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FAQ's
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Frequently Asked Questions
- What is an assignment fee?
This is a fee for services that is paid by the investor for locating a property that meets the criteria of the investor. This assignment and its fee are considered rendered by all parties upon the signing of the assignment contract by both the original buyer and the new investor.
- Is the assignment fee refundable?
Once the transaction has begun, the assignment fee is nonrefundable. If the property being assigned is unable to close, the assignment fee would be transferred to another property, rather than refunded.
- What is a construction management fee?
This is a fee for the oversight and coordination of the rehab process done by someone other than the owner/investor. This fee is typically $1,000. The construction manager interfaces with the contractor(s), the utility companies (for on-site work) and the property-management company through the final inspection of the rehabbed property and is aligned closely with the on-site inspector.
- What is an on-site inspector fee?
This $500 fee is for an independent on-site inspector who checks on your project twice a week, takes pictures and writes up reports. This information is sent to the construction manager, who in turn sends it to you, the investor. This allows you to see exactly how your project is progressing, and ensures the work is being done as scheduled.
- Why do I need to pay cash?
This expedites the buying process. We generally buy directly from wholesalers that are dealing with the asset managers of the largest banks in the country, and when we make offers they are based on our ability to get the deals done. Cash allows us speed in completing deals which affords us access as a preferred investing partner.
- What about financing?
We have a few different avenues for you to use. This can range from the hard-money lender to purchase and rehab your investment property, to the permanent loan you would put in place once the project is completed, occupied and has met all seasoning required by the lenders.
- What is seasoning?
This is by definition a period of time a property is held in the name of the investor. The amount of time may vary, from lender to lender, state to state and investor to investor. An example might be that you need to own a property 3 months in your name before you can refinance it. Another lender might require 6 months or longer.
- Who does the rehab?
We have several different contractors that do our work for all of our investors. This does several things. It ensures our rehab bids are competitive, generally improves the quality of rehab work that is done and also allows us the flexibility to do many projects at once.
- What about management after it is rehabbed?
We have a property-management company in place that will do a final inspection of your property prior to presenting it for rent. During the rehab process all our contractors work from a pre-defined list of criteria to make the properties “rent ready”, but on some occasions the property-management company will request some additional items be done prior to renting. If this falls outside the scope of rehab work that was originally bid, this becomes the decision and responsibility of the investor as to whether they want to have this additional work done. The contractors work very hard to anticipate the rent-ready condition of the properties desired by the management company, but cannot control these requests.
If the investor decides to have additional work done, it is their responsiblity to contract for the work. The property-management company can do the work or sub-contract it out; the rehab contractor may be available to do it; or the investor can make other arrangements.
- What about insurance? What do I need to do to make sure it is ready?
As soon as you contract for the purchase of the property it is critical to immediately begin conversation with the insurance company. We will provide you all the contact and property info necessary to insure your property at closing. It is your responsibility to get quotes and secure the insurance for your individual properties.
- What information will I need for the insurance company?
You will need:
* Address, City, and Zip Code.
* Number of bedrooms & baths
* If it has a garage and size - one or two car
* Does it have a basement
* Building type: brick or frame; bungalow or
ranch
* Year built
* Square footage of living space (don't include
unfinished basement or attic)
- Who do I contact if I have general questions?
From your initial questions until you close, your contact is: Gina Reyes at 800-394-0107 ext 2020, and her email address is rghousingllc@yahoo.com.
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- What about utilities?
The construction manager will work with you to coordinate utility setup immediately following the closing date of your property. This will help reduce any delays that might occur from either DTE Energy (gas and electric) or the City of Detroit (water) in scheduling turn on dates. Be prepared to produce proof of ownership and copy of deed or HUD statement.
Also remember the homes may have been vacant for some time and meters may have been removed, requiring extra time to have these meters installed. The construction manger will interface with both the construction manager and the on-site inspector to make sure someone will be at the properties when the utility service personnel arrive.
Note: if your property does not have a furnace at time of purchase, no gas can be turned on until it has been installed.
- How do the numbers come about: rehab costs, after-rehab values, rental values, and can make a counteroffer?
Once the worksheet has been presented, we have already negotiated and locked in the lowest possible price the seller will accept. Once the price has been agreed upon by seller and original buyer, we then have the property pre-appraised for after-repaired value (ARV) , which is the value after the rehab is done, and what the rents will be averaging in the area for this home size and condition. We will also have multiple rehab bids to ensure the best possible price to us and our investors. It is important that you do your own due diligence. Once the assignment has been signed, the contract is yours and you have agreed to perform/close on the property.
- What is the reason for investing in Detroit?
The main reason: We are buy-and-hold investors. We invest in Detroit because it is a market that is still very good for rentals and rental income is generally positive against the loans established on the properties. This varies with each investor based on their credit.
Detroit is not a market to buy and sell. The market for resell is depressed and that is why as buyers we have a very good negotiating position. If your intention is to fix and flip, we are not for you
We also have a much lower price point on properties, averaging in the $40-60,000 range per property for purchase and rehab vs the much-higher prices in the California market.
- What happens if for some reason I buy and need to sell, do I have options?
Yes, but just like any other investment that is designed for long term (more than 5 years), getting out early comes with penalties. When you need to sell fast, price sells. You bought wholesale and you will have to sell wholesale. This might mean selling below what you have invested in the property, depending on how quickly you need to get out. Do not expect retail value for your property, you will be disappointed. It will not happen! Detroit and real estate in general is a long-term investment. If you are not in for the long haul, this investment vehicle is not for you. We service people who are investors, not those with get-rich-quick mindsets.
- What is the average return?
Every property is different and your decisions should be based on results of your due diligence. We make no claims as to your returns. Any references to returns are based on purchase price and estimates received by property-management companies (rental rates), contractor bids (rehab costs) and after-market value (pre-appraisal) and vary with each property. We use a general personal financial profile of 620+ FICO score and stated income to estimate financing terms. This will vary by individual and depend on the current terms available when you refinance.
- Once the inspection/rehab cost is in place can it change?
This is a very good question. In the Detroit area we are dealing with rehabbing homes that can be upwards of 50 to 100 years old. Our inspectors and rehab estimators work very hard to be accurate, but sometimes once the project has begun, things that could not be seen in the inspection and rehab repair estimating process become exposed. This should be anticipated by the investor in every project. Any additional repairs that fall outside the original scope of repairs that the investor agreed to have done are their responsibility.
- What about appliances?
I have never supplied any appliances in my rentals in Detroit. This is your decision.
- Window coverings?
This is something some property-management companies suggest, others require, totally negotiable. It is a pretty inexpensive item to have installed, and gives the appearance of someone living in the house, as well as eliminates the tenants using blankets and sheets for curtains.
- Is investing in real estate easy?
Like anything else, the first time you will be in a learning curve and there will probably be some hiccups along the way. The more you do it, the more familiar you become with the process and like any new skill set, you become more efficient and effective with doing.
I have been investing in Detroit for several years and based on my mistakes and what I found difficult, I have developed the system that I am presenting you, with the goal that others can get into their market and reap the benefits with fewer frustrations than I had. Anyone, on their first time, will make the processs longer and harder than it is the next time. If you continue to invest, whether it be through me, in Detroit or pre-construction, or through someone else, time is your friend. Let me tell you that one day the rents far exceed the costs of owning your properties and this is true wealth!
Good Luck!!
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