There are three factors that you should be aware of when you look to buy rental houses here in the suburbs.

Knowing these, and acting on them, will substantially reduce your risk as a rental house owner.

The three factors are:

1. Never own a property in your name

While I’m not an attorney, I recommend holding your rental properties in a Limited Liability Company, or LLC.

If you and your property manager operate your LLC correctly, it will give you liability protection against lawsuits that may attempt to go after other properties you own or money you have. Talk to an attorney or CPA if you have questions. I can refer you to the people I use.

2. Always insist that the seller give you a Warranty Deed and a Title Insurance policy when you buy

A Warranty Deed gives you the maximum amount of assurance that you’re getting clear title to your property. Don’t settle for anything less.

Title insurance protects you in the event that there is something wrong with the title. This is common in most transactions here, and every reputable seller will willingly pay for it. If they don’t then find another seller.

3. Buy adequate property insurance before closing

This will protect you from weather related and other unexpected issues that may arise.

The key with property insurance is to be sure you get adequate coverage, but not too much coverage. Over insuring your property is a waste of money and will reduce your cash flow.

I recommend you also deal with an insurance agent and company that are experienced with rental properties in this area. I’d be happy to refer you to the people I use.

To get a free copy of my 6 Step Guide To Buying Turn Key Rentals In Metro Detroit, visit http://www.SuburbanTurnKey.com

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Choosing the right property manager is critical.

Think about it. You’re investing from a distance, and you’re buying rental houses here in the suburbs to generate consistent and predictable cash flow. Your your property manager, therefore, is the person who will have the greatest impact on it.

The best solution is to manage the properties yourself, because no matter what any property manager tells you, they don’t and won’t care as much about your property as you do.

Again, take it from a rental property owner!

So it’s important to cull through the hundreds of property managers around and find the one that’s the best for your property.

It sounds like looking for a needle in a haystack. Fortunately it’s not that difficult.

The reason is because you should look for a property manager that has direct, specific experience managing properties in the neighborhoods you’re buying in, because every neighborhood is different.

And knowing how to rent houses in specific neighborhoods is the critical factor in minimizing the vacancy time that you experience.

So the questions to ask when you’re looking for a property manager are:

• Where are the houses you manage?
• How many do you manage in my neighborhood?
• How long have you been managing in my neighborhood?
• How quickly do you re-rent houses?
• What’s the average cost to turn over a property in my neighborhood?
• How do you determine the rent to charge?

If you’re dealing with a property manager that really knows the area, you should get straight, specific answers to your questions. If you don’t, go on to the next one.

I would also ask them if they have experience managing properties for owners that are out of state or out of the country.

One last thing – managing apartment buildings is significantly different from managing single family rental houses.

Just because a property management company has experience managing apartments in your area doesn’t mean they know how to manage houses.

So make sure you choose a company that has specific expertise, with houses, in the area you’re buying in.

Your cash flow and profit depend on it!

Tune in tomorrow for Step 6: Protect Yourself!

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I alluded to this earlier and I want to reiterate it so there’s no misunderstanding.

DO NOT RENT TO SECTION 8 TENANTS!

I’m sorry to have to say this, because when I got started I was a big fan of the program, and I routinely had around 10% of my tenants in the program.

Over the last 18 months or so however, the program has changed. And not for the better.

The problem is that tenants are no longer being held accountable for their actions.

Over the last 18 months I’ve had Section 8 tenants leave without paying huge water bills, leave after they’ve done damage to the house, leave after having pets, which I don’t allow because they destroy the inside, and leave owing back rent.

All of which are against the rules of the program. And each of these violations, according to the Section 8 rules, is cause for a tenant to be removed permanently and immediately from the Section 8 program.

But in each case the tenants were allowed to move to another rental and stay in the program.

And it’s not just me who’s having these issues with the program. Most of my colleagues who own rentals in this area have also stopped renting to Section 8 renters as well.

I recommend you google it yourself and read some of the horror stories about the program.

So Section 8 is not the greatest thing on earth like others are pitching. In concept is sounds great. But in practice it sucks.

Section 8 is a prescription for disaster. Don’t turn your beautiful rental houses over one of these renters. The risk is FAR too great to take a chance.

Especially when you’re investing from a distance. It’s just not a headache you want to take on.

Take it from someone that has actually dealt extensively with the program.

Tune in tomorrow for Step 5:  Property Management is KEY

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Believe me when I tell you that all houses are not alike. And as crazy at it sounds, renters are picky, and are getting more so every year. So choosing the right types of houses to buy matters a lot to your long-term success and profitability.

Thankfully though, picking the right types of houses is not rocket science either.

Over the last seven years, through trial and error, and through exchanging notes with other rental property owners in the suburbs, I’ve developed the ideal set of criteria for rental houses.

This criteria does two things – it takes into consideration the wants and needs of a picky rental market, and it takes into consideration the wants and needs of you and I as property owners.

Why?

Because you need to think about marketability to renters when you buy. You can get a great deal on a house, but if it’s some weird or non-standard configuration you’re not going to have any success renting it.

And also because you need to think about repairs and maintenance, as well as your eventual re-sale, before you buy as well.

For example, you should never buy a rental house with either a flat roof or a roof with too high of a pitch to it.

Because if you hold onto the house for any real length of time, the odd are that you’re going to have to replace the roof at some point. And flat roofs, and roofs with excessive pitches can cost two to three times as much to replace as a standard pitched roof.

And you don’t get to charge a higher rent for replacing the roof, no matter what it costs.

So what you buy is as critical to your success as where you buy it.

My recommendation to you, and what I buy exclusively, consists of this:

• Ranch, bungalow, or colonial style
• Brick exterior
• Greater than 1000 square feet
• 3 or 4 bedrooms above grade
• a full basement
• a garage
• a fenced yard
• a normal pitched roof
• in a neighborhood and not on a busy street

Even if they meet the above criteria, however, stay away from weird configurations and additions.

Also, stay away from less popular layouts like tri-level and quad-level designs. People don’t like buying them and they like renting them even less.

Stick to this list and you’ll maximize your appeal to the renter market, and you’ll maximize the marketability of the house when you eventually want to sell it.

Tune in tomorrow for Step 4: DON’T Deal With Section 8

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The key to developing a consistent rental cash flow in Metro Detroit is getting great tenants. The key to getting great tenants is to buy in the best areas. And the key to identifying the best areas is to focus on the best school districts.

It’s not rocket science!

In my experience families with kids make the best renters. And renters with kids want the best school district they can afford, just like every other parent on the planet.

And once they pick the district, and the kids are enrolled in school, the family tends to stay in the rental house a good long time. They pay consistently and on time. And they take better care of the house.

So school district is the #1 criteria for picking an area to buy rental houses.

The great thing about this criteria is that you don’t have to know a lot about the area. If you have the right house criteria and you’re in the right school district, you’re set.

Tune in tomorrow for STEP 3: Buy the RIGHT HOUSES

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I’ve been buying rental houses here in the suburbs now for seven years.

And nearly the entire time I’ve been telling anyone and everyone to stay away from the city of Detroit if they wanted to own rental properties.

A few listened. Fortunately for them.

The rest, however did not. And now most of that group is now out of real estate altogether.

Detroit is a cesspool of crime and gangs. And because of that buying and owning in Detroit isn’t child’s play.

It’s hands on. It’s time consuming. It’s dangerous. And it costs a fortune after you buy.

What, nobody every told you that it cost a lot of money to own rental properties in Detroit? Funny how that is! All you ever hear is how cheap the houses are. For good reason.

You see, getting your first house in Detroit, with or without a first Section 8 renter looks and sounds great at closing.

But have you ever seen the damage that the typical Detroit renter will do to a house in under a year? I have. Trust me when I tell you that you don’t ever want to see it. It will literally turn your stomach.

What happens is that they’ll live in your house until it gets too filthy and beat-up even for them, then your renter, the one that you thought would live there forever, will stop paying rent, then move.

Leaving you to clean up the mess and repair the damage.

And oh by the way – the small security deposit they paid won’t cover the damage. And very few Detroit renters are collectable, so good luck taking them to court to get them to pay for the damages. (The court in Detroit is also so tenant friendly that it’s extremely difficult if not impossible to get money judgements even if they are collectable.)

Then after they move and your house is vacant, your house will get stripped within days of anything of value that the tenants didn’t take with them.

So every time you have a vacancy of even a week in Detroit, you run the very real risk of needing nearly a full rehab done on the house before you can re-rent.

And your cash flow won’t cover the cost either.

In addition, the property manager that I work with – and he’s the best in the metro area in my opinion – just stopped managing anything in the city of Detroit.

Dozens of houses and dozens of apartment units. Cancelled. He gave up a ton of money by doing that.

So I asked him why. He said it was because he was tired of his rent collectors getting shot at.

Personally I didn’t need another reason to stay away from rental houses in Detroit.

Hopefully this will be enough to convince you too to focus on the suburbs.

Tune in tomorrow for STEP 2: Focus on SCHOOL DISTRICTS

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I’M SO TIRED OF HEARING HOW WONDERFUL DETROIT PROPERTY IS!

SERIOUSLY.

With all the misinformation circulating regarding Turn Key rental houses in the Detroit, I decided I had to act to set the record straight.

Because there’s a lot of crap being slung around. And I’m tired of seeing it. I’m tired of hearing it. And I’m tired of getting asked about it.

I mean, I’ve been buying suburban rental properties in Metro Detroit now for seven years. The best houses, in the best school districts, at rock bottom prices. I’m getting the best long-term tenants and I’m charging the highest rents.

And try as I might, I can’t seem to even get close to the ROI “projections” being pitched by the guys selling crappy Detroit houses with Section 8 tenants.

I wonder why that is? And I wonder why they never use actual numbers? Strange.

My point is, to counteract all of this “information”, I decided to put together a series of posts that walk through the issues and questions with respect to getting started buying turn key rental properties in the Metro Detroit area.

I call those posts the “6 Steps to Getting Started With Turn Key Rentals In Metro Detroit”.

Now I don’t pull any punches in the steps, because investing in Metro Detroit has a ton of risk if you do it wrong, if you buy from the wrong people, or if you listen to the wrong people. Just ask any of the dozens of people from out of state and out of the country that got ripped off when they bought here.

So I hope these steps can save good people from making some big mistakes trying to do the right things.

Here’s the thing. Done right, buying rentals in Metro Detroit SUBURBS makes more than a lot of sense. I know that because, like I said, I’ve been buying here for years and have been cash flow positive every single month since I received my very first rent check.

And the case for buying rental houses here is actually better now than it was when I started. For three big reasons:

1. Cash Flow
Cash flow in the suburbs is off the charts good. I don’t know of another area in the entire country that generates the cash flow, or ROIs, that suburban properties here do.

2. House Prices
This area has suffered greatly during the foreclosure crisis. We’re likely at or near the bottom, so further decreases in value are highly unlikely. And so what if they happen? What’s a 20% drop in value on a $50,000 rental house? That rents for $1000 per month? Certainly not anything close to the end of the world. Especially when you have 50% (or more) downside protection on your rents before you break even.

3. Rental Demand
Also because of the foreclosure crisis, rental demand is strong – in the suburbs. And it’s projected to stay that way for years. But it depends on where you buy, as always.

My goal in this is not to make the case for buying here. If it’s not for you then it’s not for you, and I don’t have any desire to convince you or argue about it.

But if you’re thinking about buying here because you see the opportunity, then you should pay attention to these posts. They could help you avoid mistakes that could cost you thousands of dollars and years of headaches.

So stay tuned for Step 1: DON’T BUY IN THE CITY OF DETROIT!

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