Do I buy with my own name or through a company?
You can buy with your name or do it through a company, but we recommend doing it through a company.
How is a company set up or registered? And what kind should it be?
In case of opting for this alternative, we will take care of the complete registration. For the purchase of real estate, we recommend an LLC (Limited Liability Company). This type of company requires by law to have at least 1 (one) member; although we always suggest that they are 2 (two) or more, since at the time of selling your property, if the LLC is composed of a single partner, you must pay more taxes. Additionally, if you use our company as Manager of your company, this would be the only data that would appear in public records.
What documents do we receive as proof that we have this company and that the company has those properties?
The company will be registered in the Department of Corporations and you will be able to see all your movements Online. That is, you can see all the registered assets of your company there.
Is there a property limit per company?
There is NO type of limit. You can have all the properties that you decide to acquire.
What is the time horizon of the investment? When can money be recovered and how is it made?
As with any investment, this depends exclusively on market movements. But while the unit is appreciated, you will be receiving very good returns. At the moment and taken the decision to withdraw from the business, we can gladly deal with the sale of your unit or units.
What do they mean when they say that all expenses are contemplated at the time of closing? What is included in these?
We refer to the writing expenses, attorney's fees, taxes, stamps and any other expenses specifically associated with the closing and deed of the unit. We can estimate them in the base order of US $ 1,800, for a unit of US $ 60,000 average.
What documentation do I need? How is the data sent and how is the act of purchase signed?
ALL the required documentation is signed via email. The only documentation that the lawyer needs is a valid document - ideally a passport - that can show that you are a physical person and not a "ghost".
How is the rent guaranteed? What happens if the tenant does not pay?
You can never guarantee that a tenant will pay. What is done is to qualify it to know by its history, that its record is acceptable and has the necessary money for the payment of the rent at the time of the check.
In case he/she does not comply with his/her commitment, the law provides for "EVICTION" (eviction), which takes approximately 60 days from the time of the order until its effective.
How long is the rental agreement?
Private rental contracts in the USA are annual, although Detroit allows them to be made for up to 5 years. Ideally, if you can choose, it's 3 years.
Who does the structural maintenance of the house (if a pipe breaks, for example.)?
From IDG Homes Detroit we take care of the monitoring of each property, through our agreement with Detroit Premier Property Group, company that we supervise and audit. Detroit Premier Property Group deals with everything related to the unit, its maintenance and the collection of the rents.
Are there insurance for cases of theft, damage, etc.?
All our units are insured as soon as they are purchased. The policy consists of 2 parts, one that covers the property against damages and fire and the other one for civil liability on the tenants of up to $1 Million Dollars.
What services does the administration include?
The collection of the rent, which shows the cost of 10% of the collected (if the unit is empty or not or the rent is collected, the company of property management does not charge its administrative fees). It also responds to any repair need of the unit, resolving the inconvenience that arose to maintain the unit "functional and operative" for the tenant.
What are the monthly expenses? Real estate taxes, administrative expenses for rent collection, rental expenses, services. What happens during the period that the house is not rented?
The real estate tax is paid annually. Administration and maintenance (10% of the collected), is deducted monthly from the collection of the rent. All services are the responsibility of the tenant and the taxes correspond to the owner. While the property is unoccupied, the administration fee is not paid, but the annual taxes and the costs corresponding to arrangements made do not change.
Are the units that are acquired already equipped and readjusted to be rented?
Yes. They are completely refurbished and delivered to the investor already rented.
Do you recommend me to start a partnership or make a personal purchase?
For an operational issue and subsequent practicality that includes both the opening of a bank account and deduction of expenses (transportation, per diem, fuel, food, accommodation, etc.), 98% of buyers choose to open a company that owns of the properties.
In case of making a partnership, what is the waiting time until it is constituted and what is the cost of it?
The creation and registration of the company is a fast process. Usually, in about 72 working hours the LLC is active and in about 10 days, the TAX ID Number is received, which is necessary to open the bank account and for the tax declaration that is made annually.
Are you involved in building society?
We absolutely deal with EVERYTHING.
How and where are the payments made?
Payment of the unit can be made by transferring the funds to the Detroit Securities Company, who physically performs the deed and operates as the legal agent for the protection of the funds until the operation is complete and the title in favor of the buyer. issued. We also have a payment option in our offices in Buenos Aires (Argentina)
How are the units?
The units have an average of 360 m2 of surface. All are delivered ready to rent and with tenant under contract, so the return is not projected but real. The units we work with are always at least 3 bedrooms, brick and with "basement" (basement); This is a plus that the Detroit tenant values. All are located in areas where they will have good resale value. For rent, priority is always given to the constituted family groups, which tend to be the least problematic tenants.
As an example, what would be the detail of expenses associated with the purchase and subsequent maintenance?
Maintenance and Administration: This task is in charge of a local company with a history in Detroit, which we supervise and audit from IDG Homes Detroit. This company receives 10% of the income collected; that is, if there is no tenant or for some reason it does not pay, the administrator does not charge his fees. This not only balances the expense in direct relation to the return, but also motivates the company that collects the income to fulfill its tasks.
Taxes: The Real Estate Property Tax is paid, that is, the property tax. The value is based on the cost paid for the acquisition of the property.
Insurance: It is carried out on the property and covers above all what is known in English as LIABILITY, or Civil Liability by the tenant. Its approximate annual cost is around USD $ 400.
Free of Expenses: Since our units are not part of a condominium, there are no bills for utilities (gas, electricity etc.). The payment of all services is the responsibility of the tenant while he occupies the property.
How is the property chosen?
With our assistance and based on the analysis of the investment we made, since we only buy units that we inspect and evaluate and that definitely result in good business for the buyer, both at the time of purchase and future sale.
How much commission do you charge?
We do not charge commission since we are not a real estate company but an investment company. We do not commission or outsource units. All are purchased and refurbished - if necessary - before becoming part of the available inventory. We do the deed immediately as soon as the funds for the acquisition are received.
How long does it take for the first month's rent to be credited?
Within 30 days of the deed you receive the funds corresponding to the first month of rent or its equivalent, according to the days rented from the date of possession of the unit.
Can we have a detail of what is the amount of monthly rent according to the investment?
Of course! For each property offered, the corresponding estimated return appears in our records.
Are there properties in brand new neighborhoods?
Not yet. Until the properties reach the real market value, which contemplates construction at a minimum value of US $ 150 per square foot, it is unlikely that new homes will be built. Today estimates show that a renovated unit can be purchased for less than half of that constructed foot value.
Are there marginal areas in the city?
Detroit is a great city, even bigger than the ones known in the state of Florida. And as in any big city, there are good and bad areas. Part of our task is just knowing where to buy and where not to.
Are the properties in areas with good public schools?
All our inventory is in family or family oriented neighborhoods (hence, we always look for units of no less than 3 bedrooms) and in each of these neighborhoods there is at least 1 school.
In what percentage of the sale price is the fiscal value of the average properties located?
Nowadays, the fiscal value that determines the property taxes is "distress" (unbalanced) like the whole market. There have been some high historical values and other low that will be accommodating the country's average, which does not exceed 2% of property tax. In the forms that we send with the detail of the houses, we include this information. And we contemplate it in the estimated annual return calculation for the first year.
Who is responsible for providing and maintaining the appliances?
Unlike other cities such as Atlanta or all of Florida for example, in Detroit the owner is NOT responsible for the provision of appliances (and therefore, not their maintenance). This means that the houses are delivered without a kitchen, refrigerator, washing / drying or air conditioning. All these are the responsibility of the tenant, which implies a great saving in annual maintenance expenses. Michigan law only requires the owner to provide hot water and heat.
What does a "SECTION 8" tenant mean?
"Section 8" (section eight), is the government program of the United States that subsidizes those citizens who have a job, whose income is not enough for the payment of decent housing. In this case also, unlike other US states, the Government pays up to 100% of the rent and inspects properties that qualify to be part of the program. Once rented, it is the tenant who receives periodic inspections to check that the dwelling is maintained in the conditions in which it was received, against the risk of losing the privilege of this government subsidy if it does not.
An acquaintance told me that many investors opt for the modality of buying with mortgage credit instead of buying cash. In your experience, what's best?
The modality of purchase on credit is not recommended in the usual way in this type of investment for different reasons. Mainly, if the idea is to take advantage of the financial benefit of a purchase on credit, the ideal is to acquire the cash units and after a while make a "CASH OUT", which will allow you to obtain a very attractive return, product of the "cash on cash. " From here, you can make a mortgage on the unit with an estimated interest of the order of 5% per year to 30 years. And the money obtained from cash on cash could apply to the purchase of new units.
Although we do not do the financing, we can gladly analyze and present the financial entities that are dedicated to this type of operations.
From what I've been seeing in the simulations that determine the mortgage fee, the loan installments are similar to the rent installments. Why then would potential tenants prefer to pay a rent, rather than paying a mortgage?
The average Detroit resident does not currently qualify for credit. Although the city is leaping out of the crisis, the vast majority of the working class potentially interested in obtaining a loan for the purchase of a home does not yet have the credit rating needed to access a loan, let alone the Cash money to make the down payment or advancement that is needed in any real estate transaction. A detail that reinforces this point is that during 2017, the report of the amount of mortgage loans granted in the city of Detroit for the acquisition of homes like the ones we managed was only 17. This amounts to saying that practically no loans were granted during year.
From the perspective of an investor, it is interesting to note that in Detroit the model that has occurred in similar situations in stable countries is being repeated (something that we have already experienced in other US states a few years ago): Once the banks and financial institutions are stripped of the properties owned and return to have working capital, begin to grant the credits that today deny, at the same time they are recomposing both the rating of the credit lines and the savings capacity of the inhabitants of Detroit.
In short, the tenants of today could be the next owners of the houses that are currently renting. And as a bonus, these would have higher values than those paid at the time of acquisition by investors.