Acquisition Summary:
Property Detail: 3BR 1BA Brick
Acquisition Date: August 30, 2024
Acquisition Price: $45,000
Capital Expenditures: None for now
Current Rent: $700
Future Rent: $900
As Is Value: Approx. $60,000
Typically, it will be difficult to sell a Single Family Residential with a tenant on the MLS. This is because the majority of the buyers are looking for a home to live in. Interestingly, it is not always a good idea for investors to inherit a tenant, either. The buyer may not have full knowledge of the tenant, and in a distressed situation, sometimes the tenants are no longer responding.
The acquisition team at MTMA is always careful to vet any property with a tenant living in it. This property was no exception. The management personally visited with the tenant in order to assess the situation.
With this property, our Team quickly found out that the tenant had stayed in the property for 7 years. The rent had been kept very low, at $700. This happens quite often. Many property managers dislike raising the rents on a steady long-term tenant, and end up collecting very low rents.
Keeping rents slightly below market can help retain good tenants. However, overdoing it will end up in missed opportunities. The acquisition team immediately seized the opportunity to let the tenant know that the rents needed to come up to a realistic level if she were to stay.
The tenant, fully knowing that the area rent was likely to be above $1,000, agreed to a post-closing rent raise to $900. This was convenient to the MTMA team as well, because if this tenant leaves, the property will need a full makeover.
With this property, the Play is to hold until the current tenant leaves, and then to do the renovations. Currently, the property is not in the best condition, and may not have much equity to speak of, but the acquisition cost of $45,000 for a SFR that cash flows at $900 a month is a very easy acquisition decision to make.
The property is very close to the affluent neighborhood of Grosse Pointe, and is a five-minutes drive to a Lowe’s branch. The location sets this property apart, and when the time comes for the crew to go in to turn the property around, the Team fully expects to create that great value that is locked into this property.