Finding a profitable investment property in Detroit can seem like a fruitless endeavor. You scour neighborhoods, look at countless homes and attend auctions. No matter how many properties you look at, there never seems to be enough of a margin for you to pull the trigger and be profitable. Are there no worthwhile investment prosperities in Detroit? Unlikely.
Follow these rules to help you discover the profitable investment properties in Detroit.
Where Are the Profitable Investment Properties in Detroit?
Meet the Competition
Like any other industry, real estate investment is a very competitive arena. The pool of investors vying for the same small pool of properties makes it hard to compete – especially if you are new or not well funded. By understanding who you are bidding against for properties, you will get a better insight about how to compete for the good, profitable deals.
It can’t hurt to join an investment club and meet the competition. Not only do you learn about them, you become colleagues. Investment clubs are great resources to help you learn, develop partnerships, and build a bigger real estate investment portfolio. This will enable you to acquire profitable deals you may not otherwise have the funds or knowledge to close.
Redo Your Math
Profits are calculated by subtracting costs from the purchase price. It is that simple. If you are losing properties to other investors offering higher prices, look at the numbers again.
Can the other investors do the rehab for less? If so, why?
Are the sales prices closing higher than you would have expected because of a change in the market? If so, adjust your numbers allowing you to make higher offers.
Take a look at all line items and determine if you are in the correct ranges for all costs. It may be that you could acquire a property and still make a profit but you aren’t using accurate calculations.
Become a Better Negotiator
It isn’t just the competition that you need to gain a better understanding of in dealmaking. Learn better negotiation skills to improve your chances of closing a property at a price that will be more profitable to you. Sellers have needs. Learn what makes sellers tick.
Part of what makes a seller tick might be financial distress, a family death or job relocation. Knowing why a seller wants or needs to sell or why the property is distressed in the first place will give you trigger points to work into your conversations on price.
For example, if the seller is dealing with a probate issue, explaining to them that you are willing to work a cash offer and talk directly to the estate executor could help alleviate stress on the seller. You are offering a solution to the existing problem and this often gets results especially if your offer is below what the seller was hoping to get.
Find New Opportunities
We’ve talked about real estate investment opportunities as being a numbers game. The more properties you have the opportunity to see and bid on, the better your chances are to find one that makes you a nice, worthwhile profit.
Real estate investment clubs are one location to open up more opportunities and even find better deals. You can also talk to the local county clerk to get a list of properties behind on property taxes. In some states you can buy the tax lien certificate and make a few bucks to see if the property forecloses, giving you the first right to the property for pennies on the dollar.
Street signs are also popular ways to attract sellers who may be in an urgent situation. This is a good opportunity to have them call you rather than you doing all the legwork.