Recently in Buying Michigan Foreclosures Category

So you are at a REIA meet up and you run into Dennis. So you ask, Dennis what you have been up to? And he says, been buying rentals up at Eastpointe. You whip out your notebook and write down: buy rentals in Eastpointe although you cannot remember if Eastpointe is in Wayne County or in Ohio.

10 minutes later you see Allan Boike holding court in a corner talking about this REO he is about to close in Macomb Township and immediately your ears perk up and your notebook opens up again in which you write : buy REO's in Macomb Township although you live a good 45 miles away from Macomb Township in Ypsilanti.

That night later you stumble into Eric Tomei's Facebook Page on which he is talking about the 3 foreclosures he just bought with Scott Baumgart over at Grand Blanc and Holly and Fenton and you make yet another note about buying REO's soon in those three cities.

I love your initiative but you are, in the beginning days of your real estate investing business are asking the wrong question from all these veteran real estate investors: you are asking WHERE they are doing their deals instead of asking WHY they are buying their deals in those cities?

The WHERE in most cases is useless to you. If you live too far or know nothing about these cities where they are doing these deals and if you are just going to copycat what they are doing without knowing what they know; you are most likely end up in wrong deals.

But if you ask Boike on WHY is he buying REO's in Macomb and WHAT made him buy this deal above all or WHY Eric and Scott focus on Holly then their answers will give you a solid template that you can cut and paste in your business and find a Michigan city close to you where you live or work that would let you cross out all the points that they told you about.

Instead of just memorizing city names learn WHY they are doing WHAT they are doing and you are going to walk out of this 10 minute conversation a much smarter real estate investor in Michigan who will pick a great city close to where you live and work and which is familiar to you instead of driving and getting lost in a new city that you heard in a conversation at a real estate networking event.

Long time ago I read that the quality of your life is determined by the questions you ask. Tony says that ask better questions if you want better answers. 

This asking of WHY instead of WHERE is one of those better questions. Ask it often and ask it every time you come across an experienced real estate investor in Michigan everywhere you go for networking and meeting other like minded folks.

Make it a habit from Day 1. It will give you the eyes to start spotting all those gold mine cities that are around you already that you have been ignoring while trying to find greener pastures somewhere far in Michigan which could be right for them but so wrong for you.

You probably have some idea on what city you want to buy and flip your first five deals in Michigan. May be it is a city close to where you work or live.

You need to find out what your competition is doing. At my seminar last Saturday, I did a show of hand: raise your hands if you ONLY looked at one house when you were looking to buy a home for yourself. No hand went up. We all have this crazy dream that a home buyer is going to walk into our home and that will the be the first house on her list and she is going to stop right there and buy our house.

Well it happens. Sometime.

But almost all the 99.9995 times the home buyers have a stack of printouts from MLS or Craig's List and they are looking at bunch of houses before they decide which one to buy so whether you like it or not: every house for sale around you is competition for their attention.

So before you put in any offers, before you look at bunch of REO's, go and look at five open houses come Sunday in your target Michigan city to find out what your buyers are going to see when they start driving.

Are the kitchens new? How do the bathrooms look? Are the basements finished? What about garages? Did you see at least one house that literally blew you away or every house sort of an old, beaten down, lived in look?

This little spy-mission of yours will give you the confidence to look at horde of the people in your Open House in the eye and say without a doubt: "Hey you will not find a more beautiful fully remodeled house then mine in Livonia around here." And you mean every word of it.

Second it will also stop you... AND THIS IS THE BIGGIE... to invest your rehab money in stuff you don't need to be spending money on because now you know what your neighborhood looks like. 

Yes, your house is going to look 10 times better once you are done with it but at the same time you will not be making the biggest mistake most new real estate investors in Michigan make all the time - try to turn this flip into the house they would want to live in. 

Putting a $40,000 kitchen in a $100,000 flip just because you like to cook and always wanted a kitchen like this in your own home is a terrible idea and something you should never ever do. Going and visiting 5 Open Houses next Sunday will stop you making these kinds of rookie mistakes.

Finally, always keep a notebook and a pen in your car and when you leave every Open House, quickly jot down what you noticed in the house. Invest in a $40 digital voice recorder if you don't want to write. 

Three hours and 5 Open Houses later come Sunday, you will know exactly what you need to put in your flip that will help you sell your house fast in the Michigan city of your choice.

What is one of the biggest "Honey we got to have IT..." when it comes to people deciding where to buy a home to live in 2011 in Michigan?

A great school district.

So how do you find out which school district is great in and around the target area that you are thinking about buying and selling bank foreclosures in Michigan in 2011?

Some cities are obvious: Birmingham (excellent) or Detroit (not there yet) for instance.

You might be flipping foreclosures in the city you live in and where your own kids go to school so you have first hand knowledge.

But when in doubt and not sure about which one is the absolutely best out of 2 or 3 cities that you are thinking about hitting some offers out; go and ask the teachers in your kids class.

Teachers hangout with other teachers. They know which schools are great and which ones are struggling. If I had just moved to Oakland County in Michigan and was not sure which cities I should be looking at to buy some deals in and the school district was a big factor in my decision as it should be - I would go and ask the two teachers who teach my daughters. In 15 minutes I would know firsthand where to look and which cities to skip in 2011.

When in doubt... ask the ones who live in that world. Good information is a powerful ally. You want it in your corner before making new offers in 2011.

There are two people in your Michigan City who have first hand knowledge of what is going down right now: the REO broker who is handling bulk of the REO listings in your Michigan County of choice and the residential realtor who is outselling and outsmarting every other realtor in your County.

Call both of them up today, introduce yourself and ask them if they would let you talk them out to lunch? Nobody says NO to that offer. No matter how busy they are, they got to eat. If a Realtor is moving 100 homes in Oakland County, year after year, she knows what is moving and what the new home buyers are looking for. Why make guesses about something so important?

On a different note, ask the REO broker or agent who dominates your local area on what his repeat clients are buying and where they are buying? Just tell them honestly that you like the idea of following the path of successful investors.

Two meetings, two hours later, you are going to be a whole lot more knowledgeable about what is going on in your targeted Michigan City than you were yesterday. Don't think about it too much. Make it happen.

It is strange to hear Michigan real estate investors argue about buying homes in cities in Michigan that are not going anywhere (any time soon) in hopes of that they can perform a miracle of making a buyer show up where nobody else have won.

I am all for courage and determination but I was never ever a fan of recklessness in business.

People vote their wallets all the time. You do too. Tonight, on a Saturday night when you picked Outback Steakhouse over another restaurant, went shopping at Staples instead of Office Depot, picked up groceries at Costco instead of Kroger - in every instance you voted with your wallet. 

Buying real estate especially buying it to live in it is the ultimate vote that somebody makes with their wallet. It is not a one night date thing but rather a big long term commitment and most people aka your buyers for your future flips take it very seriously and so should you. Therefore...

Why would you spent even 10 minutes thinking about buying a house to flip in Highland Park? Do I really need to give you reasons for it? Or to go toward Pontiac which recently outsourced its police force to Oakland county sheriff department. Why even bother? The people who could live there are voting with their wallets and buying a house someplace else right now. May be it is Waterford. May be it is Walled Lake (great school district). May be it is whatever but it a'int Pontiac anymore. 

The young people of the City of Detroit vote with their wallets too when they leave behind crappy city services, lousy schools and obscene car and property insurance rates to go to Southfield, Utica, Oak Park and Berkley. And then even in the city, the voting happens everyday between East Side (extremely rent heavy) and West Side (mix renters and home buyers).

What I think. What you think. What anybody else thinks does no matter when it come to the choices people make on where they want to buy a new home, raise a family and plant their roots. These choices are made by their wallets. By the school districts. By how much money they are going to save every month on their car insurance and home insurance.

I look for opportunities in my business. I am an entrepreneur and that is what all of us do but at the same time I never go against the will of the people. 

If they don't want to live in Pontiac and rather live in Walled Lake, you would never ever see a smart real estate investor in Oakland County crying and complaining about it. You would find her however driving around Walled Lake looking at nice 3 bedrooms REO's to find some to buy to flip.

1. Buying this REO for $500 in East Side of Detroit.

2. Buying a 2 bedroom instead of a 3 or 4.

3. Buying a 'cheap' heavily discounted condo which is not on a lake or in a HOT downtown like Ann Arbor or Royal Oak.

4. Buying house without a basement. In Michigan? No basement? Come on.

5. Buying a foreclosure in a city you know nothing about just because the price is cheap. Living in Troy, working in Novi but buying something in Ypsilanti just because it is discounted even though you have not driven through Ypsilanti in the last 4 years is not a strategy that is likely to bring a check back to you unless you spend some time BEFORE you buy in getting to know the good / bad areas around town.

6. Not doing a property inspection.

1. The East Side of Detroit is rent heavy. Advertise a 3 bedroom brick bungalow for sale. Let me repeat, for sale and yet you will get a good 100 phone calls asking you if are open to rent the place. Run the same for a West Side Detroit house and you get an even split. 50 buyers. 50 renters.

2. Lawyers make lousy deal partners. They are slow and methodical and skeptical of everybody and anything. A burden of the profession I guess. Everybody is guilty till proven innocent. Not a bad mindset (slow and methodical) when you ask for their legal advice. Lousy thing to have in private investor when you lose a deal because by the time they done saying YES to you after three weeks of deliberation, somebody else got that killer REO right underneath your nose.

3. First generation successful entrepreneurs are awesome private investors. They have built their own businesses by taking risk and they appreciate young entrepreneurs like you building a business for themselves also. Not only they are faster in their decision making but they also bring valuable advice along with their checkbook to the table. I love talking to older entrepreneurs. That wisdom they have cannot be learned anyplace else.

Many things change in real estate investing and something will never change. Don't try to fight and change what cannot be changed. Instead pick the battles you can win. Don't try to do flips in East Side of Detroit. Do them in West Side. Don't spend hours trying to convince a lawyer to partner up with you. Talk to an entrepreneur instead.

Know what all politicians know - demographics are destiny. Can't change them. So don't fight. Adjust instead.