The Mysteriously Missing Tenants: A Precaution to Potential Investors
Published September 19th, 2007 in Birmingham MI Real Estate, Buyer Information, Finance, Metro Detroit.
I doubt that there has EVER been a better time to make an investment in Michigan real estate. Opportunities abound, and smart investors will be rewarded.
Not long ago, I heard about an out of state “investor” who made his first real estate investment in Michigan. He was sold a high end home in the Birmingham/Bloomfield area and shown a lease that would more than cover his monthly payments, which on a property in the million dollar price range, are hefty. I don’t know how he came into this deal, or where he found the people who “helped” him to make it happen, but it wasn’t until hours AFTER he closed on the home that he realized there was no tenant to cover the bills. A bit more digging showed that the property wasn’t worth nearly what he had paid. Talk about a bad situation.
Then last week I heard from an anxious woman asking where she should report mortgage fraud. A mortgage lender told her that she needed to diversify her investment portfolio and that the best way to do it was rental property in the City of Detroit. From the sounds of her story, he found the house, showed her a lease and she signed on the bottom line, expecting to be collecting monthly rent checks for years to come. Unfortunately, there was no tenant, the home was in major disrepair and a host of other problems.
I feel sorry for both of these people, and I don’t want to hear about other people falling prey to these “too good to be true” scams. There are wonderful opportunities for investment right now in South East Michigan.
- First of all, I don’t think that either party really knew who they were dealing with. Make sure you interview the lenders and mortgage people you work with before you invest.
- Do your own due diligence. Attend a property inspection and physically examine the property. Ask for the sales history and comps in the same area. Ask for a copy of the public records to see what is going on on that street. Ask to meet the tenant. Look at the credit report.
- Ask lots of questions.
By no means do I want to scare away anyone who is interested in investing in Oakland County real estate. Most of the professionals working in our market are honest, competent and able to guide you to a great investment. Invest, but watch your steps!
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Missing Person photo by Steve Wilde
______________________________________________________________Written by Maureen Francis
SKBK Sotheby's International Realty, 248.430.4450
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I have a six unit property for sale and at one point we had a buyer from the West Coast make a purchase offer which we accepted. Now, I know my sellers and they have valid leases for all the units; I’ve seen the tenants. What I did not understand is why the potential owner did not want to meet the tenants or at least see that the units were occupied. Luckily for him he was working with a professional Realtor® - unfortunately for him he did not get his loan lol. Good post MF.
Great post Maureen. There are great opportunities in the market - everywhere - for the smart investors. But they have to be both parts of that — smart and investors.
First-time investors are going to find it hard to get the ball rolling (since they can’t show the income from the unit to lower the debt-equity ratio) in this market and if they aren’t smart … well as my grandma always said “a fool and his money is easily parted.”
Toby
PS - You are now on my blogroll. Not sure how I missed that one. So sorry!
Maureen,
Great post. Your comments can just as easily apply to the Denver market as is does to Detroit, and probably to most any market. I continue to be amazed by people that sign contracts, trust deeds, and leases without reading and understanding them. Relying on what anyone says without performing due diligence partly explains why the nation is suffering from so many foreclosures.
-that’s 30-