Property Management

The Power of Professional Management: How Property Managers Can Benefit Detroit

by Adam Luehrs
written by Adam Luehrs

 

Whether you’re just getting into the Detroit rental market or you’ve been investing in rental properties for some time, you probably already know that effectively managing your property takes a lot of time and energy. As you start adding more properties to your portfolio, you’ll quickly find that you’re spending more time protecting your investments. While there’s certainly nothing wrong with being actively engaged in your Detroit real estate investment, one of the most alluring aspects of being a landlord is the ability to earn passive income. If you want to expand your real estate investment business but don’t want to spend all your time managing and maintaining the property, working with a property management company offers a host of benefits.

Gathering and Using Market Data

A professional property management company doesn’t only get involved once you have a tenant in the property. Thanks to the resources that these industry experts have at their disposal, they’re constantly watching the local market to get a better understanding of local rental rates. While you can certainly do a quick internet search to find out the average rental rate in Detroit, a professional property management team will get detailed information about individual neighborhoods. This type of information is incredibly important, as your price point needs to be in line with comparable properties. If you set your monthly rental rates too high, you’ll have a hard time filling vacant properties. Conversely, if you set prices too low, you’ll be cutting into your profits.

Advertising Your Property

Vacancies are an unavoidable part of real estate investing. No matter how well you maintain your property or treat your tenants, people will eventually move out of your property. In the past, landlords could get by putting a “For Rent” sign in the front yard, but in today’s competitive market, you need to be able to set your property apart from the rest. Property management companies have advertising specialists who know how to target their ad campaigns based on local market data. While you can certainly make a social media post about a vacant property that you own, you’ll find that a professional property management company offers better advertising options, which results in a better return on your investment.

The Importance of Tenant Screening

Finding potential renters is great, but finding the right renters is the lifeblood of any successful real estate investing business in Detroit. Tenant screening is a crucial part of finding success in the world of real estate investing. The tenant screening process involves an initial application, a credit check, employment verification, and much more. Not only are there a lot of legal components to this screening process, it’s also incredibly time-consuming. Do you want to spend time on the phone verifying references from past landlords for every applicant? Do you have time to run a credit history on your applicants? Property management companies handle the tenant screening process for you, allowing you to focus your energy elsewhere.

Managing Tenant Relationships

Tenant relationships are perhaps the most important part of a successful real estate investing business. While there’s certainly nothing wrong with having friendly relationships with tenants, it’s important to remember that it’s also a business. You’re the owner of the business, and your tenants are your clients. There are plenty of issues that arise over the course of this landlord-tenant relationship, and having an experienced property management company in your corner is a powerful resource. Property management companies handle routine maintenance and any emergency repairs that need to be performed along the way. This is much faster and more cost-efficient than trying to handle the issues yourself or hiring someone to handle each issue that comes up.

Your property management company probably doesn’t have a team of service professionals on hand, but they do have relationships with plumbers, electricians, and HVAC contractors. Those relationships are great news for you as a landlord. You don’t need to spend all your time combing through reviews, gathering information about a contractor’s insurance status, and going over estimates. Let a property management company handle those things for you.

Meeting Legal Requirements

Being a landlord involves a lot more than buying a property, getting it ready for tenants, and signing a lease. There are loads of legal regulations in place that dictate every step of the process, from the tenant screening process to the end of the lease. There are even laws that govern maintenance, repairs, and improvements. It’s highly unlikely that an investor knows the intricacies of these laws, which means it’s important to work with someone who does. A property management company can put the right processes in place to make sure that you’re meeting state and federal laws as a landlord. This not only protects your reputation, making your properties more attractive to potential tenants but also helps protect you from litigation and fines.

Collecting and Depositing Monthly Rental Payments

If you own one Detroit rental property, it may be easy enough to collect the rent every month, make a trip to the bank, and deposit your money. However, when you start to add multiple properties to your investment portfolio, rent collection gets more complicated. Additionally, it’s important to keep tedious financial records, regardless of the number of properties you own, to make sure that you’re filing your taxes correctly. Finally, there’s always a chance that there’s a dispute concerning the rent, and legal recourse may be your only option. With all of these circumstances in mind, it’s worth working with a property management firm that can collect and manage your rental income on your behalf.

Choosing the Right Property Management Company in Detroit

Most people who start investing in Detroit rental properties do so because they want to earn passive income. At Upside Investments, we believe in letting you be as involved as you want to be. If you’re looking for a proven property management company that understands the Detroit market, we’re here for you. Contact the team at Upside Investments today to find out more about how we can help you effectively manage your Detroit rental properties.

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HousingTurnkey Investing

Identifying High Yield Areas in Redevelopment

by Scott Dylan
written by Scott Dylan

As a real estate investor, you may prioritize diversifying your portfolio as much as possible. Even so, you still might debate about which neighborhoods to buy properties in and what parts of the city to avoid entirely.

Even if you are an experienced investor, you still might find it challenging to settle this debate yourself. Instead, you can work with an experienced real estate investment business like Upside Investments to identify high yield areas in which to invest today.

Class A Properties

Class A properties are the highest level of properties available to investors today. As their classification denotes, neighborhoods in Class A areas feature high-end, top-notch appearances and values. High levels of pride of ownership are common in Class A properties.

Even more, they are low crime areas, full of beautiful homes on well-kept properties. People who own or rent homes in such neighborhoods prioritize keeping highly manicured lawns and gardens, which lend to the beauty and value of their neighborhoods.

Class A properties offer high-quality, high-performance schools, as well as ample amenities for residents. Residents also typically are very involved in their communities in these types of neighborhoods, which contribute to Class A properties being both safe and comfortable for people who live in them.

Overall, Class A properties are impressive and desirable places for people to settle down in with their families. As appealing as they sound, however, Class A properties can be less than ideal for investors.

For starters, the rents in Class A properties are often so high that they exceed the financial reach of average renters. Further, many Class A properties have homeowners associations, or HOAs, which often add to the hassle of investing in properties in them.

HOAs, for example, often require an extensive amount of repairs and upkeep for properties in their neighborhoods. This burden can add to the costs you have to put into maintaining your investment properties. The costs of satisfying the expectations and requirements of HOAs can significantly detract from any profits you make from the homes you own in Class A properties.

With that, Class A properties are more suited for people looking to buy and live in houses long-term. They may not offer the opportunities to generate solid incomes for investors looking to diversify their portfolios.

Class B Properties

Class B properties typically offer better opportunities for real estate investors. These properties are often home to blue collar and middle class homeowners. People working in professions like manufacturing, construction or education often live in Class B properties.

Neighborhoods in Class B properties are typically safe and comfortable, albeit without the luxury and exclusiveness found in Class A properties. Still, they offer comfortable and quality homes that appeal to middle class earners.

They can also provide the ideal market for investors looking to diversify their portfolios. Because of the quality and comfort of the homes found in these properties, they tend to attract both renters and buyers. Further, the home prices in Class B properties may fit more conveniently in the budget you have for buying properties.

Moreover, you can charge reasonable rents, allowing you to recoup money that you have put into your investment properties. These neighborhoods often do not have HOAs, which further can save you money. You can keep your properties repaired and maintained without the hassle of having to satisfy the persistent and high demands of an HOA that is typical of a Class A property.

Additionally, given the safety and quality of residents in Class B properties, you may find it easier to afford insurance on properties that you own in them. You avoid paying the high costs of insuring premium houses like those found in Class A properties. However, you also avoid having to take out higher amounts of insurance to protect your properties because of factors like high crime rates.

Class C Properties

Class C properties are the lowest quality properties into which investors can buy. These properties often are home to run down neighborhoods. They also feature congested areas and have little to no revitalization.

As an investor, you may find plenty of housing options to buy in Class C properties. You may also find it easier to buy houses in a Class C property. Even so, you still need to weigh this option carefully to protect your portfolio and income.

For example, investors who buy properties in Class C areas may experience high turnover rates in their rentals. People who rent housing in such properties often move in and out quickly, which can result in high vacancy rates and little to no income from your rental investments. You may not be able to count on your investments in Class C properties to provide you with any kind of solid and reliable income.

Alternatively, you may find that you can always attract new renters, particularly those that are low-income, because of the lower rents found in Class C properties. Lower income renters cannot afford the rental amounts for properties in Class A and B properties. Still, the lower rents you charge for housing in a Class C neighborhood can translate into a lower income for you as an investor.

Other characteristics to take note of in Class C properties include:

  • High crime rates
  • Higher levels of drug activities
  • More crime
  • Lower performing schools
  • Fewer neighborhood amenities
  • Congested traffic
  • Less access to community resources

Further, you may notice a higher police presence in Class C properties because of drug activities and crimes.

Alternatively, you may find it less expensive to maintain any houses you buy in these neighborhoods. You may keep more of your income that you generate from your investments there.

With that, you understandably want to consider the pros and cons of investing in Class C properties. Adding one or two investments from a Class C property can be a realistic, more affordable and lower risk way to add to your portfolio of mainly Class B properties.

Choosing properties to invest in and finding houses to buy in them can be challenging. Upside Investments has the expertise you are looking for when it comes to diversifying your portfolio and getting a solid return on your investments. Contact us to learn more about investing in high yield property classes today.

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Real Estate Investing

Top Legal Entities for Overseas Real Estate Investment Success

by Adam Luehrs
written by Adam Luehrs

The Detroit real estate market is appealing, not only to people in the United States but to investors all around the world. As the US housing market continues to try to find its footing after the economic issues brought about by the COVID-19 pandemic, investors who want to own rental properties are becoming more and more involved in the US rental market, especially in secondary markets like Detroit. Thanks to the advances in technology that have revolutionized the real estate industry, it’s easier than ever to invest in a property, even if it’s on the other side of the world. If you’re an international investor looking at getting into the Detroit rental property market, it’s important that you choose the right legal structure to protect your investment and yourself.

Why You Need to Choose the Right Legal Structure

Before we dive into the right legal structure for your Detroit real estate investments, it’s important to understand why you need to choose one at all. After all, can’t you just buy one or more properties, work with a Detroit property management company, and let them handle everything for you? You can, but that’s probably not the best idea.

A sole proprietorship is a structure that involves an investor owning a business, in this case, rental properties. While this is certainly the most straightforward way to get into the Detroit rental market, it also comes with some risks.

As a sole proprietor, you’re responsible for personally handling any legal claims made against the property. This can range from unpaid property taxes to personal liability claims filed by a tenant. As an international investor, these claims are even harder to deal with unless you plan on traveling to Detroit to handle them. It also means that your personal assets are at risk. If a claim gets filed against you and you lose the litigation battle that follows, you’re personally responsible as the sole proprietor. With this in mind, there are multiple structures that are better suited for your goals as an investor.

Limited Liability Corporation (LLC)

A limited liability corporation (LLC) is the most popular choice among real estate investors. In Michigan, you’ll pay an initial filing fee to set up your LLC with the state, and then every property that you own is the property of the LLC. In Michigan, the filing fee is $50. You can pay $100 and have your LLC formed on the same day that you file, $500 to have your LLC formed in two hours, and $1,000 to have your LLC officially formed in one hour.

One of the most appealing aspects of an LLC is the number of structures that fall under the umbrella. A single-member LLC involves one person who owns the business, while a multi-member LLC has two or more members. You can also set up a series LLC in which your first LLC eventually owns other LLCs. There are tax breaks available to LLCs that sole proprietorships don’t have access to.

However, the biggest benefit of choosing an LLC is the legal protection that it offers. While you can own the LLC yourself, your personal assets are not at risk in the event of litigation. Instead, the LLC can be sued by a tenant, but they would only be able to bring litigation against the corporation, not you as the owner. The minimal formation costs, tax breaks, and legal protection make the LLC the most popular business structure in the United States.

Partnerships

Partnerships involve two or more people sharing ownership of a property. When choosing a business structure, you’ll need to remember that there are two types of partnerships to choose from, general and limited.

In a general partnership, all the parties share equal responsibility for the business’s debts and liabilities. There are benefits to choosing this structure, as you don’t have to be solely responsible for any financial obstacles that pop up along the way. In a limited partnership, one or of the partners serves as a general manager for the business.

Since the type of business that you’re looking into is a real estate investment business, this would mean that one or more of the partners was responsible for managing the property. While it’s certainly a good thing to have an owner involved in the daily responsibilities of owning a rental property in Detroit, it’s important to note that the partner who is involved in the management has lower liability protection. This puts that partner at greater risk for personal financial loss, which makes it harder to find a partner who’s willing to take that type of risk.

Real Estate Trusts

As is the case with your other options, there are multiple types of real estate trusts to choose from. A trust is a legal entity that manages assets, in this case, properties, on behalf of its beneficiaries. There are different tax implications for foreign nationals using a trust to purchase real estate, so you’ll want to work with a real estate attorney and an accountant who understands these intricacies.

Grantor trusts allow you as the grantor to hold certain rights associated with the properties held in the trust. While the right to make decisions is appealing, any taxes owed on the state or federal level must be claimed on your personal tax return. Conversely, in a non-grantor trust, the trust itself gets to make decisions about managing the property. The positive side of this decreased operational control is that the trust pays the annual taxes associated with the properties held by the trust.

Choosing the Right Partner Helps You Make the Right Choice

The Detroit real estate market is a great option for international investors. However, it’s important to work with someone who not only understands the market but also the intricacies of investing in the Motor City. The team at Upside Investments has helped domestic and international investors navigate the competitive Detroit real estate market for years. Contact us today to find out more about how we can help you add Detroit rental properties to your investment portfolio.

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HousingProperty Management

Rent Collection Strategies for Detroit Property Owners: Ensuring On-Time Payments

by Scott Dylan
written by Scott Dylan

As a real estate investor, you may rely on your properties providing you with solid sources of monthly income. You cannot risk money not coming in from them if you want to cover expenses, such as taxes and upkeep, for your properties and also have an income for you and your family.

Part of ensuring money comes in from your investments involves having your tenants pay their rent on time. You can use several simple strategies to ensure on-time rental payments and avoid going without the income you need and expect from your real estate investments.

Communicate Clearly with Tenants

You cannot expect your tenants to pay their rent on time every month if you fail to communicate clearly to them when that rent is due. As a real estate investor, you should clearly stipulate in your leases when you expect rent to be paid every month and at what point you will begin charging late fees. You should also make it clear to tenants in what forms, such as check or money order, you will accept rent payments.

Likewise, if you allow your tenants to pay their rent to you online, you should include a link to your rent payment portal in your lease agreements. It would help as well if you give details on how to create an account, pay the indicated rent and store payment methods for future use.

You additionally should have your tenants sign and initial their lease agreements. This tactic ensures your tenants agree to your lease terms and understand when rent is due every month.

Enforce Late Fees

As a landlord, you may hesitate to enforce late fees out of empathy for your tenants. However, late fees can become a compelling force to get your tenants to pay their rent on time.

Tenants may find the late fees you charge to be so financially burdensome that they realize it is better to pay rent on time rather than late. Late fees also compensate you, as a real estate investor, for the money you need for paying expenses related to your properties, such as taxes, insurance and maintenance.

Before charging penalties for late rental payments, you should check the landlord-tenant laws in the state where your investment properties are located. You can ensure you are charging amounts that do not violate the laws and give tenants cause to take legal action against you.

Report to the Credit Bureaus

Many tenants prefer to improve or maintain their good credit ratings. They do not want any blemishes on their credit reports because poor credit prevents them from securing future leases, buying a house or obtaining financing like loans.

To ensure on-time monthly rental payments, you can report late payment from your tenants to the credit bureaus. Knowing that their late rental payments could show up on their credit reports can compel tenants to prioritize paying their rent on time. They know they can avoid having a tarnished credit record if they make their rent payments on or before the first of the month rather than late every month.

Send Out Email Reminders

As a real estate investor, you might keep a busy schedule. You may lack the time to sit down and type or write out monthly rental invoices for all of your tenants.

Rather than take time out of your busy work calendar for such a task, you can send out email reminders every month to tenants about their approaching rent dates. This option saves you time and lets you focus on more important matters rather than writing or typing out individual rent invoices for each of your tenants.

You can also use a form email and set it up to send out automatically to all of your tenants every month. These emails not only remind your tenants to pay their rent on time. They also provide you with written proof that you did your part as a landlord to ensure monthly on-time payments. You can take this proof to court, if necessary, if or when you have to evict a tenant for non-payment of rent.

Offer Occasional Discounts

Tenants like to be rewarded for paying their rent on time. Not only do they get peace of mind for another month that they have a roof over their heads. They may also want to know that you, as their landlord, appreciate them making an effort to pay rent to you on time each month.

To acknowledge this effort, you can give out occasional rewards, such as a discount off the next month’s rent, to tenants who pay their rent on time. Such a discount can come in handy for tenants during certain times of the year, such as around Christmas or New Year’s Day. They can use the money that they saved from your discount to pocket or put towards celebrating the holidays with their loved ones.

Uphold Your Landlord Obligations

Finally, on-time rental payments should reflect your effort as a landlord to uphold your obligations toward your tenants. For example, you have the responsibility of making timely repairs to their apartments or houses. You also must ensure their places are safe and clean in which to live.

If you fail to uphold your proverbial end of the bargain as a landlord, you may give your tenants the right to issue you a 14/30 notice and withhold rent from you. To avoid giving your tenants any reason to not pay their rent on time, you should prioritize making needed repairs on time, keeping your real estate investments safe and sanitary and otherwise fulfilling the state-required obligations you take on when you lease out your properties to tenants.

Knowing what is expected of you as a landlord and likewise ensuring on-time rental payments can be challenging. Rather than figure out such legalities on your own, you can rely on the professional and experienced real estate investment services at Upside Investments. Contact us today to learn how to ensure you get your rent payments on time each month.

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Uncategorized

Evaluating and Keeping Good Tenants

by Adam Luehrs
written by Adam Luehrs

As a real estate investor in Detroit, it’s important to keep the best tenants in your property. While there are plenty of laws that dictate how to navigate the tenant screening and selection process, it’s equally important that you keep good tenants for as long as possible. Some of your tenants are going to rent a home from you until they can buy a home of their own, and that’s OK. There will always be people out there looking for a good Detroit rental property. With that in mind, these tips can help you evaluate and keep your best tenants for the long haul.

Choosing the Right Tenants

The Fair Housing Act is a federal law that dictates the tenant screening and selection process. This law ensures that landlords don’t discriminate against potential renters based on race, sex, religion, and a number of other factors. As a landlord, you’re responsible for knowing these laws and abiding by them. Additionally, the state of Michigan has its own laws that govern Detroit real estate investors, and it’s important that you follow them at all times. Failure to do so leaves you subject to significant fines and severely damages your reputation.

How to Evaluate Renters for Your Detroit Investment Property

Once you’ve received written consent to perform a credit check on a potential tenant, you should make sure that you’re renting to someone who is financially responsible. However, this doesn’t mean that you have to write off anyone who has a blemish on their credit report. Remember, plenty of renters have hiccups in their credit history, some of which may be precluding them from buying a home. Just because someone has made some mistakes in the past doesn’t mean that they won’t be good renters now. However, you should have a minimum credit score requirement in place. If someone applies for your Detroit rental property but has a score that falls below your minimum, be willing to move on to another applicant.

Additionally, you probably only want to rent to someone who has verifiable employment. As a landlord, you must abide by the lease, but you do so with the understanding that the renter will pay you on time, every time. Call to verify that the place of employment listed on the rental application is accurate, as there are people who will lie on rental applications. If someone doesn’t have a job, it’s safe to assume they’ll struggle to pay you on time each month.

Finally, reach out to previous landlords and find out why the tenant is searching for a new place. Were they constantly late on their rent? Did they leave before the lease was up? Did they do damage to the property before they left? Remember, you’re looking for quality renters, and someone’s past behavior is the best predictor of their future behavior. If your applicant was always two to three months behind on their rent and damaged their previous rental home, that’s probably not someone you want living in a home that you own. Once you’ve chosen the right renters, how do you keep them?

How to Keep Good Renters in Your Detroit Rental Properties

Finding good renters is great, but if they leave after their first lease term is up, you’ll find yourself right back in the same search. As we discussed earlier, some renters will move on when they find a chance to buy a home. Others will move on when they relocate for work, family, or another issue. However, you can keep good renters in your property for an extended period of time.

Communication is key in the world of real estate investing. While you don’t have to be “on call” every second of every day, it’s important that your tenants know that they can get in contact with you when they need something. Even if you don’t answer the phone every time a renter calls, call them back as quickly as possible. When your renters know that you’re easy to contact and will address their concerns, they’ll be more likely to stay in your property.

Communicating effectively with your renters is only part of the equation. You also need to respond quickly to their needs, as long as it’s reasonable to do so. For instance, if your renter calls you at 2 AM to tell you that the dryer isn’t working, it’s reasonable to tell them that you’ll have someone come out and look at it the next day. However, if someone calls you at 11 PM and says that they have a pipe spewing water across the kitchen, it’s your responsibility to contact a plumber who offers emergency services to get the problem solved quickly. In addition to repairs, don’t get behind on maintenance tasks. Remember, you own the home, but your tenants live there. They want their home to look nice and feel inviting. Handling seemingly minor maintenance tasks in a timely fashion ensures that they’ll be comfortable and confident in the home and you as their landlord.

The first lease agreement that you enter into with your tenants covers how the home looks and functions when they move in. However, when the lease comes up for renewal, you may want to increase their monthly rent. Consider offering them some bonuses for signing a new lease and agreeing to stay in your Detroit rental property. For instance, offer to have a dishwasher, new lighting, or new tile floors in the space if they’re willing to pay more in rent each month. Additionally, if you have a good relationship with your renter, consider offering them a discount on monthly rent for signing a longer lease.

Finally, commit to being consistent. Renters want to know that the way you treat them today is how you’ll treat them next month. Be consistent in your response to their issues, your communication with them, and in how you collect the rent. Communication is crucial, but consistency is key.

Building Yourself for Future Success

Finding the right renters is important, but keeping them is paramount. Our team not only knows the Detroit real estate market, but we also know how to help you evaluate renters and are here to help every step of the way. Contact Upside Investments today to find out more about how we can help you take your real estate investing to the next level.

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Property ManagementTurnkey Investing

Legal Considerations for Detroit Landlords: Understanding Your Rights and Responsibilities

by Scott Dylan
written by Scott Dylan

Owning and operating rental properties in Detroit can be a lucrative way to secure valuable monthly income for you and your family. However, this venture requires you to abide by certain responsibilities.

You also have certain rights as a landlord in Detroit. Find out what your rights and responsibilities are and how you can take care of your rental properties successfully by contacting us today at Upside Investments.

Landlord Rights

As a Detroit landlord, you have numerous rights allotted to you. These rights include:

Charging a reasonable deposit for your rental units: You have the right to charge an affordable sum for a deposit for any rental unit that you lease to tenants.

In Michigan, you can charge up to 1.5 times the monthly rent for a security deposit, including the one you charge for pets. You also have the right to expect that deposit to be paid in full before you hand over the keys to one of your rental properties to a tenant.

Requiring on-time rental payments: You additionally have the right to expect your tenants to pay their full rental amounts on time every month. As a landlord, you are effectively running a business and may rely heavily on those rental payments for the income on which you and your family live.

You may also use those rents to put back into the properties you have invested in to pay for expenses like insurance and maintenance. You have the right to stipulate on what date each month you require tenants to pay their rent and charge late fees or evict tenants who fail to abide by that set date.

Entering the premises during emergencies: You likewise have the right to enter your rental properties during emergencies, such as fire or floods. Under normal circumstances, you must provide a 24-hour written notice to your tenants of your intent to enter their rental units. However, if there is an emergency like a fire or flood, you have the right to enter immediately to address the crisis and protect you and your rental property from damages and losses.

Denying subletting: When you lease out rental properties in Detroit, you have the right to deny your tenants from subletting their units. You ultimately have the last say in who rents your units and to whom you offer a lease.

Subletting can invite in people whom you have not approved to live in your rental properties or even be on the premises legally. To protect you as a landlord and also protect your investment properties, Detroit allows you the right to deny subletting in them.

Screening tenants: Finally, Detroit gives you the right to screen tenants thoroughly before you lease to them. You have the right to know if prospective tenants are employed or have the means to pay the rent each month.

You also have the right to know if they have offenses like fraud or assault on their criminal backgrounds. You can use services like those we offer at Upside Investments to screen your tenants in Detroit.

Of course, you also have numerous responsibilities you must fulfill as a landlord in Detroit. These responsibilities include:

Paying taxes and insurance on your rental properties: You must pay property taxes on your rental properties each year and keep them insured with the mandated amount of coverage in Detroit. If you fail to meet this important responsibility, you risk having the city or state seize your properties from you for non-payment of property taxes. You may also forfeit your properties if you fail to keep them insured as required in Detroit.

Keeping properties in a safe and livable condition: As a landlord in Detroit, you also have the responsibility of keeping your rental properties safe and livable. This obligation can include investing in security patrols to minimize property crimes like car break-ins or apartment burglaries.

It can also involve hiring professional contractors to handle tasks like repairing building rooftops, hanging new siding, repairing or replacing broken appliances and fixing foundations to prevent mold growth in basement and first-floor apartments. If you fail to keep your rental units in safe and livable conditions, you could risk losing income from them. Your tenants may even have the right to stop paying rent until you improve the property conditions.

Abiding by the written terms in the lease: Additionally, as a Detroit landlord, you must abide by the written terms in the lease you sign with your tenants. You cannot add or take away term conditions on a whim.

If you have to make changes to the lease, you must provide a 15 days’ written notice to your tenants to advise them about changes to their leases. You must also provide your tenants with copies of their leases for their own records.

Following legal eviction processes: Last, you must follow the legal process in Detroit for evicting a tenant from one of your rental properties. This process involves providing written notice of why you are evicting them from the unit.

You must also serve the written notice to them and appear in court to get a judge’s order to evict a tenant from a rental property that you own. Reasons to evict tenants in Detroit can include non-payment of rent, damage to your rental property or engaging in criminal activities. You must clearly stipulate what your reason for eviction is and ensure that reason falls within the allowed category of offenses for evicting tenants in Detroit.

As a landlord in Detroit, you have the right to rent out your properties to good tenants who will pay rent on time and abide by your rental rules. You also have obligations to your tenants to ensure they can remain safe and accommodated during the time they rent from you.

Recalling what your rights and responsibilities as a landlord can be challenging. Rather than risk violating Detroit’s rental laws or compromise your relationship with your tenants, let us at Upside Investments help you better understand your rights and responsibilities as a Detroit landlord.

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Turnkey Investing

How Many Rental Properties To Retire?

by Adam Luehrs
written by Adam Luehrs

There are plenty of reasons that people invest in the Detroit real estate market, but building wealth for the future is always one of the most prominent. The ability to build wealth for retirement, especially in something like real estate that continues to generate income, is an appealing option. With that in mind, many new investors want to know how many properties they need to own in order to fund their retirement. While there isn’t a single “one size fits all” answer to a question like that, there are plenty of stats out there that can give you a better idea about how many properties you need to add to your portfolio in order to retire with confidence.

Laying the Foundation Before Investments

Before you start investing in properties, it’s important that you assess how much money you have and how much you think you’ll need to retire. Based on recent studies, the average American needs $1.8 million to retire comfortably when they’re 64 years old. If that number seems alarming, take a moment and consider some other factors.

For instance, do you plan on retiring at 64? There are plenty of people who enjoy their jobs and want to work as long as they’re physically able to do so. There’s certainly no rule that says you have to stop working at 64, and if you plan on working beyond that point, you won’t need that amount. Additionally, take the time to consider your current health. While there’s no way to guarantee your long-term health, you should certainly consider it.

Some retirement experts say that you should have between 80% and 90% of your annual income before quitting work. This typically comes to around 12 times the amount that you used to make each year.

With these numbers in place as a foundation, you can better determine how many properties you need to invest in before retiring. If you’re in a position to retire with $1.5 million in a retirement account, you may not need to invest in as many properties as someone who is looking toward retirement with $500,000.

The Rental Property Retirement Formula

Detroit real estate investors who want to use their investments to fund retirement can use some specialized formulas to determine the right strategy for them. For instance, when deciding how many properties you need to invest in, use the following formula:

The monthly amount you need to retire / monthly cash flow per property = the number of properties you need.

For instance, if you need $5,000 to retire and you generate $1,000 per month from each rental property, you would need five rental properties to retire comfortably. This formula does not take any existing retirement funds into account.

Now, with that formula in mind, you need to know what cash flow is in the formula. Cash flow is the amount of rent that you charge per month minus the monthly mortgage costs of the property and any operating expenses.

Let’s look at another example to understand this. In the previous example, we assumed that you were generating $1,000 per month on each property. This number probably won’t apply to the current Detroit rental market, but for the sake of clarity, let’s use some round numbers that are easy to work with.

In order to generate $1,000 per month on each property, you need to be sure that you charge enough rent to leave you with that amount of profit. Additionally, you’ll need to add any of the ongoing maintenance costs associated with the property to the rent. If your monthly mortgage is $800 per month and you designate $200 a month for maintenance and other fees, that’s another $1,000 that you’ll need to add to the monthly rent to generate $1,000 in cash flow.

Based on the numbers that we’ve looked at here, you would need to rent five properties at $2,000 per month to make $5,000 per month in profit.

How Does the 1% Rule Apply to the Detroit Rental Market?

The formula that we already looked at is one proven method of determining how many Detroit rental properties you should invest in to retire, but this isn’t the only formula to consider. While the 1% rule doesn’t really focus on how many properties you should buy, it does give you a good idea about which properties you should consider adding to your portfolio, and which properties you should avoid altogether.

The 1% rule states that a property should generate at least 1% of its purchase price in monthly rent. For instance, if you buy a property for $150,000, the 1% rule states that this property should generate at least $1,500 per month in rent. Properties that generate more than 1% are certainly valuable assets, but they’re hard to find. Conversely, properties that generate less than 1% of their purchase price each month take longer to pay off and cut into your long-term profitability.

What is the 50% Rule in Real Estate Investing?

The 1% rule isn’t the only thing to consider. The 50% rule says that a Detroit real estate investor should assume that 50% of the money generated by an investment property is going to go toward expenses such as property taxes, maintenance, repairs, vacancies, landlord’s insurance, and more. Unfortunately, Michigan has some of the highest property taxes in the United States, and as the owner of a rental property in Detroit, you’ll be responsible for paying those taxes.

Funding Your Retirement Through Real Estate is Possible

You can certainly set yourself up for a comfortable, prosperous retirement by investing in the Detroit real estate market. However, it’s important that you do so with a strategy in place that sets you up for success.

That’s why it’s so important to work with a team of industry professionals who not only know Detroit real estate but also know how to help you build your retirement account. The team at Upside Investments not only knows Detroit real estate, but we’ve helped countless people fund their retirement. Contact us today to find out how we can help you.

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Property ManagementTurnkey Investing

8 Keys to Successful, Long-Term Property Management

by Scott Dylan
written by Scott Dylan

When you invest in and rent out commercial or residential properties, you want them to generate sufficient, if not lucrative, incomes for you. To make money from them, however, you must ensure they are properly managed.

It may not be possible for you to manage them in-person on your own. Instead, you can use these eight vital tips that we at Upside Investments recommend to ensure the successful and long-term property management of your real estate investments.

1. Communicate Effectively

One of the key factors of ensuring successful and long-term property management for your real estate investments involves the lines of communication with your property managers open. You must ensure you communicate thoroughly with your property managers so they know what you want and expect of them and the properties they manage.

By that same token, you must be responsive to communications like phone calls, text and emails that your property managers may send to you. If your property managers suspect you do not care about communicating effectively with them, they may assume as well that you do not care about them, your properties or the manner in which your investments are managed.

2. Guard against Procrastination

Procrastination can also sink the success and long-term management of your properties. You need to hire property managers who are proactive, prompt and do not procrastinate when you direct them to carry out management tasks on your behalf.

Procrastination can result in detriments like rent not being collected on time or repairs and maintenance getting overlooked for weeks or longer. Your properties may decline in both appearance and value. Rather than risk losing money on your real estate investments, you should hire property managers who will not procrastinate and instead handle any task you put to them immediately and as effectively as possible.

3. Stay Updated about Property Management Regulations

Housing laws in each city, county and state can change at a moment’s notice. It is not enough that you require your property managers to know what these changing laws are and how they apply to your real estate investments. You must also keep informed about these regulations and ensure your property managers are utilizing them properly.

Together, you and your property managers can work together to manage and ensure the profitability, appearance and value of your investments. You can also ensure you do not risk infractions like failing property inspections or violating local tenant laws as a property owner.

4. Screen Your Tenants

As a property owner, you likewise need to screen your tenants before you lease to them. By using a service like Upside Investments, you can avoid leasing to anyone who will not pay rent on time, has a questionable credit record or could otherwise put your real estate investments at risk.

You can also require your property managers to rely on the screening details from Upside Investments to determine what tenants to whom to lease. You avoid the risk of property managers perhaps leasing to friends, family members and others who do not meet your qualifications for leasing from you or overlooking infractions that could result in late rental payments, property damages, criminal activities and other risks.

5. Keep a Positive Attitude

Owning and managing rental properties can often become fraught with challenges. You may have to deal with issues like leaking pipes or broken sewer lines, along with broken windows, malfunctioning appliances and late rental payments.

Despite all of these challenges, it is vital that you keep a positive attitude as much as possible. When you are positive about your own real estate investments, you can motivate, if not placate, the property managers working for you. Your attitude can keep them focused on helping you resolve issues with your properties and keep your investments as profitable as possible.

6. Be Decisive

Your property managers also look to you for direction when it comes to managing your real estate investments. If you hesitate to make decisions or contradict yourself in what you want or expect, you could drive away good property managers and have difficulties finding professional and effective replacements for them.

Instead, you should be decisive about what you expect for your properties and require from your tenants. You should also provide firm and clear directions to your property managers so they can abide by your expectations and know what you need or want from them as your employees.

7. Be Adaptable

Still, you should also be adaptable as the owner of rental properties. You have to leave some proverbial wiggle room in how your properties are managed and in what manner your property managers carry out the tasks you put to them.

Factors like the weather or construction on the property may prevent certain tasks from getting carried out to your satisfaction. You also may not know what challenges your tenants may face or why they failed to pay rent to your property managers on time.

For those unexpected circumstances, adaptability can help you manage and overcome them. You can adjust your plans and figure out other ways to operate your real estate investments and direct your property managers to act on your behalf.

8. Set Goals

Finally, when you set goals for your real estate investments, you give your property managers a benchmark for which to stride. Your managers want to feel like they are working towards a goal for you and have a specific purpose in their jobs. They want to avoid boredom or feeling confused or rushed to carry out hasty decisions.

You can set a goal for how many units you want to rent out by the end of a season, for example, or what improvements you want to make to your buildings. By setting goals, you can provide motivation and direction for your property managers, foster higher retention rates and help your managers feel like they are useful to you.

These helpful tips are just a few to help you manage your real estate investments effectively. Learn more about the keys to ensuring successful and long-term property management by contacting us at Upside Investments.

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Property ManagementTurnkey Investing

Top Tips Detroit Landlords Need to Know

by Adam Luehrs
written by Adam Luehrs

Being a Detroit landlord is one of the most rewarding ways to make money that you’ll ever come across. However, there are also plenty of responsibilities that you’ll be taking on when you decide to invest in the Detroit housing market. Whether you’re renting out a single-family home or you’re investing in a multi-family property, it’s crucial that you understand the legal responsibilities associated with being a landlord. In addition to federal laws that govern multiple aspects of real estate investing, there are plenty of laws that are specific to the state of Michigan that you need to follow. Additionally, many of those laws also protect you. Today, learn more about some legal considerations for Detroit real estate investors.

The Power of a Lease

Many landlords fall into the trap of renting a property to someone, usually someone they know, without a written lease in place. After all, you probably assume that if you’re renting your Detroit rental property to a close friend or family member, you can trust them.

You should not go into any sort of rental agreement without a written document. Can you trust your best friend to pay you on time? Maybe. Can you trust your brother or sister to give you the monthly rent on the day it’s due? Probably. However, a written lease covers more than the amount the tenant pays and the day that it’s due. It covers the legal responsibilities of both parties. As a landlord, this written contract not only outlines your responsibilities, protecting your renter, but it also puts your rights in writing, protecting you.

Tenant Screening: Rights and Responsibilities

As a real estate investor, you have the right to decide who you’re going to rent your property to. You do not have to offer the property on a first-come, first-served basis. You have the right to require potential renters to fill out an application for the property, and you even have the right to verify the information that they provide. It’s sad to say, but there are people who will lie on a rental application to try to get a property that they can’t afford or have no intention of paying rent for.

However, this right comes along with some responsibilities. For instance, the state of Michigan requires you to get written consent before performing credit checks or background checks on a potential renter. You’ll find yourself subject to heavy fines if a renter finds out that you ran their credit without written consent, so you need to include a consent form with the rental application.

You also have the right to deny a person the property if you have a viable reason to believe that they cannot pay rent. For instance, if the applicant claims to have a job on their rental application but you find out they were fired when you verify, you can deny the application. However, there are a variety of reasons why you cannot deny a rental application. The Fair Housing Act is a federal law that dictates the rental process, and Michigan has laws in place, too. Spend some time working with a real estate attorney to craft a rental application that maximizes your rights without including any questions that are against the law.

Taking Care of the Property

One of the most important things to remember is that even though you’re renting the property to a tenant, you still own the property. With that in mind, you’re responsible for repairs and other maintenance tasks associated with property ownership. For instance, if there is a busted water line in the home, you’re responsible for getting it repaired. If you know how to perform some repair and maintenance tasks on your own, you can certainly do them yourself. If not, you are financially responsible for making those repairs.

It’s important to understand that there are some loopholes to this rule. First, you can allow the tenant to hire a plumber to repair a broken water line, but the tenant is allowed to deduct that they pay from that month’s rent. Additionally, you are not financially responsible if the need for repair is the result of the tenant’s abuse or negligence of the property. For instance, if your tenant breaks a window because they throw something in the house, you don’t have to pay for the window.

Inspecting the Property

Since you own the property, you may assume that you can enter it any time you want to in order to make sure that the tenant isn’t abusing or neglecting the property. That’s not exactly the case. In every state, including Michigan, the tenant has the right to “quiet enjoyment.” That term means that the tenant has the legal right to enjoy every aspect of the property without interference from the landlord. Generally, this means that the landlord must provide the tenant with notice before entering the property except in the case of an emergency.

Some states have laws that dictate how much notice the landlord must give. Michigan does not, which means that Detroit landlords and their tenants must agree on how much notice is required before entering the property. This is another piece of information that you should include in the lease.

Terminating the Lease

A lease is a legally binding contract, but both parties may find themselves needing to terminate the lease for any number of reasons. For instance, in Michigan, a landlord can sue for possession if the rent is seven days late. If the tenant violates another lease provision, you can sue for possession after 30 days. If you find valid proof of illegal drug activity in the home, you can sue for possession after 24 hours. As a landlord, you need to not only understand these provisions but also incorporate them into the lease.

Conversely, there are times when a tenant can break the lease. If you don’t perform the necessary repairs, the tenant can end the lease agreement since you didn’t uphold your end. Additionally, Michigan has a law that allows people who are victims of stalking or domestic violence to terminate a lease at any time if they fear for their safety.

What It All Means for Your Detroit Real Estate Investing

As a real estate investor in Detroit, you need to operate legally and ethically in every situation. Knowing your rights and responsibilities not only sets you up for success as a Detroit landlord but also helps you build a strong reputation. Contact Upside Investments today to find out how we can help you choose the right property, get the funding you need, and more.

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Turnkey Investing

Best Legal Structures for Out-of-Country Real Estate Investors

by Scott Dylan
written by Scott Dylan

The U.S. real estate market offers some of the most lucrative returns for people who invest in it. However, when you are based outside of the U.S., you may wonder how you can stake a claim in this market and reap the biggest rewards from it.

As an out-of-country investor, you actually have several legal structures available to you. At Upside Investments, we can help you choose the best option for your investment goals today.

Limited Liability Company

As an out-of-country investor, you may utilize a limited liability company, or LLC, as a legal structure for investing in real estate in the U.S. An LLC can actually consist of one or more owners, who are called members, in this type of structure. Members can include:

  • Sole proprietors
  • Non-corporate legal entities
  • Corporations
  • Other LLCs

An LLC is designed to protect the personal and business assets in it from liabilities, such as becoming the target of a lawsuit. Further, income generated from assets in the LLC are not taxed at an entity level but instead on members’ income tax returns. This structure protects your income from the LLC from double taxation.

To set up an LLC, you must first file articles of organization with the state where the property you want to invest in is located. You must include the name of the LLC, as well as the purpose of the LLC and the names of all of its members.

Once the state approves your LLC, you and its members must then draft an operating agreement. This agreement should indicate how you will manage and operate the LLC.

Likewise, if you choose this legal structure for investing in the U.S. real estate market, you should be aware that you must pay upfront fees to start an LLC. You likewise must pay annual fees for it for as long as it remains in operation.

Limited Partnership

At Upsell Investments, we can also help you explore whether or not a limited partnership is the right legal structure for you as an out-of-country real estate investor. A limited partnership is set up to include you and then one or more limited liability partners. It can be ideal for real estate syndications and larger investment projects.

A limited partnership also allows for more flexible management and taxation of your real estate investment. As with an LLC, income from your investment is reported on your individual tax return rather than being taxed at an entity level. It can result in you paying lower overall taxes as an investor.

Further, when you opt for a limited partnership, you can benefit from each partner’s unique set of investment or finance skills and resources. Your partners can help you grow and build your real estate investment significantly.

Depending on how you structure your limited partnership, you can also ensure your partners share varying levels of benefits and obligations, such as debts like property taxes, as you for the property in which you invest. One caution involving a limited partnership can center around differences between or among partners that can jeopardize this type of legal structure.

Grantor Trust

As an out-of-country investor, you can also explore the possibility of utilizing a grantor trust for investing in the U.S. real estate market. A grantor trust is a legal structure that consists of a grantor, or investor, who retains certain rights over the real estate that is held within the trust.

This control can grant the investor the ability to make investment decisions or access to income that the assets generate. The grantor is also typically the person who is responsible for paying taxes on the trust’s assets.

A grantor trust can be ideal if your investments include rental properties in the U.S. Rental income from a U.S.-based property that is owned by the trust would then be reported on the grantor’s personal income tax returns.

To set up a trust, you must first transfer ownership of your property to the trust. As the grantor, you can then appoint a trustee to manage your property or properties on your behalf. The trustee would be responsible for tasks like collecting rents, as well as upgrading or repairing your properties held in the trust.

You can set up either a revocable or irrevocable trust as an out-of-country investor. A revocable trust lets you change or revoke the terms of the trust at any time. An irrevocable trust cannot be changed once the grantor creates it.

A grantor trust offers numerous benefits to you as an out-of-country investor. Primarily, it allows you to pass on assets in the trust to your heirs. Further, it protects the assets in your trust from liabilities like lawsuit judgments. You will need to pay upfront costs to set up a trust, as well as ongoing fees to manage and retain it.

C-corporation

Finally, you may consider using a C-corporation for investing in U.S. real estate as an out-of-country investor. This type of legal structure is not utilized as frequently as others, primarily because investors are required to be gainfully employed and have W-2 incomes for the last two years. Still, it can be a viable option if you do, in fact, work in the U.S. and have a U.S.-based income yet still live or initiate your investments from outside of the United States.

A C-corporation offers a high level of protection from liabilities for the assets in which you have invested. It is subject to double taxation, however, as it will be taxed as both personal and corporate income. Even so, a C-corporation allows for more complex ownership structures, which may appeal to you as a real estate investor.

These legal structures are some that are available to you as an out-of-country investor. At Upside Investments, we can help you decide which one will ultimately serve you the best and maximize your investment potential in the U.S. real estate market. Contact us at Upside Investments today to learn more.

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DISCLAIMER: UPSIDE INVESTMENTS CORP IS A LICENSED BROKER COMPANY IN THE STATE OF MICHIGAN AND NADER SHARIFF IS A LICENSED REAL ESTATE BROKER IN THE STATES OF MICHIGAN AND NEW YORK. PURCHASERS SHOULD MAKE NOTE OF THE ADVANTAGE A LICENSEE HOLDS IN THE MARKETPLACE AND UNDERSTAND A PROFIT IS MADE THROUGH THE RESALE OF PROPERTIES BOUGHT AND SOLD THROUGH THE COMPANY.