Too good to be true!

Just another quick article to let you know how I recently helped a client with their Saline real estate investment plans.

Bart and Lisa are experienced real estate investors in the Saline area. They watched with great interest as home prices have declined about 30% over the past 3 years, focusing mainly on bank foreclosures. Recently, a bank listed a home for sale which was “too good to be true,” only this time, it really was true!

Bart and Lisa had already done their “home”work, by getting their pre-approval with their bank. When the opportunity came up, we jumped, making the first and best offer, on the house.


After we had the home inspected and found nothing objectionable, we knew that Bart and Lisa would be making money right away with this property.

A wise Real Estate investor once told me “I never made money when selling a property – I made money when I bought it.” Given the level of home prices right now – mostly in bank foreclosures - lots of people will be making money when they buy. Will you?

Are you ready to start your Saline real estate investment search? Contact me, and I’ll guide you on finding the perfect investment property in Saline to meet your needs. (734) 476-2063.

Duplex? Do what?

One of the biggest decisions most people will ever make with their finances and their lifestyle is to buy (or sell) a home. Getting the best bargain in the purchase, or making the most profit on the sale, give buyers and sellers so much to think about that many may never stop to consider keeping that old house - or buying another - as an income-generating property. But the rewards, in savings, profits and problem-solving, can be high.

One option for buyers who otherwise might consider home prices beyond their reach is the property that pays for itself: a house you live in part of and rent out the rest (the simplest form is a duplex). This offers not only an obvious balance of cost and income, but perhaps lesser-known benefits in taxes and mortgage.

The rental unit(s) can be depreciated over time; considered to offset the rental income, this can lower your taxes on that income. At the same time, the addition of the rent to your finances helps you qualify for a larger mortgage, and investors who occupy their rental properties can, under certain conditions, get interest rates lower than those who do not. Of course you'll want to decide if the demands of being a live-in landlord are for you.

One of my early clients as a Realtor® is a prime example of what you can accomplish with an income-generating property.

Rob was in his late 20s, had a great job in the area, and earned a nice income. He could qualify for a mortgage for a “trophy” home, if he chose. Instead, Rob followed a game plan which I would have loved to have followed at his age.

Rob bought his first duplex with me in my first year of business. It needed some minor work (sweat equity) on the owner-occupied side, while the rental unit was nicely updated. Rob fixed up his side in the two years he lived there. On the two-year anniversary of the purchase of his duplex, Rob called to ask about the available duplexes on the market. He bought his second duplex a month later. He moved into the new duplex, taking the “worst” side for himself, and renting out both sides of his first duplex.

Over the next two years, Rob fixed up the unit he lived in, building more sweat equity. As Rob and I were regularly in contact, I knew to send him the list of available duplexes at his purchase anniversary date. Rob bought his third duplex almost four years after his first duplex.

Why always two years between purchases? Tax purposes only. Not being a tax-law expert, I’m not qualified to explain exactly why Rob always waited two years between purchases, except to say that he always explained it as being for “tax purposes”. Ok.

To make a long story short, Rob now owns five duplexes. The first three are fully paid for. The income from those three are used to pay down the fourth duplex. By the time that Rob is in his mid-40’s, he will have all five duplexes fully paid for. He can retire, if he wishes, and live off the passive income for the rest of his life. But knowing Rob, he’ll keep building his empire.

Owning an income-generating property is not for everyone, but - from younger buyers offsetting their purchase costs, to seniors easing the expenses of their retirement years - it can be for all kinds of people.

Who know? You could be the next “Rob” that I’ll be writing about?

Rental Property - a Primer

If you’ve decided that you’re tired of the ups-and-downs of the stock market, and are bored with a simple savings account, you might be a candidate to become a landlord. Not everyone has what it takes to be a landlord, but those who do, may find that owning rental property can be a way to build wealth.

Once you've made the decision to buy rental property, your real work begins. Finding a profitable rental property usually takes time, connections and plenty of research. There’s a lot I can write about on this topic, so today I’ll just cover the basics. Here's what you need to know to get started:

In Our Area:

In the Saline area, you’ll have a more limited market for rental property than you would in a larger community like Ann Arbor. In general, in Saline, you’ll be looking at single-family homes, 2- or 3-unit homes, small apartment buildings, or commercial property (office or retail).
In the larger community of Ann Arbor, with the influence of the University of Michigan, you’ll find more “student rental” properties near the campus, in addition to the types of property you’ll find in Saline.

Before You Buy:

Before you buy a rental property, you should have a good idea how long you plan to own it. The longer you plan to own the property, the more you'll probably need to invest in maintenance, repairs and improvements. If you're only planning to own a property for five years or less, you'll probably want to avoid making any major improvements unless you're sure you can recoup the cost with a higher sale price.

An Example:

For me, I made the decision to buy single-family homes for the long term. Here’s a photo of one of my rentals in Saline.

My thought regarding a single-family home like the one pictured above is that “they’re not building any more like these”. Think about it. When you “come of age” and move out of the home you grew up in, where do you go first? Likely to an apartment. If you don’t want to be in an apartment, and want a home instead, your first rental home isn’t going to be a Taj Majal.

The Basics:

So, find a 3-bedroom brick ranch, like those built in the 1950s. It seems that most communities have neighborhoods like this. In Saline, you’ll find these homes around the Pleasant Ridge school, and near the Liberty School. In Ann Arbor, you’ll find these homes near Abbot Elementary, and around Scarlett Middle School.

Be sure the home has at least 1 ½ bathrooms. A garage is nice, but not required. A basement is essential, especially if it is finished (for more living space). Remember, this type of rental property is only going to have about 1000 square feet, so a small, but growing, family will really appreciate a finished basement, and be more likely to rent.

Risks and Rewards:

The primary risk associated with a single-family rental is that a vacancy means NO income from the property. With a duplex or three-unit, you would at least have income from the other unit(s) to assist with your mortgage payment. Not so with a single-family rental. So, you need to be sure that you can handle the monthly payment for a while when the property is vacant.

The upside of a single-family rental is that the increase in value is not entirely tied to the income the property produces. In general, an income property is only as valuable as the income it produces. If you have a 3-unit home, the increase in value will only come at the same rate as the increase in rents. With a single-family home, you can always sell it as a single-family home, should the market for those type of homes really BOOM in value. In the meantime, you can collect your rents, and take advantage of the significant tax benefits.

In a future post, I’ll build on this primer, so you can gain some confidence that you can do this too!