As most real estate investors know, advice about real estate investment is easy to come by, you get it often, whether you want it or not, and from people who mean well. If you're an investor, you likely agree with the words of Mary Schich, "Be careful whose advice you buy, but be patient with those who supply it." Yes, the second they got wind of your real estate investing plans, your Uncle Ned, his third cousin, and their labradoodle all had the "best idea ever." But if you want some investment strategies you can depend on, keep reading!
Be Careful Who You Trust
Investing in Detroit real estate is best done by professionals. There's significant money involved, and those who are interested in diving in need to know how to swim. Hence, you should beware of anyone that is either desperate or unprofessional.
So no matter how good an offer seems, if it's stapled to the telephone pole in front of the local McDonalds, yeah—you'd be better off listening to the labradoodle. While makeshift advertisements are clearly warning "signs," many of the more dangerous real estate investment strategies can be harder to spot. Beware of the following:
- Contractors in need of cash: If they haven't thought of how to pay for the construction, they probably haven't thought about how to properly build it—or control costs.
- Pushy flippers: Let's say a Detroit flipper wants to partner with you. When you say you want to take a few days to think things over and they start talking about how this is "the deal of a lifetime," you've just been warned.
- Pre-construction discounts on remote properties: Investing in pre-construction properties can be fruitful. However, you have to know a lot of details, and the most reliable information—about the location, construction techniques, and financial records—has to be gathered in person.
Choose the Right Investor Groups
An investor group in Detroit can be one of the most powerful assets you have. The key is to make sure the group has a proven track record of success. Because real estate records are open to the public, it's easy to double-check any claims those in an investor group may make. Here are some questions you can ask those in an investor group:
- How often do you do deals?
- What kinds of returns do you typically see? This question may seem a little nosey, but using language that allows them to provide ranges ("what kinds" or "typically") softens the query.
- What are some of the biggest challenges you have faced? Very few deals go through without a hitch, so if they claim everything always goes smoothly, you may want to 'smoothly' move on to another group.
- How many deals did you do last year? Getting up-to-date information is critical. Some investors were successful at one point—but since then, they've lost their edge. You want to work with people whose strategies are getting results in the here and now.
- Have you ever lost money on a deal? This question is another tricky one. The answer can reveal a lot about what the investor, or the group as a whole, learned from the experience. Making a mistake doesn't mean you can't make a profit. You can earn knowledge and experience, which pays bigger dividends than any single good deal.
Consider Turnkey Properties
In addition to the renovation costs necessary to get a distressed Detroit property up to snuff, the mental work is an "investment," too. Investing in turnkey properties gives you the chance to hit the ground running without having to calculate and re-calculate the time and money involved in turning a property from an income dream to an income stream. Turnkey investment properties allow you to sign on the dotted line and start renting it within a few days.
Even if the numbers on a distressed property look good, other expenses may pop up as you get behind the walls and into the nooks and crannies of the home. A turnkey property in Detroit, on the other hand, allows you to focus on how to start cranking cash.
Use a Property Management Company to Help Reduce Risk
A property management company in Detroit can help you manage investments into which you've put your hard-earned money. Trying to go it alone—or hiring an individual—carries risks that many investors would rather not assume. As an owner, your attention and efforts are going to be divided. You may not have the bandwidth to balance all of the tasks involved.
If you hire someone to look after the properties, they may also get buried in the responsibilities. On the other hand, a property management company in Detroit provides you with a team of capable professionals who specialize in helping maintain the solvency of your investment.
At JMZ Management, we know how important your investment properties are to your long-term wealth. We know you don't mess around with your properties—and neither do we. That's why we put together our free guide, "Real Estate Investing: Grow Your Portfolio," because serious investors deserve serious support.