I’m buying less houses because of the prices right now. All that it’s going to mean for me and the investors that I work with is the opportunity to purchase more properties at excellent prices.
Of course there will be doom and gloom spread in the national media outlets about the fall in prices in Detroit and the average person will think the world is going to end but two things will remain the same. 1. Investors will still be identifying opportunity and making great money and 2. there will still be many retail sales (as there are today) that will help keep the non-foreclosure market from dipping too much. With Detroit rental markets and first time home buyer programs being stronger than ever, this is definitely the best time to start or to continue investing in Detroit real estate.
A blog about my real estate adventures, advice, and education. I'll talk about Detroit Real Estate, foreclosures, detroit investment properties, cash flow properties, michigan, and my company Urban Detroit Wholesalers.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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