One thing that people have to remember is that the job growth and the opportunities got to keep up with the development. Mike Jordan, president of Strategy Investment Group based in Michigan says he’s seeing a lot more Motor City investments as investors pick up properties and revitalize them in the Detroit area. Jordan specializes in real estate investments and property management services. His specific philosophy is to always look at clean, repair, replace. Where a lot of people in the note business take over poppies, Jordan says he takes over property. He says one thing where you could never go wrong is taking care of the client. Always be honest and communicate with the client even if it’s something they don’t want to hear, and that’s where success is. He shares what his clean, repair, replace philosophy is all about and talks about the Detroit Home Mortgage program.
Listen to the podcast here:
Motor City Investments with Michael Jordan
What changes have you seen happen in the last 24 to 36 months? I’m sure you’ve seen quite a bit take place there in your area.
We’ve seen new construction going up. In my parking lot near my office, Holiday Inn Express that was completed around eight or nine months ago. Right down the street a Hampton Inn. We have another development down the street about a million square feet of warehouse space that is being rented out. About three-quarters of a mile from my office. I’m not even talking about Detroit area yet. We have a bowling alley that got knocked down and they’re turning it into RV and boat storage. We’ve seen in the market a lot of new construction going on. Unemployment dropping, drought has dropped, more opportunities for people to work. The neighborhoods being cleaned up, new lighting, increased police and fire department services and a lot of blight being removed.
One of the most important things that I can mention here is we’ve seen increase in values. The homes I used to buy 24, 36 months ago, they’ve appreciated so much. There’s a program called Detroit Home Mortgage, it’s publicized pretty well. They’re upping the values of the homes by giving people second mortgage which is above the value of the home. That’s strategic to raise comps throughout the City of Detroit. We’ve seen tremendous improvement in neighborhoods, city services and the mayor is doing a phenomenal job. Mike Duggan is a phenomenal mayor. Dan Gilbert is amazing. He is a genius when it comes to the revitalization of the entire city, partnered up with Mike Duggan and the City of Detroit to do a lot of those things as well as the Ilitch family. We’ve seen a lot of improvements.
I’ve loved Michigan from the get-go because it’s a relatively fast foreclosure state. We had an attorney on the show, Franco Barile. Talking about the markets in Michigan and what it takes to foreclose and evictions. A lot of people are used to you’re driving by, “There’s a nice house,” and there are five burnouts next to five vacant ones. That perception of Detroit needs to start going away. You probably still have some of those neighborhoods on the southeast side of the downtown a little bit, between there and Grosse Pointe? Those are changing though too? You’re not seeing as much of that.
The East side is mainly an area where you see a lot of neighborhoods that have more distress, some board-ups and burn downs. You’re seeing less of that. We’re seeing a lot more investors pick up those properties and revitalize them. You’re seeing areas that in the future, I look at potential developers coming down there and putting up new apartment complexes or new single-family homes. A lot of that’s going on. One thing that people have got to remember is that the job growth and the opportunities got to keep up with the development. It’s there. There’s a new bridge that’s going up from Detroit to Canada.
The Gordie Howe Bridge.
There’s a lot going on. I put my confidence in guys like Dan Gilbert and the City of Detroit that are creating opportunities for companies to come in here and to create jobs for the residents. That’s where you see the revitalization of those homes with burn downs being knocked down. Developers coming in there and having ideas of ways to put up new construction or do other things with it. You see a lot of improvement on the eastside of Detroit.
Going back into the numbers, because you look at properties to eventually turn it into turnkey rentals. Is there a price point as far as the monthly rents in an area that you try to stay above?
We never try to go too high in the rents either because you don’t want the tenant to be thinking about moving out of your house. You want to try to have the tenants in your house for three to five years. Our average rent rate is around $850. That’s the median rent rate of homes that we provide to tenants. That works well because we got an abundance of tenants that that sweet spot of $850 works well for. You get other areas where the rent is $900, $950 or $1,000. Once you get to that $1,200 mark, that’s the cap that we see in the City of Detroit. That’s usually the four-bedroom, two-bathroom home with a two-car garage and certain area. I never like to go above $1,200, not in Detroit. That’s not where I feel that number serves the clientele well.
One of the great things that you do is you try to put people into a long-term lease. It’s not a six-month. It’s sometimes a two-year, three-year.
Our goal is to sign people up for a 24-month plus lease. Sometimes we have someone in a five-year lease. What we do is 90 days prior to the lease coming due, we contact them and get them to re-sign up. Generally, what the finishes of our house is in the way that we communicate with tenants and take care of our tenants and whatever they need and maintenance supplies. Our average stay is going up to three and a half years roughly now. That’s what we’ve seen. We have some tenants that will stay five years. We have some tenants that will be there for two years. Our goal is to get them to stay there for as long as possible.
A lot of investors look at two short-terms, six or twelve months. When you look at these houses and we have the absolute value put into it, it’s a brand-new house. Same rent for two years and fix it in. It’s a home. They may not own it, but you’ve got some great opportunities with that too. Like you said before, if you ask a homeowner who wants to buy, you’ll put them on a land contract, to get things rock and rolling. You’ve got a big heart for helping out your fellow man there locally.
I would love to share some videos with you one day of our renovation. You can see some before and after to see the product that we provide. We’re able to do that in economical fashion because it’s the law of volume. We have generally 70 to 80 rehabs going out at one time. We buy materials in bulk, calling materials in bulk. We keep our crews busy all year round. We have around 40 to 50 crews at work for us. We can provide those kinds of rehabs in economical fashion. Still make money for the investor as well as our self by providing quality turnkey products.
Your website has got some great stuff. StrategyProperties.com is the website. Got some great photos. You do a great job with stuff. You do some things a little bit differently than most people. Why don’t you talk about your philosophy when you’re buying a note or a property and take them back? You have a specific philosophy what you want to put into that property or how you want to make it look?
Let’s say there are hardwood floors in the home. We’re trying to always restore the hardwood floors because we feel that it’s good for wear and tear. We also think the look of it is phenomenal. When you finish a hardwood floor, it looks great. Sometimes when we get some homes that we take over and they have tile floors in the kitchens or bathrooms, there’s a situation where you can clean it up. I always look at clean, repair, replace. If I have a new tile floor, there’s no way and there’s no reason to tear that out. That would be silly. Our first option when we train our scope writers to go into homes is cleaning. Saving what we could save that’s in good shape and is going to be a benefit to the home than repairing some items.
You might have new cabinets that just need new hardware on there. That makes a lot of sense. We go into the replacement portion where we’re mainly tearing out and gutting out kitchens and bathrooms. That’s mainly what we do. In some circumstances we can save them. It would be helpful to you and your community on We Close Notes network, I would love to even walk through and show sometime on video. I could create some videos for you guys to show you guys how we write scopes of work and how we come with our pricing. Whether someone’s buying notes in Michigan, Illinois or in Texas, this gives you a certain standard and that we follow on how to write scopes of work, how to price them out and then how to get the work done.
A lot of people in the note business, you take over properties. Sometimes someone doesn’t want to pay, they don’t want to do cash for keys or they’re not interested in staying in the property. We take it over. If it’s vacant, give a notice of presumptive abandonment, then we get the property back because no one’s living in the home. We’re at a situation where we can write the scope of work. In my situation, I’m buying a lot of vacants or homes that are sold without an owner in the home. We’re familiar with that. We’d be more than happy to help out whoever would like to see our process.
A lot of people that get in the note game, they like the performing side. They like to buy the non-performing and do a modification work out, or the homeowner get it re-performing so they don’t have to do some work. With the rehab side, you’re not scared of the vacant properties because you’re there locally and you’re doing some things there. What’s your bread and butter when it comes to looking at notes? What do you prefer?
We buy land contracts too in Michigan sometimes. They’re not even mortgaged or has a land contract. I have two favorites. One which is buying a note and having a vacant where we could do a notice of presumptive abandonment, give it back but we bought it at a discount where it makes a lot of sense. I like the option of a homeowner living in the home and us remodifying the note. Sometimes taking them until lease for the first six months to make sure they’re going to perform well. Putting a down payment and getting that re-performing. You may be in a great situation where you’re into the note for only X amount and your return on investment is high. Those are my two favorite aspects of the note business.
That’s what’s great about this business is that we are seeing deals six to twelve to 24 months before it ever hits MLS before your traditional fix and flippers are looking for it. It’s a whole avenue that most people don’t know. Believe it or not, Texas is second in the nation as far as the defaults right now after the hurricanes. I’m starting to see stuff because of the floods. Everyone else affected from their jobs. We’re starting to see it. It’s at 6.7% of all Houstonians are in default. There’s opportunity there if you know where it’s going.
For years I’ve been screaming, “There’s opportunity where the high default rates are. There’s opportunity with a lot of foreclosures. You can get stuff at a discount that makes sense.” I pay attention and I love what you’re doing because I see you travel. You’re traveling more so, spreading the Detroit gospel in different parts of the country at different expos. You’re also part of a couple of different masterminds. I see you with different investors. Sharing the fact, “This is an opportunity,” what’s going on there with appreciation in double figures for the last couple of years in Michigan for the most part? It’s affordable at that point compared to California, Arizona and Nevada. Even Houston with a median home price is almost $300,000, you can buy a lot of houses there in Michigan.
If you know how many houses you can buy for $300,000. When they come out to Michigan, I had a couple that you and I know. A great couple that was here, we had dinner with them. We went around the downtown area and we took a look at some different areas of Michigan and Detroit. We came down to my office and he said, “When can we get started? This is amazing.” You see that Detroit isn’t what you think it would be from what you hear about it. When you come here, there are people that live here. There’s business and industry.
It’s nice to see you when you had the major employers like the big three doing well, getting back up. It’s a rippling effect. Not only does it do well there local in Detroit. There’s across the state and even rippling into Indiana, Ohio and those other cities out there that had manufacturing. Fort Wayne is doing well again in Indiana. Parts of Ohio are doing well. We’ve got to somebody up in Lubbock. He’s used to doing fix and flips in the Lubbock area.
He has an engineering mindset. He said, “I’ve got to touch it. I’ve got to feel it,” and I said, “No, you don’t. If you reach out to other people, you reach out to professionals in the markets like yourself, you’ve got somebody there who’s going to handle all the work. You can have fun. You don’t have to be an over analyst paralysis individual come up and see what’s going on. See how well Mike is doing. His whole team is there to take care of it. It creates a true win-win. It’s a win-win for the investors because they’re buying assets that make sense. It’s a win for you guys too. You understand the note game. You also understand the rehab, the rental, the after thing or the sales price.” That’s the thing I keep telling people, “This is a network of people. Quit trying to do it all yourself. Find good vendors like you. A strategy to do the heavy lifting for a lot of people”
That’s why we provide services, property management as well as construction services. One thing we pride ourselves in, it’s our key. Since I’ve been in business is I have my entire staff that is on the same wavelength, which is taking care of the client. Always take care of the client. Always be honest and communicate with the client. Even if it’s something they don’t want to hear. You could never go wrong with that. That’s where our success is. We don’t have a magic system or anything, other than working hard and using our resources. We use honesty, respect, integrity and communication to deal with clients. It doesn’t have to be a headache. You could use resources, the right people, companies to work with that can deliver. You could prosper from investing the right way.
Do you see a lot of investors coming into your backyard there? Has there been a surprise or to become a regular river from different parts of the country or different countries of people coming in?
We’ve seen different countries around the world that come in here and buy from us and we manage for, namely China, Taiwan, Singapore, London. There have been a lot of investors from London, France, South Africa, Israel and Canada. Lately, we’ve seen a lot of South American investors that have come up from Brazil and different parts of South America. Domestically in the US, a lot of people from Miami have been coming here. Mostly it doesn’t make sense that those prices down there. New York and California. California is one of the bigger ones, but then you have also Miami and New York. It’s been quite interesting to see and meet many different people, to service them and provide them with the best services that we can provide. Doing things the right way produces results.
You’ve gone through the EOS. Anybody who’s got business with employees, that’s one of the most important things that you could read. If you don’t have employees read it and learn to evolve into it. What has been your biggest surprise from starting to implement those theories and thoughts into your business?
Holding people accountable and before holding people accountable, having the right people. Sometimes you might have the right people in there in the wrong seats on the bus. You’ve got to move them around and they’ll excel. Mainly understanding your people, understanding their strengths and then let them know that there’s a certain culture that we have in our company which is providing the best services possible for clients. You take care of clients, clients take care of you. You don’t take care of clients; you don’t take care of yourself. That’s the biggest way I look at it. That’s being open upfront and honest. It’s delivering results from them and also creating proper expectations.
EOS has helped us to not only identify the right people that we want in our company, but also what seats to put them in and then finding the right leaders to hold their teams accountable. That’s an important part of any business, whether you’re baking cookies, selling cookies, selling cars or homes or if you’re in technology. We have process maps for everything we do. We’re not going to assume someone knows what I’m thinking or what a leader is thinking. We make sure everyone understands it. That will lead us to what we want to get to, which is favorable results.
You’ve joined a couple of masterminds. How important have masterminds been with your growth over the last couple of years?
It’s helped out. Being around the right people such as yourself and other experts in the business is important. We feed off of each other. I have two or three important questions for you that I want to ask you. I feel comfortable where I can send you even a text because I know you’re jumping on a plane. I’m not going to call you when you’re going through security. I’m probably going to send a text. He’s got real good question. I’m looking for a lender on performing notes. Do you know anyone that does that?
It’s important to have those resources around you. It all also boils down to the fact that you have to learn from experience and get your feet wet. You can go out and read a million books, but I don’t think anything is as important as experience. Experience coupled with surrounding yourself with the right people that you can communicate with and they’ll give you honest and straightforward answers to help you in your journey is important. That’s why I like to build long-term bridges with people. I never like to burn them. You want to build those bridges as much as possible. The one that has the most bridges is a successful person.
Bridges don’t often get built by yourself. They can but they take time. If you’ve got somebody on the other end working to build that bridge over, you meet in the middle a lot of times and it gets twice the work done in half the time. Being able to align yourself with other networks or getting in and figuring out other people’s strengths that help offset your weaknesses or vice versa is one of the most important things when it comes to the masterminds and being able to share.
One of the biggest things is being open. I’ve been to places where people were open and they continue to struggle, but those that were open, “Here’s a problem that I have. Here’s a shortcoming that I have.” You will often see people in the audience or in the same mastermind come and say, “I can help you with that. I can help you with this.” It’s such a good warm feeling to have those relationships. What’s the best way for people to get ahold of you and reach out to you?
They could go visit our website. Take a look at our website. If they ever have any questions on what we provide, what we do or services that we provide, if they ever need any assistance, please feel free to email me. That’s usually the best route. Many people have emailed me, and talked about how they worked with you and how much respect they have for you. They’re in the Detroit market and they know that you’ve told them about me. They may need some advice on comps in the area or opinion in the area. I’m honest with them. I tell them if they say, “What about this area?” We pull comps and they’re looking at buying a note.
I don’t know if I will buy that note in that area, but everything has its price. I let them know what I would consider an A area, a B area, a C area, a C minus and a D area. Some people make a ton of money in the D area in notes because they’re buying it for pennies and they’re turning around and selling it. Everyone has their own strategy. It’s my obligation to tell them the comps in the area, what they can sell it for or the rental rate in the area. I’m more than happy to do that. Some people have asked me to help clean up homes and get the home ready to show. We’re more than happy to do that.
To list the home for sale on the MLS, we do that. Our brokerage division does that. We have a brokerage division called Your Path Realty. That’s what they do. We basically work with owners that want to sell or buy real estate or buy notes. You might say, “Scott, we have this investor that’s looking to buy some notes. Do you have a tape?” That’s when I reach out to you. We’re more than happy to help your clients throughout the country with anything they need. The best way to reach me is via email. I’ll put them in touch with different department heads that I have. Sometimes I have people that drill in further than me and they could help them out quicker. They send me an email. If they want to do several property management, selling a property, buying a property, listing a property, whatever it may be, I put them in the right direction to people in our company and we help them out. Even if it sounds something financial-related, they want advice, contact us. We build bridges. We want to be someone that can be an asset to investors in any realm of the business.
Mike, as always, thank you so much. Reach out to him and his team. They do a great job. If Detroit is a market you’ve invested, it’s one of your top markets. Mike, thanks for being here and sharing your insight.
My pleasure, Scott. Anyone that wants to ever email me with any questions, my email address is Mike@StrategyIG.com. They’re more than welcome to email me with any questions in the Detroit and Southeast Michigan market. That’s what our expertise is. We’re more than happy to help you out. Scott, you’re a great friend. I appreciate you very much. I look forward to hopefully seeing you and continuing our great friendship, relationship and our business together throughout the years. We appreciate you having us on here.
Thanks. Do me a favor, if you don’t have an actual asset you’re working through or have made an offer on, don’t send him an email. Make that initial bid and when you get a counter back, then reach out to him. Don’t bombard him with questions and stuff that you have not made a bid on.
About Michael Jordan