Frequently Asked Questions About Detroit Investment Property
Detroit Investment Property Questions
Why buy homes from Strategy Properties?
Detroit Investment Property – Strategy Properties’ four step process is second to none:
• Strategically purchase homes in areas of high rental demand
• Renovate homes to high rental standard and obtain a city rental certificate
• Place screened and qualified tenants in the homes
• Property manage every home with the highest level of care
Do you own these properties?
Yes. We buy our houses from banks, investors, hedge funds, private equity groups, cities/counties, and homeowners. We obtain a clear title for every property we sell.
What type of construction are the homes?
We offer properties in different neighborhoods throughout Southeast Michigan. The build style of the homes vary: some are brick built while others are frame (aluminum or vinyl siding). The square footage on the homes will vary depending on the style: bungalow properties range between 850 to 1,100 square feet, while colonials range between 1,000 to 1,500 square feet.
Which time period were these properties were typically built?
The homes we sell were built during the economic prosperity eras in American history, including the Roaring Twenties and the post-WWII Housing Boom. One can expect the year of build to be between 1925 and 1950. The age of the homes will vary, depending on the neighborhood. Architectural styles are among the best in the country, with entire neighborhoods influenced by world-renowned architects like Frank Lloyd Wright and Albert Kahn.
Are your homes city certified by the cities they are located in?
Yes. All of our homes are certified as rental home. However, there is one exception in that some cities that do not require city-certification, so we use our own in-house inspection department.
How are you providing such great deals?
We have great contacts with foreclosure realtors, asset managers, and other sources for purchasing homes, which are not available to the average investor. Our focus is acquiring homes in the best areas in Michigan; at prices that create the greatest rental cash flow to our investors, to make these the best deals available. Detroit Investment Property is our business.
How do I purchase a home from Strategy Properties?
What payment methods do you accept?
As an investor, you may purchase with cash, financing from a lender of your choice, your IRA/other retirement accounts, or you may contact us about our seller financing.
How long does it take to purchase a property?
After an investor makes the decision to purchase, the purchase process can be completed in approximately one week. The process is very simple and can be completed remotely, no matter where in the world our investors are located. We work with a title company that conducts an extensive title search on each home, making sure there are no encumbrances (back taxes, water bills, claims on the title), and provides buyers with title insurance. After reviewing and signing all documents, (buyer’s statement, purchase agreement, seller’s disclosures) the next step is to wire funds to the title company so that they can complete the transaction.
How do I know the transaction is secure?
Transacting business through the Internet has changed the way businesses operate, and in many ways has made the world a “global village.” However, necessary precautions must be taken to ensure that transactions are safe and secure. All property transactions are conducted through a reputable insured title company. The title agency essentially works to ensure you are buying the property “free and clear,” and that title insurance is included in every transaction. Investors send their funds to their escrow account, and no money is dispersed until the title company verifies all documents are received and signed, and that the property can be insured with a title insurance policy.
What is title insurance?
Title insurance insures the deed transfer of a property, guaranteeing that the deed is transferred free and clear of any liens and encumbrances. It guarantees all money associated with the transaction is dispersed according to the closing instructions.
Who pays for title insurance?
This is paid by the buyer as this insures the deed transfer of a property and guarantees the deed is free of any liens and encumbrances.
What is a Closing Statement?
A Closing Statement, sometimes referred to as a Closing Settlement Statement, is a statement that most licensed title companies use for a conveyance/closing. The closing statement has two columns that show all of the fees and money that is transferred between the seller and the buyer. All monies being conveyed/transferred for the property are accounted for on the closing statement.
What is an EMD and why is it needed?
An EMD is an Earnest Money Deposit, that secures a buyers position to purchase a property/reserve the purchase of a property from a seller. This insures that the buyer will be the only person holding the property before final purchase from the seller, and will require the seller to move forward on the process of closing on the subject property.
What are closing costs?
Closing costs is a general term for all fees associated with conveying/transferring/closing on the property. These fees for Michigan properties are generally about $2,000.
What are pro-rated property taxes?
In the state of Michigan, property taxes are paid in advance, twice per year. For example, if the buyer had purchased the property when the taxes were due, all of the year’s taxes would have to be paid at the conveyance/closing. When the buyer sells the property thirty days later, the pro-rated amount, lesser the thirty days the buyer owned it, would be collected from the new buyer at the conveyance/closing.
How is property ownership transferred in the state of Michigan?
In the state of Michigan, the conveyance of property occurs via state licensed Title Insurance Companies. These Title Companies handle both the buyer and seller side of the transaction, all of the paperwork, and the money transaction. They also insure the property transfer with title insurance. The process of transferring the deed from the seller to the buyer is generally referred to as “the closing”. Detroit Investment Property is our business.
Can I own a property in my personal name as a non-resident of the United States?
Yes, the majority of our clients are either out of state or foreign nationals. As a non-resident of the United States, you may purchase a property in your personal name or set up a United States company to purchase the homes. Strategy Properties can help you to set up your own LLC (Limited Liability Company) in just a few days.
Are there any advantages to opening an LLC over owning the property in my personal name?
While we are not a law firm and cannot provide you with legal or tax advice, we do believe that opening an LLC does have an advantage from a liability perspective. If investors are interested in started a United States based company, they would need to travel to the United States in order to open a bank account related to that entity. American law currently restricts the opening of business bank accounts by foreign nationals remotely.
How much can I expect to pay in property taxes?
Property taxes vary in range. They depend on several factors, two of which are the size of the home and city millage rates. Property taxes are calculated based on the home’s SEV (State Equalized Value), which is approximately half of the market value. SEV values can vary greatly from house to house, even in the same neighborhood. Therefore, research into the property at hand is extremely important. Taxes are paid twice per year, with Summer taxes due on July 1st (comprising roughly 75% of total taxes), and Winter taxes due on December 1st (comprising roughly 25% of total taxes). For our typical properties, yearly taxes can range between $1,200 to $2,500.
Can property taxes rise drastically from year to year?
A property’s taxable value can only increase annually by the rate of inflation or five percent, whichever is less. This does not hold true if there is an addition to the property (i.e., physical improvement or omitted property) or if the property’s ownership transferred during a previous tax year. See MCL 211.27a and MCL 211.34d. A property’s taxable value can also decrease if there is a physical loss to the property. Source: http://www.michigan.gov/taxtrib/0,1607,7-187–126336–,00.html
Will my property appreciate in value?
We do not guarantee the performance of your property appreciation. While there is no guarantee, the most recent statistics from the most credible sources in the industry point to continued growth in the Metropolitan Detroit Real Estate Market. RealtyTrac 2015 U.S. Home Sales Report indicated that Metropolitan Detroit has hit its highest peak since the mortgage crisis, leading the country in capital appreciation. As lenders continue to issue mortgages, inventory levels continue to decrease, and demand steadily climbs. With this, property values are expected to rise. Standard & Poor’s/Case-Shiller Home Price Index (the latest report from S&P) also indicated another year over year rise in 2015.
Do you offer an exit strategy if I decide to sell my property?
Yes. As a licensed brokerage, Strategy Properties can list your property for sale on the open market (MLS) to solicit local purchasers, specifically primary homebuyers. We also have a network of international agents who can market your property to other investors worldwide. We offer investors with a free consultation with one of our realtors who can provide them with an assessment to determine their property’s market value.
Is it possible to purchase properties in Metro Detroit for just a few thousand dollars?
While there are properties that sell for just a few thousand in the city, there are often other costs associated with those properties that must be considered. Examples of such costs may be delinquent property taxes, rehabilitation, closing costs, and municipal compliance costs. Additionally, the purchase price is typically indicative of the level of demand in a certain neighborhood, for both prospective renters and purchasers. Properties that sell for just a few thousand dollars come with real risks, including extended vacancy periods and holding costs (property security, utilities). Generally, those homes can end up being more of a liability than an investment. To mitigate the risks associated with distressed properties, we would recommend buying a turnkey property in the right area that has already been rehabilitated to high standards, tenanted with a screened/qualified tenant, and managed through a quality property management company.
How do International Investors open US Bank Accounts?
Every U.S. Bank operates a little differently, so there is not a single answer to this question. The majority of banks in the US will allow an international resident to open a bank account. While the process varies, most banks require similar documents;
• Greencard if available
• 2 Proofs of state issued ID
• Passport for proof of residency
• Bill with house address on it, to verify ID.
• If the Investor has a US Address/citizenship or greencard, that helps a lot
Once these documents are ready, the process of opening a bank account is relatively smooth, and can be done at a local bank without much problems. Again, all banks have slightly different requirements, so it is best for the investor to choose a bank and get the specific requirements. There are a lot of “if-then” situations. Example; If the investor has a green card, then he/she will need A and B. If they have a passport, he/she will need a A, B, C & D. If there is no green card, they will need A, B and C.
How do International Investors open US LLC's?
Every state operates a little differently, so there is not a single answer to this question. To open an LLC, certain general requirements must be met, and personal details should be available. Requirements include having a registered agent that has a physical address in the state that the LLC will be linked to. Also, personal details required by the registered agent to have for the client are a colour scanned copy of their passport (per shareholder), personal details such as contact information and address, occupation etc.
If you are an international investor looking to open an LLC, contact us today to learn more!
Property Management Questions
What company is managing the investment?
Detroit Investment Property is our business. The management of the properties will be delivered by Strategy Property Management, LLC, an affiliate of Strategy Properties. This company currently manages a large portfolio of residential and commercial properties within Metropolitan Detroit. With a staff of property management professionals that oversees all properties with the highest level of professionalism, Strategy Property Management provides excellent service to its clients.
Does the tenant provide a security deposit? If so, how much and who holds it?
Yes, the security deposit is paid by the tenant and is in the amount equal to one and a half times the monthly rent. The deposit is held by the Management Company in a designated escrow account, as required by law.
How long is the management agreement?
The management agreement is for a duration of 12 months and can be cancelled anytime, with a written thirty day advanced notice. As the legal owner of the property, you reserve the right to evaluate our management services and compare our fees with that of competitors in the market. You are never obligated to remain in contract with a single management company.
What is your tenant screening process?
Strategy Properties utilizes a reputable third-party agency (Core Logic) to conduct the tenant screening process. Through the agency, we are able to conduct a thorough background check that encompasses criminal, credit, and eviction history. This data is used in conjunction with an internal income evaluation formula to determine whether the applicant is suitable for a property. This process is mandatory for all tenants, both private and government-backed.
How does the management company handle and charge for repairs?
The Management Company employs its own maintenance technicians as well as third party specialists to complete repair work. With a twenty-four hour emergency maintenance hotline, tenants can request service at any time. This ensures quick action and resolution of the issue. For repairs costing over $250, written approval is required from the investor. Otherwise, repairs are completed and deducted on the monthly income/expense statement. Detroit Investment Property is our business.
What is the management fee?
The management fee is the industry standard of 10% of the monthly rent, which is deducted on a monthly basis from the gross rental amount collected. If a property is not performing, no management fee is due.
What is Section 8?
Section 8 is a federal program administered through local branch offices. It provides qualified families with a Housing Choice Voucher that documents the subsidy amount paid by the Housing Commission as well as any portion required by the family (known as the Family Contribution/Payment). For more information, please visit the Section 8 Program website. Detroit Investment Property is our business.
Do you offer real estate investment training workshops or bus tours?
Yes, we offer both and also offer personal tours. For more information, please contact us today.
Can I assign your properties?
Yes. Request an Assignment Form from us, have your buyer sign it, and then fax it back to us at (734) 744-5082.