Categories
Flipping

Can You Make Money Flipping Blighted Houses?

Are blighted properties diamonds in the rough for property flippers?

Many investors were attracted to Metro Detroit when they heard about $500 houses for sale on eBay. Now, it’s more like $10k a home, but can you still realistically make money by flipping these?

What are blighted properties?

Blighted houses are abandoned properties in derelict or dangerous condition. They might have overgrown lawns, dilapidated roofs, broken doors and windows, or other signs of neglect. These houses have been deemed uninhabitable, and need either complete renovations or a tear-down to become livable once more.

Where are the blight areas in Metro Detroit?

There’s a big difference between a blighted property and a blighted area. You should be able to make money flipping a blighted house in a neighborhood with solid buyer demand, but flipping for profit in a blighted area is another story – so it’s important to know where you’re buying.

You can see plenty of blighted areas in the City of Detroit, due to the area’s history, which saw the population plummet by nearly two-thirds in the 70s and 80s. Residents left, causing a corresponding loss of tax revenues, resulting in significant cuts to city services. 

This led to neighborhoods full of neglected, vacant properties. You’ll see this in Brightmoor, Burbank, Ravendale, State Fair, Grixdale Farms, Petosky-Otsego, NW Goldberg, and Westwood Park, where roughly 30-40% of buildings are unoccupied.

However, this isn’t the case across the entire Metro Detroit area. You still have the “Ring Cities” surrounding Detroit, which don’t have these blighted areas. Overall, the Metro Detroit real estate market is generally healthy.

Are blighted property flips profitable?

So, many people are curious about the potential “flippability” of these houses in blighted areas. Can you make money from flipping them? We’ll have to go back to the basics of how a flip can be profitable in the first place.

What’s important when flipping a house? 

  1. You Need to Get It at a Good Price

Like any real estate investment, you need to acquire your blighted house at an excellent price to achieve a decent ROI. 

This applies to tear-downs as well–which is a common situation for blighted homes–where you actually just want the land that a house is currently sitting on. You’ll need to buy the property cheaper than a bare plot of land, because of the additional cost to demolish and remove rubble. 

  1. You Need to Renovate Fast and Efficiently

At the heart of every good flip is a fast and cost-efficient renovation, which requires accurate prediction of the overhaul costs. If you’re a beginner, correctly budgeting for a blighted property flip can be quite tricky. There can be a lot of hidden, expensive problems within their walls! 

This is exactly what buyers of $500 houses didn’t realize–a deal on a blighted house is often too good to be true. Did you consider that it’ll be a knockdown? Is the layout of the house costly to change) even good?

If you’re buying a blighted house in a blighted neighborhood, renovations will probably be a nightmare. It’s not uncommon to experience break-ins, theft of materials, and vandalism (all of which equal additional costs and headaches) – and after all that, you still likely won’t be able to find a buyer at a profitable price. Which brings us to our next point about flipping blighted properties…

  1. You Need to Sell It at a Profitable Price

You need to sell it at a price that makes financial sense. Look for a price that’s 70% of its market value, minus repairs. It actually takes a special skill to find distressed properties and negotiating it down to a profitable price! So keep this example in mind: If the house will sell for 100k fully fixed up, and it will cost you 30k for renovations, then you should pay no more than 40k.

70% x $100,000 (market value) = $70,000

$70,000 – $30,000 (repairs) = $40,000 

If the math doesn’t add up–steer clear. You can end up spending more money fixing than acquiring, but don’t overspend and end up with a house too expensive for the area. Which leads us to our next point…

  1. You Need People to Want to Buy

You don’t want to be stuck with a fully-renovated house that nobody wants. Your flip needs to be sellable at the price you need, within the time you have, to a willing market, in the right area. 

Maintaining and holding a vacant property while you wait two years for a buyer doesn’t make financial sense. So make sure you’re confident that there is a market for what you’re fixing up, – which, if it’s in a blighted area, there almost certainly isn’t. (In the City of Detroit, some abandoned areas have steadily improved, but it’s still a slow process.)

It may be hard to believe, but you can still lose money, even if you’ve only paid a couple of dollars for the house. You may buy it for next to nothing, but end up spending so much money and time renovating it, that it costs you more than what you’ll sell it for. And what happens if people don’t buy it at all? This is why it’s important to know the difference between flipping a blighted house in an up-and-coming area, versus flipping in blighted neighborhoods.

If you have great experience in restoring and selling neglected properties, and you’re in an area that does have buyers, and you have enough contingencies in case it doesn’t fall through, then you’ll probably make a lot of money flipping blighted houses. Experts will benefit from its high-risk-high-return factor. 

However, it’s never a safe bet. If you’re a newbie, you might want to avoid this type of real estate investing for now (and stick to Ring City properties instead, where the risk is significantly lower). Flipping blighted houses is definitely not for the faint of heart!

Have you thought of flipping blighted houses? Or maybe you’ve done it already? It’d be great to hear from you below.

Image Courtesy of: Webdexter Apeldoorn

Categories
Landlords

Pros and Cons of Assignment of Contract

The most attractive thing about wholesaling as a real estate investment strategy is that you can do it with no money of your own and none of the headaches that generally come with owning a property.

There are two ways to wholesale real estate: double-closing and assignment of contract. We covered the down and dirty of double-closing a few months ago, but now let’s take a look at the pros and cons of wholesaling using the assignment of contract method.

What is Assignment?

An assignment of contract is when a wholesaler enters into a purchase agreement with a seller, giving them the right to sell the contract to a buyer for a fee. The good thing about this is there’s no capital gains tax involved (but you still need to pay about 30% ordinary income tax, depending on your tax bracket, if you’re holding it for less than one year).

Pros

  • Assignment is cheaper than double-closing: Because there’s only one set of closing costs to pay, this is the most cost-effective wholesaling method.
  • It’s a good selling point: You can negotiate a better price from sellers by assuring them that it will be a smooth and easy transaction, you will cover all their closing costs, pay off their lenders, and then deliver their remaining profits to them.
  • It’s simple: You find a buyer, sign an agreement, put the ‘earnest money’ into escrow, then step back and let the deal go through. It’s also easier to explain to titles companies than a double-closing, if the company you’re using isn’t experienced in wholesale deals.
  • Assignment can be done quickly: The process doesn’t require much time from your end – often just the amount of time it takes you to market and find a buyer. Because there’s only a single closing, that part of the process is usually faster than with double-closing, also.
  • It can create opportunities for repeat business: If done right, this can allow you to establish a relationship with the buyer and do repeat business with them over time. The most important thing here is to remain transparent, so that all parties are aware that you’re making money and are bringing value to the deal, whereas this is less clear with a double-close.

Cons

  • Your assignment fee is visible to all: One of the cons about this arrangement is that your fee will appear on the settlement statement. As we said, this kind of transparency can help you form lasting business relationships with your buyers, but it also can make some buyers and sellers wary. If you’re making a hefty sum, the seller might be taken aback or begin to rethink whether they’re getting a good deal or being ripped off by you. By the same token, buyers might think they could get a better price elsewhere, so it’s possible either party could try to back out of the deal once they realize you’re making money off of the transaction.
  • State legalities could be an issue: Realtors lobby hard to keep laws tight against wholesalers so they can avoid losing business in their respective states, so you need to remain vigilant and politically active to safeguard your rights and your business.
  • It can limit your options: You need to verify with your buyer if they intend to pay in cash or use bank financing. Keep in mind that some properties, like short sales and bank-owned homes, can have no-assignment clauses in place, which means you can’t use this method to wholesale these properties.

Assignment of contract is a good way to approach wholesaling if you’re looking for quick, relatively easy transactions and the opportunity to develop long-term relationships in the industry. However, this method might not be the best for those who want to make large profits off of each deal they do, as it can put off buyers and sellers alike. A good rule of thumb is to use assignment only if you’re making less than $10k off a deal, and to always be upfront with all parties about your fee and the benefits you bring to the table in exchange for this fee.

Ultimately, the efficiency of assigning a contract means that you can complete more transactions in a shorter period of time, which can make up for the fact that your fee will be smaller than in a double-close scenario. If you’re uncomfortable with the idea of being transparent about how much you’re making, or if you want to get bigger returns from each deal, then opting for a double-close is probably the better choice.

Image Courtesy of Cytonn Photography

Categories
Shortterm Rentals

How Soon Until Short Term Rentals Bounce Back From Coronavirus

Lady wearing a face mask
What is the new normal?

Coronavirus has affected the travel and tourism industry at an unprecedented scale. With strict stay-at-home orders and lockdowns still in place globally, online travel traffic is down by 70%, potentially accounting for up to $20B in missed revenues. In the US, bookings for short-term rentals bookings saw a 94% year-on-year decrease due to the pandemic.

As borders slowly start to reopen in the near future, what will the new normal of the short-term rental industry look like in Metro Detroit and Oakland County, in particular?

Localized Effects Will Differ

Travel restrictions have crippled the industry severely, but data suggests that the short-term rental industry is doing better than the hotel industry, which reported continuous declines, with revenues per available hotel room dropping year-on-year by as much as 94%.

Urban markets will likely suffer more than holiday or leisure destinations. In New York (where the virus hit hardest), year-on-year data indicate that the demand for short-term rental properties have decreased by 50%, and consequently, revenues have gone down by 47%, too.

What we’re currently seeing is a shift in demand from urban to remote rental locations, where there is less exposure to the virus. As these patterns carry on into the foreseeable future, we recommend STR operators to keep a closer eye on market trends and industry news. More than ever, strategic and data-driven decisions will be crucial in bouncing back from this crisis.

Assessing the Impact of COVID-19

To predict demand and gain market insights, consider using a trend analysis tool, such as MarketMinder. They provide good breakdowns of market rates and offer valuable insights on trends that can help you work out the state of your particular market, and adjust your strategy accordingly. (Note: some of their features are only available for paid subscribers, but you can do 5 basic reports a month for free).

Here are some trends to look at to gauge the stage of your market’s recovery:

  • How far ahead reservations are being made?
  • How are other hosts pricing their properties now vs. their pre-pandemic rates?
  • What rate do guests actually book the property for?
  • How far are people travelling to reach your area?
  • How are they getting there – by air or car?
  • When will business-related travel resume? Are there any conferences planned for the future in your area?
  • Are people booking owner-occupied rentals, or only “have the whole place to yourself” ones?

Post-pandemic, it seems very likely that travelers may opt for vacations that could be reached via land travel to mitigate risks. This may lead to an increase in demand for nearby STRs, as travelers try to find budget-friendly holidays and accommodations within easy reach of the city. 

To see how these trends are developing in Metro Detroit, we used MarketMinder to conduct a comparison between Downtown Detroit and a suburban area closer to the lake, such as Saint Clair Shores.

Insights from the tool indicate a rental demand score for Saint Clair Shores of 72, in comparison to Detroit’s score of 69. Median occupancy rates (calculated over the last 12 months) in Downtown Detroit are also down, from 69% in June 2019 to 45% in April 2020. By comparison, Saint Clair Shores has a current occupancy rate of 50%, possibly showing early signs of the shift in demand from urban locations to less densely-populated areas.

Human beings have an inherent desire to travel and explore. So it’s almost certain that, once travel restrictions are lifted globally, the demand for STRs will slowly increase again. Although we don’t exactly know when this “new normal” will begin in earnest, for now, property owners and landlords can spend this time preparing for it, by implementing strict sanitation measures to reassure and attract future guests.

Image Courtesy of: Anan Shvets

Categories
Landlords

Overview of the Student Rental Market in Metro Detroit

Student tenants can rent anywhere. They don’t always choose to live in student housing, or even in the immediate vicinity of their school, but often rent or split a regular unit instead. That means, no matter where you are in Metro Detroit, you can end up with student applicants for your properties.

You can run into them in three situations: If you’re in or near college towns, near a university in a bigger city, or even randomly, as long as you have student-appealing amenities nearby. And though Metro Detroit isn’t a popular university area, here are some neighborhoods where you can expect student applicants:

  1. College Towns

Landlords in college towns deal with students all the time. If you own rentals near one of the college towns in Livonia or Dearborn, there’s a high chance you’ve already run into them. A lot of these areas have vibrant downtowns, with many gyms, restaurants, and other amenities catering to the younger crowd.

  1. University Areas

Besides college towns, there are also spots near universities like the University of Detroit Mercy and Wayne State University (both in Detroit City) and Oakland University in Rochester. These have fewer student tenants looking to rent in the immediate area, as a lot of them commute from home, but you’ll still run into student applicants here fairly regularly. 

  1. Randomly!

There’s a community college in Royal Oak, but that’s not the reason students rent there. They rent there for its trendiness and great nightlife. Students can show up in any area like this, as long as it’s young, vibrant, and appealing to them. Some students would much rather live in a great neighborhood and just commute to their university, so regardless of your proximity to a school, you can still run into them occasionally.  

One of the most significant differences between student vs. non-student tenants is that they usually lack established income or credit history. But that doesn’t mean you should skip considering them altogether–you just have to know what to look out for.

How to Screen for Student Tenants

They should have a reliable source of funds, whether that be student loans or a supportive parent. Just make sure to also screen any cosigner that will be paying the rent. 

Once their financials are set, use your better judgment (and their track record, if any) to see if they’ll make good tenants or not. Obviously, the number one concern with students is that they’ll throw crazy parties and treat your property like a messy dorm. However, you can’t just discriminate against students on this basis alone – you’ll need clear criteria for selecting tenants, and be able to show that a particular applicant didn’t meet those criteria. 

Be careful of how you phrase things, especially when you don’t accept students and cosigners flat out as a blanket statement. You can have a policy that dictates no acceptance of cosigners, but in this case, you can never accept cosigners for anyone else without risking being accused of discrimination.

Student renters come in all forms, and they can crop up anywhere. You may not market your property to students, but if you’re near a trendy area that’s desirable amongst young people, you’ll likely get at least a few student applicants anyway. Your property doesn’t even need to be located close to one of Metro Detroit’s colleges or universities. 

So be prepared to handle student applicants when they appear: conduct proper screening and don’t be discriminatory when considering them–as long as the financials make sense and they have a co-signer that can guarantee you their rent!

Have you had student tenants in Metro Detroit? What was your experience with them?

Image Courtesy of Andrew Neel

Categories
DIY

How Long Does It Take To Fill Rental Vacancies in Metro Detroit?

The amount of time it usually takes to fill a rental vacancy varies from area to area

Rental vacancy rates are an important indicator for investors to judge the strength of individual real estate markets, because these shows whether or not there is an adequate demand for the number of rental properties available in a given area.

Rental vacancies are also one of the biggest impacts on landlords’ net operating income (NOI) each year, so, apart from retaining tenants, having a short turnover time is crucial for minimizing losses. According to SmartMove, vacant rentals cost landlords in the US $1,750 each month, on average, so investing in an area with lower vacancy rates and quick turnover times is essential for maximizing the return on your rental investment.

Vacancy rates in Metro Detroit

Vacancy rates across the country reached their peak in 2008 and have been steadily decreasing year-on-year ever since. According to FRED, the average vacancy rate in the US in Q1 2020 was 6.6%. Census data for 2019 shows that rental vacancy rates in Michigan were at 6.8%, and 6.2% in the Metro Detroit area, down from a peak of 12.8% in 2010.

According to the most recent data from HUD, Oakland County has an overall vacancy rate of 4.68%, although apartments are in even higher demand, meaning complexes have only a 2.4% vacancy rate. By comparison, Wayne County has an average rental vacancy rate of 6.7%, with apartment vacancy rates at 3.4%, Midtown Detroit has a vacancy rate of just 1.9%, and the highest rates in Metro Detroit are seen Detroit, sitting at 5.3%, on average.

However, in the Metro Detroit area, vacancy rates have been steadily declining, due to population growth and the corresponding increase in rental demand. There’s been an increase in the number of rental home developments in recent years, but it’s estimated that the current planned construction projects in Oakland and Wayne will only account for roughly 20% of the new rental homes that will be required to meet this demand, boosting competition for existing rentals on the market.

This is good news for landlords, as prices have been going up, while turnover times are getting shorter.

You can find vacancy rates for the 75 largest metropolitan areas in the country at cccensus.gov, but this data won’t tell you what the average rental turnover time is for each specific neighborhood. The best way to find out how long it takes to fill a rental vacancy for your property type in your area is by talking to local real estate agents, landlords, and property management companies. They will be able to give you an insider view into the current rental demand in your market, the amount of time a typical turnover process takes, and the kinds of issues which generally slow down or speed up the process in your neighborhood.

Rental turnover times in Metro Detroit

So how do vacancy rates translate into turnover times? Higher vacancy rates in an area means less demand for rental properties, which in turn creates longer turnover periods for landlords looking for new tenants. In Metro Detroit, rental homes on average remain vacant for 52 days, and turnover times can reach up to 90 days, depending on several conditions.

The amount of time it usually takes to fill a rental vacancy varies from area to area, with rural properties generally experiencing longer vacancy periods than urban rentals. The type of property also has an impact on vacancy rates – for example, student rentals have longer turnover times, owing both to the summer holidays and more intensive repairs requirements. Single and multi-family rental vacancies also experience seasonal swings, with turnover periods taking longer during the winter months than in the summer, when rental demands for family homes are 51% higher, on average.

In Metro Detroit the tenant turnover process is particularly fraught with difficulties: finding quality tenants can be a challenge, meaning there is a greater risk that landlords will have to deal with evictions or time-consuming and costly repairs between tenancies. All of this can drive up the number of days your rental sits empty throughout the year. The best way to combat these issues is to be highly selective when choosing tenants and to manage your rentals well to avoid unforeseen issues when the lease ends.

Pricing is also a key determinant of rental turnover times. Interestingly research indicates that, across all rental property price brackets, slightly lowering your asking rent correlates directly to a shorter turnover time. On the other hand, overpricing a rental and later reducing the asking rent leads to properties spending longer on the market and achieving lower rents. Ultimately, pricing your rental competitively will lead to a shorter turnover time and drive up competition for your property, letting you be more selective when it comes to choosing the best tenant.

Working with a good property management company, having a solid rental marketing strategy, and carrying out thorough tenant screening are the best ways to ensure that the turnover process goes as fast and smoothly as possible for your Metro Detroit property. Vacancy rates in the area have been steadily decreasing, so if you’re still experiencing longer-than-usual turnover times, it might be worth talking to your property manager, or revising your pricing, advertising, and tenant selection strategies.

Image Courtesy of Sarah Trummer

Categories
Flipping

Time vs. Cost: What Jobs are Worth Doing Yourself?

Don’t you love it when people watch house flipping and renovation TV shows and say, “wow, it looks so easy to flip houses for great returns”? But the reality is that flipping is a risky business that requires a lot of hard work, excellent project management skills, and savvy budgeting in order to succeed. 

One of the most important parts of flipping houses is the way you restore it for reselling. Some flippers like to do nearly all the renovations themselves to save on costs, but others would rather pay contractors to do it to save on time. Many also opt for a mix of DIY and professional contractors, but in this case, which jobs should you handle yourself, and which are best left to the pros? 

While it’s generally cheaper to DIY, those savings could be nullified if you do it wrong and end up with expensive corrections. And while some tasks might look easy, you need to give up significant hours of your own time to learn and accomplish them. So if we look at the time/cost benefit analysis, which jobs are worth doing yourself?

PLAN OUT THE RENOVATION

Before you start swinging a hammer in good faith, go over the whole property and list down all the repairs that it needs, taking into account the cost and lead times for each. If you’re going to DIY, you have to be able to accurately calculate their costs and realistically estimate the time it will take to complete, as well as the order in which projects should be carried out.

DO WHAT YOU KNOW, HIRE WHAT YOU DON’T

SKILL REQUIREMENTS

Fixing high-ticket areas like the roof, floors, and kitchen areas yourself can save a lot of money, because professionals usually charge a premium for these services. However, the reason for that is these tasks require a high level of expertise to do them well. When done poorly, constantly repairing them will outweigh the money you supposedly saved by doing it yourself. 

You might be charged anywhere from $300 – $10,000 for a professionally installed drywall, while you can do it yourself for significantly less. Similarly, painting will cost you $2-3 per square foot if you get it done professionally, whereas you can do it yourself for just the cost of the paint – it also has a low skill requirement, so not much can go wrong if you DIY. 

So if you have experience in doing these, by all means, DIY. But being inexperienced will only leave you with wasted time, accidents, more repairs to fix, and a lower flipping profit.  

PAPERWORK REQUIREMENTS

Some repairs require specific building codes, permits, and inspections, like removing walls or installing new bathrooms. Better steer clear from DIY-ing these, unless you plan to leave your full-time job to be a contractor yourself. A professional will help you with the paperwork required and provide knowledge if the wall is load-bearing, or if you’d need more space for a bathroom. Their work is also insured, so if anything does go wrong, you’ll know that it’s covered.

A GENERAL GUIDE

Which jobs you do yourself should be based on your skillset and condition of the house, as well as permit requirements. Some jobs will require a licensed professional, like installing complete new plumbing, which you need a permit for, unless you want to get a citation from the city. A homeowner can pull their own permit in most states, without a license, because the homeowner is the one taking the risk. But if you do it wrong, you could have an electrical fire, etc., or end up failing your building inspection and being told to redo it.

However, this list should give you a general guide on when to DIY and when to hire a professional:

DO IT YOURSELF

  • Fix an outlet, doorknob, lights
  • Painting
  • Install baseboards
  • Install laminate flooring or luxury vinyl
  • Insulate open walls
  • Install a toilet (bowl)
  • Install minor PEX plumbing

HIRE A PROFESSIONAL

  • Additions
  • Replacing sidewalks and driveways
  • Replumbing the whole house
  • New electrical service panel and circuits
  • Replacing windows
  • Install solid hardwood flooring
  • Installing a furnace or central AC

Timing is everything with a flip, so work within your set of skills. Consider splitting the workload between you and a contractor who can compensate in places where you struggle. That way, you can focus on the things you know how to do, and still save yourself some money. At the same time, you’re not being slowed down by more complicated projects which will take you as a DIY-er much longer than a professional team to carry out.

What are the fixes you DIY when you flip a house, and which do you always leave to the pros?

Image Courtesy of Laurie Shaw

Categories
Shortterm Rentals

How to Market Short-Term Rental in Metro Detroit

short-term rental

Got a property in Metro Detroit that you want to rent out short-term, but don’t know how best to market it? In Michigan, short-term rental properties were banned during the height of the pandemic to help contain the spread of the virus. However, now businesses have almost fully reopened, and short-term rentals are allowed to operate again.

People are still wary of travel, but short-term rental properties are seen as a safer alternative to crowded hotels for many, and this demand is helping steadily revive the industry as a whole.

Aside from that, the City of Detroit is still keen on limiting short-term rentals that are not owner-occupied.

This gives short-term rental owners in the Ring Cities (the cities surrounding Detroit) an edge. If the ordinance passes, travelers expecting to book an Airbnb in the city center will now have to choose between hotels or shared STRs within Detroit, or look beyond it to the Ring Cities.

So, along with the growing tourism of the general metropolitan area, it’s no wonder that many have chosen to invest in Metro Detroit short-term rentals. But how can you make your property stand out from the competition, and encourage guests to book?

  1. Know the Rules in Your City

Just a few days ago, the city of Ann Arbor banned short-term rentals, except for shared listings where the owner-occupier will be staying in the house alongside their guests. If you want to rent your whole house out in Ann Arbor after March 2021, you can now only do so for a short period, and all short-term rentals need to be licensed by the city. 

Ordinances like this are being passed all the time, so make sure your city allows Airbnbs, and that you fulfill any licensing requirements before marketing your unit. 

  1. Know Your Audience

The first step in any business is knowing who your core audience is, and what they want. Are you catering to families, staycationers, business travelers, out-of-towners, or young people? Know what’s in your specific area, and you’ll start to understand who would want to stay there because of those amenities. Most short-term rental properties attract a mix of different demographics, but some will be stronger contenders for your property than others – so don’t try to sell your listing to businesspeople if you’re not near good travel links.

Next, think of what your audience wants. Right now, that will almost certainly include some added assurances regarding property cleaning and disinfection between visitors. Airbnb has come out with their own set of enhanced cleaning protocols, and if hosts follow these guidelines, they’ll earn an additional badge on their profile showing guests that they’re dedicated to health and safety. Something like this shows you’re reacting to your customer’s wants and fears, and may prompt them to choose your place over another similar property on offer. 

  1. Use Great Photos 

Did you know that the success of Airbnb is mostly due to the quality of their photos? The company, now worth $2 billion, began with two guys renting out a couple of air mattresses to guests, out of necessity, to pay their own rent. They expanded to letting other people rent out spaces in their homes on an online platform, but found that hosts were taking poor-quality photos that didn’t entice anyone to book. So Airbnb called up a professional photographer and had them take quality photos of the properties. Right away, they saw bookings increase by 2-3x, and had doubled their revenues by the end of the month. 

The moral of the story? It’s worth the extra buck to hire a freelance photographer (or ask your tech-savvy nephew) to take quality photos for you. Guests will judge your property and base their decision mainly on the images you post, so it’s important to get these right. It doesn’t cost much to hire a freelancer online for an hour or two, and it’s an investment that you can recoup in just a few bookings. 

If you’re already a great photographer, then the next time the sunset is just right or your house is covered in a perfect layer of snow – get out your camera! A special photo like this will help your listing stand out from the rest, and help guests imagine having their perfect getaway in your place.

  1. Write an Engaging, Easy-to-Read Description

To compliment your great photos, also have a property description that accurately and attractively explains what you’re offering. The first step is to have a great title for your listing that gets across your property’s unique selling point(s). For example, if your unit is close to important landmarks or can accommodate a lot more people than other properties in the area, highlight this in your title, e.g. “5 mins from hospital, sleeps up to 12”. 

Since most people will just scan through the body of your description quickly, use short paragraphs or bulleted lists to highlight relevant features to your core audience. Avoid using too many superfluous words, and focus on the things people need or want to know. Here are some examples:

Need to know:

  • If some parts of the property are only accessible by stairs
  • If any pets live at the property usually (for those with allergies)
  • Any important house rules

Want to know

  • Travel distances to local attractions and amenities
  • How the windows in the bedroom overlook a lake
  • Special cleaning measures during the pandemic
  1. Stand Out with Little Details & Extras

The little details make a big difference when it comes to short-term rental properties. Guests want to experience staying in a temporary home that’s cuter or cooler than their own. Just a few throw pillows, some candles, a couple of paintings from your local bargain store, and some small decorative touches can elevate your place 4 stars to 5. It’s all about adding finishing touches that will help you stand out from the competition.

When it comes to deciding on those little extras that entice bookings (and encourage great reviews), use the competitors around you to your advantage. Do some research on what they offer: free Netflix, gourmet coffee, fluffy bathrobes? Compare their extras to yours, and see where you can outdo them. These details might be small, but they play a big part when people browse through multiple options – especially when you have a unit that’s very similar to others. 

  1. Validate Your Offer with Good Reviews

Reviews have become a significant decision-making driver in the short-term rental market, with 90% of people checking reviews first because proceeding with their booking. Getting good reviews from past guests will therefore either make or break your listing. A great listing could be significantly damaged just by one negative review, while similarly, a positive review could do wonders for your occupancy rate. It’s “word-of-mouth marketing,” but in digital form!

So, how do you get good reviews? Kill your guests with kindness. Be readily available to assist them throughout their stay, create a folder that details all your favorite restaurants and tourist spots nearby, and go above-and-beyond with those little extras, like leaving a welcome basket with wine, snacks, or hand soaps which guests can take home with them as a souvenir. 

Another reason why reviews are critical is that they are a direct reflection of customer satisfaction; therefore, they can help you figure out what your core audience expects from you. Take the time to read both negative and positive feedback, then use it to improve your offer and engage with your guests. Just never argue or get angry with former guests in the comments, even if they leave a bad review, as this can harm your reputation as a host and drive away potential customers.

Apply these 6 tips and prepare yourself for a flood of guests! 

Right now is an optimal time for short-term rental owners to grow their business in the Metro Detroit area. It may not be as developed as other areas, like Chicago, but the industry was growing before the pandemic and will likely keep growing once the new normal gets in full swing. 

Just remember to keep an eye out for ordinances regulating short-term rental properties in your area, so you can adjust your strategy if needed to remain competitive.

Any short-term rental marketing tips we’ve missed? Share your thoughts below! 

Image Courtesy of Andrea Piacquadio

Categories
Wholesaling

7 Steps to Real Estate Wholesaling

People outside the real estate industry don’t realize how difficult it is to source wholesale deals. They might think this kind of investing is relatively easy, since wholesalers don’t have to do renovations or deal with tenants, but the difficulty of this strategy is actually in sourcing good deals.

So what tools can wholesalers use to source good deals quickly and consistently? Let’s look at 7 ways you can find both buyers and sellers for your wholesale deals:

  1. Find Motivated Sellers – Many wholesale deals are sourced from owners who haven’t even thought about selling before you, the wholesaler, came into the picture – so their properties won’t be listed on the MLS or traditional real estate listing sites. You need to find and directly contact them, and one way of doing this is to build a professional network of deal-hunting “bird dogs” to track down motivated sellers and look for distressed houses to pass along to you.

2. Get Properties Buyers Want – Look for distressed properties, or ones with delinquent taxes–most homeowners of those are eager to sell, and only a little negotiating from you could help secure a deal at a reasonable price. However, you also need to look for properties with desirable features in locations that you know are attractive to investors and other potential buyers, otherwise your contract could expire before you find a suitable purchaser. Find target neighborhoods that fit your criteria and drive around them to find distressed houses, or contact the county records office to get a list of tax-delinquent properties.

3. Promote Yourself Online – If you don’t have an online presence, you’re missing out on perhaps one of the most crucial channels for potential customers to find you. Have a website or page with a Lead Capture Form where visitors can submit their contact details, and keep these for sending out future email blasts with details of your available deals. Then you can increase the reach of your website by promoting it to targeted markets on multiple online platforms, helping passively bring you more potential sellers and buyers.

4. Connect with Hard Money Lenders –  Sometimes cash buyers don’t have the total purchase price of a property upfront, so they call up a hard money lender. That means hard money lenders also know a lot of cash buyers that they can refer to you. (Plus, they’re incentivized to connect you to these buyers, in case one of your future deals would require their services to close!

5. Build a Large Network – Having a community of investors at your disposal who are interested in buying wholesale deals makes it faster and easier to market your deals. Network with real estate agents, investors, and landlords in your area – either online, or through in-person groups, like your local REIA.

6. Visit Courthouse Auctions – Since buyers need to have all cash in courthouse auctions, this is a great source for finding cash buyers. Try to drop by courthouse auction sessions early and regularly to network with the people there, and add them to your email mailing lists.

Wholesaling real estate is a great way to get into the property business without any upfront capital. All you need are the tools listed above, persistence, and great negotiating skills to become a successful wholesaler.

Any other tools we missed? Tell us in the comments section below

Image Courtesy of Deva Darshan

Categories
Flipping Landlords

How to Target Metro Detroit Landlords with your Flip (Part 2)

Last week, we looked at how to plan your flip to target an owner-occupier buyer in Metro Detroit. This week, we’ll take it a step further and consider how to market flipped properties to another kind of buyer, and one which most flippers wouldn’t necessarily consider right off the bat: landlords.

Landlords are probably not going to pay as much as an owner-occupier would, but they could be a consistent buyer for your properties, so building relationships with local buy and hold investors could be a great back-up strategy for marketing your flips.

Especially in the current economic environment, having a consistent buyer for multiple properties could be a serious boon for flippers. More people are choosing to rent long-term rather than buy, and this trend is likely going to continue as we slowly recover from the financial strain caused by coronavirus. But, while first-time buyers could be shying away from buying now, investors are always on the look out for a good deal.

So, here are some points to consider when targeting Metro Detroit landlords as buyers:

  • Landlords are Investors, Just Like You: This means they won’t be sold purely on light, airy spaces and nice kitchen counters – they want to see the hard numbers when making their decision. Highlight the financial benefits of the property when marketing to them, like whether the area has low vacancy rates, the rent-to-price ratio, and CapEx projections for any maintenance that will be required in the coming years.
  • Lower Margins: Buy and hold investors will be looking for a deal, and in Metro Detroit they’re unlikely to be looking for a single family home that costs several hundred thousand dollars, meaning your margins on each sale will be lower. However, you may be able to compensate for this in the volume of sales you do, since a landlord could become a guaranteed buyer for multiple flips. If you build relationships with local landlords, you can also do off-market deals with them, saving both of you time and money spent on marketing and agents’ commissions.
  • Out-of-State Buyers: When you consider the fact that the rental market in Metro Detroit attracts tons of investors from out of state – and even overseas – to the area in search of high rent-to-price ratios, you can see how marketing to this group can significantly widen your pool of buyers. Most of these out-of-area investors look for properties that are fully–rehabbed and ready to rent out, meaning a fresh flip could be the perfect choice for them.

Many of them also look for ‘turnkey’ rental opportunities, meaning properties which have a tenant and property management company in place, so you can find a tenant and then sell your flip as an active rental investment. You can also partner with a local PMC to show landlords that your property comes with the whole package, turning it into a mostly hands-off investment for them.

  • Invest in Different Markets: Selling to landlords can also widen the pool of areas you can invest in, since a strong rental neighborhood and a strong seller’s market are two different things. This gives you the chance to flip properties in lower-price areas, with less upfront capital. You also won’t need to shell out as much for high-end fixtures and fittings, since these won’t matter to a landlord like they would to an owner-occupier.

Landlords may not be your primary market, but they can account for a healthy secondary market when it comes to finding buyers for your flips. Keep these points in mind when targeting local buy and hold investors with your flip, and you could end up with a lifetime customer for your business.

Image Courtesy of Lisa Fotios

Categories
Landlords

How to Target Metro Detroit Owner-Occupiers with your Flip (Part 1)

Home values in Metro Detroit were on the rise at the beginning of 2020, and are expected to continue to increase in the aftermath of coronavirus, making it an attractive market for flippers looking to add value to distressed properties. In this 2-part series, we’re looking at how flippers in the Metro Detroit area can tailor their properties to appeal to different types of local buyers in today’s economy.

The ideal buyer for a flipper is an owner-occupier, since they buy emotionally and thus will usually pay the most for your property. In a perfect world, you’ll even have multiple owner-occupiers vying for your house, leading to a bidding war that drives up the price. The key to generating this kind of demand for your property is to make sure your flip is targeted to appeal to buyers in your area.

So what do owner-occupiers in Metro Detroit look for when purchasing a house?

  1. Location, Location, Location: If you’re just getting started in flipping properties in this area, the most important thing to do is pinpoint the neighborhoods with the strongest demand from buyers. Completing an attractive flip will mean nothing, if it’s not in an area that owner-occupiers actually want to purchase in. In Metro Detroit, the areas with the strongest appeal are cities with vibrant downtown areas, like Ferndale, Royal Oak, Rochester, Plymouth, etc. The cities near these areas are also good places to focus your search. Do as much due-diligence as possible to familiarize yourself with an area before deciding to invest there, since even a few streets over in one direction can make a big difference in terms of desirability.
  2. Floorplans We’ve seen several flippers lose their shirt on a flip they did a great job of renovating, but the property had floorplan issues they didn’t or couldn’t address. Low ceilings in a basement or the upstairs of a bungalow, pass-thru bedrooms, nowhere to dine, inaccessible garages and more. Stay away from these types of projects unless you are really good at calculating an ARV that takes them into account, or your budget includes addressing them.
  3. Amenities: More than ever, homebuyers expect everything to not only be done and done well, but they want all the amenities included. Study what the market wants and include as many as you can in your budget.
  4. Security: People want to feel safe in their homes, but bars on the windows aren’t the most aesthetically pleasing design feature. Consider adding smart security features, like digital keypads and mobile-controlled alarm systems, to give your property a leg up over the competition.
  5. Social Distancing: In the era of the new normal, homeowners are starting to look at properties in a different light. Houses which have large outside spaces, home entertainment features, or are located in less population-dense areas might have a higher appeal than ever before. The same goes for layouts which are conducive to a whole family living and working from home, so think about including a dedicated office space and segmented living areas.

Plan your flip to include these features, and you’ll be in the best position possible to produce a quick sale, so you can get started on your next investment property ASAP!

Keep an eye out for Part 2 of this series, where we’ll be looking at how you can target a different kind of buyer with your Metro Detroit flip: buy and hold investors.

Image Courtesy of Lisa Fotios

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