Investor Question: High Cash on Cash Return AND Property Management Fee Covered - - HOW?

Someone asked me a really good question.

I said that an investor buying properties in Detroit can get a really high cash on cash return (10% to over 30%)--AND this includes the monthly fee to pay someone to manage your property for you.

He asked me, “HOW does this work?”

Here are the biggest factors to making it work:

1. Buy at the right price

2. Correctly assess repair values (be close, at least)

However, what is the BIGGEST factor that makes it work in Detroit?

The renters market is MASSIVELY HIGH. (While the house seller's market is incredibly low.)

This combination allows an investor to buy properties really inexpensively while still charging normal to higher monthly rents.

Overall goals:
• Maximize positive cash flow

• Minimize hands-on work needed

The Detroit market allows this to happen, but you HAVE to know what you are doing.

You will probably not find these great deals within Detroit's Historical Districts (i.e. Rosedale Park, Palmer Woods, Indian Village, Sherwood Forest, etc.). You can still find properties inexpensively, but too many people know about these areas for you to "sneak" anything past other potential buyers.

Detroit is a strange place--possibly for many reasons, but stick with me here. Outside of the Historical Districts, there are not many "BIG pockets" of easy to find, good neighborhoods. With the exception of these well-known nice districts and a few horrible neighborhoods, good and bad places to live vary fom street to street--sometimes from block to block, even.

Since these places are harder to find than the more noted neighborhoods, fewer investors know to look in these spots, because it takes ACTUAL investigation. (The wrong move can put you in a bad area, and a lot of people are NOT willing to do this.)

Fewer buyers mean that these properties sell for a lower amount. However, since they are in good areas, plenty of people will want to live there, increasing the amount of rent that you charge. (Higher Demand = Higher Rent)