Best Practices for Detroit Real Estate Investors

Investing in real estate can be more responsibility than you think. Not only do you have to account for market fluctuations and financing, but you also have to focus on maintaining the property and its inhabitants. This responsibility may seem daunting but by implementing industry best practices, you can be sure to safeguard your investment.

In this blog post, our team of experts at Own It Detroit will discuss the essential knowledge and actions required for the successful management of your investment properties. We will also provide valuable insights and techniques for avoiding risk to help you excel in this industry.

1. Know Your Market

Knowing your market is the most important place to start for real estate investing. This knowledge will help you choose the best location for your rental property, set a competitive price, and be prepared for market fluctuations or anything else the Detroit market has in store.

What to Know About the Detroit Real Estate Market

Detroit is a historic city with numerous older buildings and areas, but with the introduction of revitalization efforts, the city has seen an influx of modern buildings and infrastructure. These efforts have severely increased its appeal, making it one of the most popular cities in the country for real estate buyers and investors. The diverse range of luxury condos in Midtown and historic homes in the city's many neighborhoods, coupled with the city's affordability make Detroit a prime location for investors.

In recent years, there has been an increase in younger buyers moving to the city to explore the vibrant culture of Detroit. Inhabitants enjoy museums, restaurants, music, and more unique experiences. Detroit also houses many automotive manufacturing companies, creating job opportunities and economic security for locals.

These market factors can tell you a lot about your target audience, and the prime locations, and provide unique selling points for prospective tenants.

What to Research Before Entering a Real Estate Market

Before entering the Detroit real estate market, start by researching different neighborhoods in the city. The key factors to look for when researching neighborhoods are their rent averages, vacancy rates, and tenant demographics. This will give you insight into the potential challenges and opportunities of investing in the neighborhood and inform your investment decision overall.

If you decide to invest, having this knowledge will be extremely valuable, helping you market to the right demographic and set a profitable and competitive rent.

2. Comprehensive Tenant Screening

As a landlord, one of your most essential responsibilities is tenant screening. If you don't diligently screen your tenants, you may find yourself dealing with late payments, property damage, tenant confrontations, or even unexpected move-outs. In the end, this is subjecting yourself to more risk and uncertainty than is needed and can lead to financial losses.

Let's explore some tenant screening best practices that are sure to protect you, your investment property, and your other tenants.

Pre-Screening Tips

It's not just important to be diligent during the tenant screening but to also be thorough in your preparation beforehand. Start by carefully considering the specific criteria you are looking for and make sure to note them down to ensure consistency across all tenants. This could be a minimum credit score, proof of employment, or anything you feel is necessary to verify that the applicant is reliable.

You should also provide requirements like pet policies, smoking policies, and other important information on the listing. This has benefits as well as risks, but this initial step can significantly enhance the quality of the pool of applicants, making your job easier.

Conduct Credit and Background

For the tenant screening process, it's important to conduct credit checks and background checks. A person's credit score can say a lot about their ability to make payments and financial responsibility. A good credit score is between 690-719, but landlords typically accept credit scores as low as 650.

Background checks will tell you if the applicant has any criminal history before deciding to accept them. However, it's important to note that you can't reject an applicant based solely on their record. This is against the Fair Housing Act and can lead to legal disputes.

Verify Employment

It's crucial to verify the applicant's employment to ensure they are financially secure enough to make monthly payments. This is essential to protect yourself and the tenant from instability or eviction. Nobody wants to maintain a property that no one is living in, so it's best to find quality tenants to reduce vacancy rates.

Get References from Past Landlords

No one has a better understanding of an applicant's qualities as a tenant than the previous landlords who witnessed it firsthand. Getting references from past landlords will give you insights into the tenant's ability to make payments, their professionalism, and any other qualities that you should be made aware of. This step is a must for landlords to protect their investment and other tenants.

3. Regular Property Maintenance

As previously mentioned, Detroit is a historic city. If your rental property is older, it is likely to require additional maintenance and repairs.

If this is the case, first determine a maintenance budget. It is always crucial to have a maintenance budget, but it becomes increasingly more important as the property ages. You can easily download a maintenance budget online, which will help you plan out and track month-to-month expenses for maintenance and repairs.

The need for repairs can happen unexpectedly, but you can reduce the number of tenant maintenance requests if you conduct regular property inspections and maintenance. This way, you can catch an issue early before it balloons into a more significant issue, ultimately saving you money and stress. It also shows your tenants that you are committed to providing a safe and comfortable living environment.

4. Stay Updated With Local Laws and Regulations

If you're a seasoned property investor, you know that every state has local laws and regulations about rental properties, and Detroit is no exception. Staying up to date on Detroit's laws is essential to owning a property and avoiding legal complications. Even if you read up on the city's laws before investing in the property, these laws can change, and if you don't keep up with those changes, you may find yourself in a hole.

Look online to find resources like the Landlord Compliance Manual provided by the Building, Safety Engineering, and Environmental Department (BSEED). This document serves as an excellent starting point as it provides valuable insights into the current landlord laws in Detroit and offers valuable cost-saving resources.

According to Airmason, you can monitor revisions to regulations through city hall websites and other official channels. Another way to stay updated is to attend webinars or conferences hosted by government entities, specifically designed to educate residents, employers, and property owners on legislative changes.

5. Build a Local Network

Finding a network of professionals can be invaluable to your investment experience. Let's discuss who you should have within your circle and the benefits that may stem from the relationship.

• Local Contractors: Building relationships with local contractors is essential to your success as a landlord. If maintenance or repair issues arise, you already have a solid point of contact to fix the issue as quickly as possible.
• Property Managers: When times get tough, you may want to hire a property manager to help manage your properties. Property managers can help take care of maintenance requests, tenant screening, rent collection, tenant communication, and more.
• Other Real Estate Professionals: Other real estate professionals, such as a realtor or real estate attorney, can give you valuable advice and assistance that can guide you through your real estate investment.

Remember, you don't have to manage your properties alone. Attending networking events, joining local real estate groups or clubs, and attending webinars can get you in touch with people who are ready to offer a wealth of knowledge or assistance.

6. Maintain Open Communication with Tenants

As your rental properties grow, you are hopefully attracting more and more tenants. Although this is a win to celebrate, more tenants means more responsibility. Attracting tenants is only half the job—it's just as important to keep your tenants happy and retain your tenants.

The best way to do this is by maintaining open communication and addressing their concerns promptly. This will help your tenants feel valued as well as ensure that you are quickly addressing maintenance issues and other concerns.

One strategy for good tenant communication is having a clear communication plan in place that you follow for all tenants. You should be consistent with communication, use a consolidated communication method, and always follow up on issues.

Consistency in communication includes using the same method of communication and maintaining a regular frequency. You should decide if you want to communicate via email, phone, text, or forms and create a schedule that you can consistently follow. Having a system in place will keep you accountable and make sure that all tenant issues are addressed, keeping your tenants content.

After all, keeping your tenants happy leads to lower vacancy rates and therefore, higher profitability for your investment.

7. Plan for the Unexpected

Unfortunately, real estate and property ownership are not always predictable. Whether it's a sudden repair, economic downturns, or vacancies lasting longer than expected, it's a best practice to have a contingency fund. Having these funds ready before the unexpected happens can reduce stress and the risk of financial instability.

When developing your contingency plans, it's not only important to meticulously outline this plan but also to test and update them to make sure they are feasible. This will help you be prepared for any situation that may arise.

Navigate Detroit Real Estate With the Best Detroit Property Management Companies

Being a property owner is not just investing in real estate, but diligently managing the properties as well. There's a lot to keep in mind to ensure your investments are staying profitable, but you don't have to handle it all on your own. If you're overwhelmed with the responsibility of property ownership, you should contact a property manager, such as Own It Detroit.

Own It Detroit is a comprehensive property management company that has in-depth experience with the market that ensures you won't be blindsided. We take care of tenant screening, communication, and all other tenant management responsibilities. We also provide finance services and will guide you in the right direction.

To learn more about investing and property management, download our resource, How to Invest In Real Estate: A Guide.