Greg White from Imagine Home Realty talks to us about taking advantage of depressed markets and knowing who to trust.
Property management doesn’t have to be done by a third party if you know who to trust and know what you can do on your own.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level.
And now, let’s meet today’s expert host.
Greg: Hi, I’m Greg White and I’m going to be your host today for the REI Classroom from Imagine Home Realty in Detroit, and I look forward to teaching you.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Greg: Hey, welcome back to the REI Classroom. I’m Greg White from Imagine Home Realty, here today to talk about buying and holding properties in depressed markets. There is amazing opportunity for huge return on investment to be made in depressed markets, such as Detroit, Kansas City, Cleveland, and other places around the country that the values still haven’t come back. What I’d like to talk to you today about is getting in those markets and the right way to get properties.
Your best bet, first and foremost, is to buy depressed properties that need rehab and then you can ultimately place a tenant. There are many outfits throughout the world that are selling turnkey properties, but with a turnkey outfit the issue is you’re oftentimes paying a very large project management fee.
Take, for instance, in our Detroit market here there are many companies that you can buy a turnkey property for $50,000. But what that person has done, or that company or outfit has done, is bought that house for $15,000, renovate it for $15,000, and placed a tenant, and now you’re paying them a $20,000 project management fee, where you could step in and do that yourself if you have the capital. Of course, there are many different ways to raise that capital, but you can obtain huge cash-on-cash returns of cap rates of 15% to 20% to sometimes even 30% on these properties.
Building a portfolio can be an excellent way to start your real estate investment goals or to even supplement retirement, long-term investments that can turn around cash-on-cash-wise. This is not even mentioning the equity stake that can happen long-term, as well, as the values go back up in these cities. So that being said, there’s an amazing opportunity out there in depressed markets that we can all take advantage of. And trust me, these markets are large enough that we can all do very well in them.
So the key is to find a great realtor. I’m a broker here in Detroit, and this is all I do. I only work with investment properties. So your best bet, and my number one tip, is find professionals that do this. Don’t just call any random realtor, any random company in town that sells short sales or traditional real estate or something along those lines, as they’re not going to be able to provide you the same type of service as somebody that deals strictly and dynamically with investment properties. That’s number one.
Number two is you have to have good contractors. Contractors, contractors, contractors. Very, very important. Without those, you go to craigslist, try to find some people there, your money is probably going to disappear. So without a well-rehabbed house, it’s going to be very hard for the next step, which is to place a tenant.
Once you’ve done these steps in order with good, reputable companies, do your homework, do your research, make sure that you’re finding the right type of people that you want to work with. Look for references, look for resources that say that they’re experts in the market, and take your time.
I oftentimes get calls from international investors that have looked up the Detroit market and they want to buy. They’re like, “Let’s buy 500 properties today.” I would love to sell 500 properties, but it’s not a great idea. What to do better is to buy one or two, let’s go through the entire process, make sure it makes sense for you, and then from there you can begin to build your portfolio. So faster isn’t always better. Make sure that it makes sense for you, and you can take it from there.
This is Greg from Imagine Home Realty. Thanks for letting me host today, and I look forward to speaking with you all soon.
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