Today in Detroit 12/14/2023

Welcome back to A Day in Detroit! My name’s TJ. I’m a husband and father to 5, a Christian, Real Estate Broker, and Investor. I write about our adventures in real estate, and share personal growth and success stories in these posts as well. I write about house flipping, wholesaling and more. We’re always looking for new contractors! If you’re interested in working with us, please reach out on Instagram @wisepropertybuyers

Thieves

 Someone keeps on stealing our furnaces and water heaters. We just got keys yesterday to a property we closed on last month. Detroit duplex, eastside, of course not the greatest area. Well, this morning the guys were there to clean out the house and guess what – the furnace and water heater were gone.

We actually just had security doors installed on the property this morning too. So if they would’ve came, you know maybe a day later, they wouldn’t have been able to get the furnace out. It’s possible the furnace is an inside job by the security door company. It’s unlikely but anything is possible. It’s also possible that the contractor could be in on it, but, I don’t believe that is what’s happening. Our contractor is a very honest God-fearing man.

What it is about furnaces and water heaters that makes people steal them is beyond me. I mean they aren’t really worth all that much. Hundreds of dollars maybe each especially because these were not new pieces of equipment. But nonetheless they do steal them and they risk their liberty over a few hundred bucks. Scary. 

We had someone break into our west side flip, and they stole our dining room table, which wasn’t ours. It belong to our staging company, as did the piece of art and rug they stole. They also stole all of our brand new appliances and a brand new water heater that we just had installed. Total value of the theft was over $5000.

DR Table? It Gone!

Do we have insurance? Yes, we do. The problem is that if you make an insurance claim, the insurance company is definitely going to get their money back and then some. It’s our understanding that unless it’s a catastrophic loss it’s not worth it to file a claim. Plus our deductible is $2500 so all we would really get is $2500. Not exactly worth having your premiums go up or worth having your houses become uninsurable. There are not many companies that actually insure Detroit properties as it is.

I was surprised that our staging company requested us to pay $500 for their stolen inventory. I would’ve thought that their insurance company/policy would cover that and maybe be a lower deductible? I guess I understand that if inventory is stolen, someone has to be liable for it but gosh we’re the ones that got ripped off. We had 10x the loss that they did, so I’m a little disappointed. If you know anybody with a staging company that wouldn’t charge their client if something was stolen, I’d love to know about it. I would think that the value of the inventory is probably around 500 bucks. I’m in a table, some chairs and a rug, a piece of artwork kind of hard to procure those items under 500 bucks.

New

We are about to begin construction on a flip in Bagley. It’s a three bedroom house with one and a half bathrooms. We are adding a second bathroom in the basement and doing a complete rehab. The total project value is $57,000 and we are paying $77,000 for the house. The resale value is probably around $225,000.

I was initially thinking to re-list at $250,000 because the property was reported to be over 2000 ft.² Upon visiting the property however it was clear that estimate was incorrect. It was also supposed to have 2 1/2 bathrooms. At the same time, we were willing to pay $10,000–$20,000 more for the property under those assumptions. We also assumed it was in better condition.

The Inside is HIT!

The seller explained to us that the ceiling was caving in a little bit, or that “there was some buckling”, I guess is what he said. He also indicated that the floors were buckling. What he didn’t say is that it was covered with mold throughout. He didn’t say that the entire property needed a complete rehab. He said it needed a little work, but the house needed a lot more than a little. This house is probably one of the worst conditioned houses that we’re actually going to flip. 

You might ask, why are you going to flip it then? The reason is because it’s worth so much money. What a property can be resold for over $200,000. There’s generally a lot of room for profit. Whether house is totally toast or whether it just needs a cosmetic rehab, the rehab costs aren’t a whole lot different in our experience. We’ve had properties that have needed windows and roof, (in addition to a cosmetic rehab) cost us the same as a property that only needed a cosmetic rehab . 

Until recently our most expensive rehab was right around $60,000. In fact that’s actually been pretty consistent. I don’t think we’ve spent more than $60,000 on a rehab yet. We’ve come close, and our total cost of ownership has certainly exceeded $60,000 on these projects but I don’t think we’ve actually had an estimate exceed $60,000 yet. 

MIA

I didn’t publish a blog entry last week. And I think I missed one or two over the last few months in addition to that. The one from last week was missed because although I typed it, it didn’t save in the system. When I realized that it didn’t save, I didn’t have the time or desire to actually rewrite the entry. I was pretty pissed off as a matter of fact.

It made me angry because I wasn’t able to publish; and I have taken pride in getting these entries published (almost) every week this year. I enjoy writing these, it gives me a certain amount of pleasure to download my experiences and feelings in writing. It’s nothing new to say that writing can be therapeutic, and if it helps me to write then I’ll keep doing it.

This entry is actually being dictated. It’s more fun to write and also more therapeutic, probably to write than it is to dictate, but I’m using my iPhones dictation capabilities to “write” this inside of Google Docs. I love Google Docs. I love the whole G Suite. Sheets, Docs, Calendar and Gmail…they occupy more of my time and attention than most other things in my life. Not sure that’s 100% healthy, but it’s true.

One downside of dictation, is that I will go back and edit it before publishing. What you’re reading here isn’t what I dictated per se. The reason I am doing it this way is because of the fiasco with last week’s entry. Google Docs automatically saves periodically (as in, every time you stop typing for a moment) where the system that I use to deliver the blog, which is WordPress, does not (even though it says that it does).

Coming Soon

It looks like Joe’s girlfriend is going to team up with us on a project. This will be our first time teaming up with her. She has done a few projects with another partner and now she is about to do one on her own, or with us! It is actually right down the street from our Bagley project, (also in Bagley) on San Juan.

Hers is a 75K acquisition and will probably sell right in the same general price range as ours. The scope of work won’t be as extensive with San Juan as the other one. Hers is in better condition. Ours is in a slightly better area on the south side of 7 mile. We’re guessing ours will sell for a little more, but hers will cost a little less. Ultimately both will be very profitable projects.

We acquired a property in Redford last week for $90,000. This morning we relisted it for $119,900. We already have parties interested. That’s exciting. When you can buy a property and immediately resell it for a $30,000 profit, you’re doing something right.

I love wholesaling, it’s just that wholetaling is much more profitable. We borrowed money to cover the acquisition on this deal. Our lender gets paid 12% interest and also we guarantee a minimum of three months interest regardless of how long we have the property. If it goes under contract this week, we will probably close in the month of January. That means that the lender would only have had their money lent out for six weeks. But they’ll still make at least $3600 (3 months worth) in interest.

We don’t use hard money, at least we haven’t yet, thank God. Everybody starts somewhere and some people have to start by using hard money. We never did. They charge points and they charge interest and they charge fees. Hard money eats up so much of the profit, it’s just never been worth it for us.

Certainly we’re blessed to have private lenders so we never had any projects which we needed to do hard money on. We fund a lot of our own projects. We keep a lot of money in the company so that we are able to self fund. Still, money is finite and deals are infinite. There’s always another deal to do and if we had more money at our disposal than we do, we’d find a way to deploy it.

Our lenders actually have a mortgage against our property, but that doesn’t mean that they take out a loan. When someone says they’re getting a mortgage, they’re actually giving a mortgage. So if I get a loan from Chase on a house, I might say I’m getting a mortgage from Chase. In reality, I’m giving a mortgage to Chase because a mortgage is a contract that secures real estate to a promissory note. Borrowers (mortgagors) give mortgages to lenders (mortgagees).

We have had lenders in the past that have just accepted a promissory note for the money they’ve lent. Those lenders were generally giving us $20,000 or $30,000 or $50,000. But when lenders start giving you hundreds of thousands of dollars, whether they trust you or not, they’re going to protect their interest with a mortgage. So essentially, we have regular people who are acting like the bank. It’s a pretty cool set up because you can actually use your 401(k) or your IRA to make loans to people like us. If you’re not earning at least 12% on your retirement accounts, you should reach out to us!

Thanks for reading A Day in Detroit. If you’re interested in flipping houses, lending money, being a landlord or learning how to wholesale, you’ve come to the right place. Feel free to reach out to us on Instagram @wisepropertybuyers

Leave a Reply

Your email address will not be published. Required fields are marked *

What’s A Day in Detroit?

This is a Day in Detroit through the eyes of a Real Estate Investor

Want to get more updates?