Diary of a Real Estate Fund Manager

SFR Acqusition #16 – 8259 Meyers Street, Growth, Growth, Growth!

Thu, 16 Jan 2025 15:34:00 GMT

We at Mutual Trust Management Advisory LP offer our investors a long term residential real estate investment opportunity with an aggressive outlook as per below.

8% Annual Preferred Return to our investors.
A Target Total of 10 to 16% Annual Returns
The difference will be split by investors and general partners.

Many real estate investors may wonder, how is this possible, when retail residential purchases at today’s prices can only typically produce a 3 to 4% cash-on-cash return if lucky?

We are here to offer individual investment details of each property that goes into our portfolio in order to show our investors exactly how this is done.

The typical investment thesis is that firstly, we purchase a value-add property and fix it up to create immediate equity growth. The equity will then keep appreciating at a compounded rate far superior to a typical retail play.

Then, we ascertain that enough cash flow from the rents are available to secure most of the Preferred Returns. While most properties may not start at a cash-on-cash return of 8% and more, we do look for properties that can deliver this goal within a few years’ holding period.

Of course, we employ further tweaks to accommodate detailed portfolio management, however in this article we will keep the framework simple.

Let us take the example of 8259 Meyers Street, a recent proud acquisition.

Property Address: 8259 Meyers Street, Detroit, Michigan 48228
Acquisition Date: 10/11/2024
Acquisition Price: $90,000
Capital Expenditures (CapEx): $20,000
After Repair Value (ARV): $140,000 (conservatively).
See Comp 1 A comparable property of similar size, fully renovated and vacant, sold for $169,000.
See Comp 2 A smaller property requiring a comprehensive cosmetic refresh, sold for $120,000.
See Comp 3 A smaller property with a long-term tenant and a listing history of $149,999
Current Rent: $1,000 per month (projected to increase to $1,200 immediately post-closing).
Simple Cash-on-Cash Return Projection: 7%+ after rent increase

8259 Meyers Street is a promising brick property situated in the small but well-maintained Aviation Sub neighborhood of Detroit.

Aviation Sub is known for its well-kept homes that feature a variety of architectural styles, including bungalows, colonials, and ranches. The predominantly brick construction adds to the area’s visual appeal and long-term durability, making it a highly desirable choice for residents and investors alike.

Recent interest in this neighborhood stems from its proximity to Dearborn, a vibrant community known for its Middle Eastern culture and landmarks. Dearborn real estate prices are now more than three times the value of typical Detroit properties. This makes the Aviation Sub neighborhood attractive to families seeking affordability with convenient access to Dearborn.

Dearborn real estate has outpriced and outpaced Detroit, and is set to boom further.

The locational advantage of 8259 Meyers Street places it just minutes from key growth hubs, including:

Islamic Center of Detroit (ICD)
Qahwah House coffee shop on Shaefer
Numerous Arabic bakeries and restaurants on West Warren Avenue
Many fresh foods supermarkets such as the Happy Land Market and Super Greenland Market
Entertainment such as the Ford-Wyoming drive-in theater and other essential services such as a dental clinic on Ford Street

According to Zillow, the zip code 48228 has appreciated over 12% year-over-year from December 2023 to December 2024. This outpaces Detroit’s 7.9% growth and Dearborn’s 6.9%, reflecting the rising spill-over demand in this still-affordable area.

The accessible home values and renovation opportunities still to be found in this area is likely to continue to attract investors and homebuyers, driving further gentrification.

As already mentioned, at MTMA, we structure our single-family residential (SFR) acquisitions strategy to align with the below metrics.

Preferred Return Rates of an annualized 8% to investors
Overall target annualized returns of 10–16%

The majority of the Preferred Returns will be provided from the yearly rental cash flow. The remainder of the returns will occur from the value creation.

This property is projected to gain a conservative equity return of 27% upon renovation completion (total investment: $110,000; ARV: $140,000) as well as achieve a cash-on-cash return of over 7% once the rent increase occurs.

Combined, the Team estimates a first-year total return of approximately 34%, effectively doubling the fund’s total annual return expectations of 10-16%.

This first year will be followed by annual equity growth on the ARV and rent increases. Let us assume the area property prices appreciated by 5%, a very conservative rate judged against the recent trends and this exceptional location. In Year 2, this property will be returning:

5% appreciation against $140,000. This is 6.38% against the original investment amount of $110,000.
$50 increase on the $1,200 rent, or 4.1% rent increase. This will produce a cash-on-cash return of 7.64% against the original investment amount.

The Year 2 returns goal against our original investment amount is estimated to be 14% if no major incidents, and our numbers will grow further into the future years, positioning this investment comfortably above and beyond our fund goals with the initial value creation offering a performance reserve for possible market variability.

This is how our investors can rest assured that our strategy—targeting an annualized portfolio growth of 10 to 16%, with 8% allocated to investor Preferred Returns—is typically shown to be achievable within a few months of acquisition.

Every acquisition will have a similar specific investment thesis that aligns with the above goals, and investors will have a good idea, typically within the first half year of each acquisition, whether the benchmarks are being achieved or not.

Based on the two key metrics of rental cash flow potential and equity creation, the successful acquisition of 8259 Meyers Street stands to demonstrate our fund’s ability to deliver and perform.

===== December 30, 2024 Update

The property lease was renewed to $1,200 a month on 11/1/2024. The repairs on the roof, landscaping, and kitchen floors were immediately ordered and made also at this time.

The property is now safely set to a cash-on-cash return of above 7% as we have projected.

In relation to value creation, on December 30, 2024, this property has a Zestimate of $115,600 on the popular real estate website, Zillow. This gap between our Comparative Market Analysis performed by veteran local listing agents may occur from time to time due to the nature of our acquisition and value creation styles. We purchase properties typically not listed openly, and fix them up without listing them again.

While achieving a top-market price through a MLS listing might indeed require additional cosmetic repairs (see Comp 1), we confidently stand by the as-is valuation of $140,000 (See Comp 3).

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SFR Acquistion #18 – A Solid Investment in A Brick Area – Rented with Upsides!

Thu, 12 Dec 2024 07:27:00 GMT

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SFR Acqusition #17 – Section 8 Rental with High Growth Potential: 18239 St. Marys, Detroit

Thu, 12 Dec 2024 06:40:00 GMT

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PRIME VALUE-ADD POTENTIAL IN PALMER PARK: 1000 MERTON, DETROIT, MI 48203

Thu, 12 Dec 2024 05:30:00 GMT

1000 Merton is a 20-unit, 70%-occupied multifamily property located near the entrance of Palmer Park, just off McNichols Road.

The property is part of Detroit’s Palmer Park Apartment Buildings Historic District. The area has undergone numerous successful revitalization efforts during the past decade.

The latest development has been created through the contributions of Detroit’s premier entrepreneur-turned-real estate developer, Dan Gilbert.

His efforts brought the annual Rocket Mortgage Classic Golf Tournaments to the Detroit Golf Club within Palmer Park in 2019.

Single residential homes around the Subject Property within Palmer Park are positioned for further
gentrification. The area’s median home values of $360,000 prices competitively alongside its
popular neighbors, Bagley and University District.

The increasing attention that the Palmer Park area has been receiving of late has not been lost on
our Team. We believe that our favorable acquisition price, the strong-value proposition, and the inhouse
construction and management teams can create a lucrative investment opportunity for our
investors for years to come.

Our investors can view the full Investment Thesis once they log in.

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SFR Acqusition #15 – 18951 Lauder Street; Exceptional Growth Potential, Exceptional Rents

Wed, 11 Dec 2024 14:28:00 GMT

Post-Purchase Update: This property was approved for $1,500/mo., starting January 1, 2025.

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SFR Acqusition #14 – 3607 S. B. Street Zero-CapEx Gem with Extra-High Cash Flow!

Wed, 11 Dec 2024 12:49:00 GMT

Property Overview

Address: 3607 S B Street, Detroit, MI 48217
Neighborhood: Detroit – Boynton
Property Type: Single-Family Residence
Year Built: 1945
Size: 872 sq. ft. with a 280 sq. ft. garage and an 864 sq. ft. basement
Lot Size: 0.095 acres (39 ft x 106 ft)
Purchase Price: $65,000

Area Characteristics

3607 S B. Street is located in Detroit’s Boynton neighborhood, the southernmost part of the city. The area faces neighboring cities like Lincoln Park and provides convenient access to key amenities and destinations:

The street predominantly features vinyl siding homes, which may suggest slower equity growth. However, the property’s advantageous location and rental potential offer significant investment value.

Financial Highlights

Investment Appeal

This zero-CapEx, high-return property is the definition of a turnkey investment, combining affordability, rental stability, and accessibility into one unbeatable package.

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SFR Acqusition #13 – 19944 S. Street Rented At $1,200 A Month

Sun, 08 Dec 2024 17:02:00 GMT

Acquisition Summary

Property Detail: Single-family home, 1,152 sq ft, 1BA
Acquisition Date: October 4, 2024
Purchase Price: $45,000
Repair Estimate: $10,000 (roof and exterior work)
Total Investment: $55,000
Projected ARV: $80,000
Current Rent: $1,200/month (good tenant)
Estimated Future Taxes: $2,316/year (adjusted based on SEV for non-homestead property)

Located in the Five Points area of Detroit, 19944 S sits near 8 Mile Road, the dividing line between Detroit, Southfield, and Farmington. The location benefits from nearby suburban retail offerings, such as a Sam’s Club in Southfield, and essential services like Corewell Health Farmington Hills Hospital. These conveniences add appeal to renters and potential future buyers.

Constructed in 1951, the property has 1,152 square feet of living space and a 768-square-foot basement. It is set on a lot measuring 45 ft x 133 ft. The home is in fair condition but requires immediate roof repairs as part of a planned $10,000 renovation to ensure tenant safety and maintain structural integrity.

Currently rented at $1,200 per month, the property provides steady cash flow. With manageable improvement costs, reliable rental income, and value appreciation potential, 19944 S. Street is another triumph by the Acquisition Team’s invaluable networks.

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SFR Acqusition #12 – 18037 R. Acquired with a Renter, Raised to $1,000 Immediately!

Sun, 08 Dec 2024 16:22:00 GMT

This single-family residence in the College Park neighborhood offers immediate stability and strong cash flow rather than a typical value-add project. Key highlights include:

Purchase Price: $75,000 – an exceptionally low entry point relative to the market.
Capital Expenditures: Minimal or none required ($5,000 or less anticipated).
ARV: $150,000, indicating significant inherent value.
Rent: $1,150/month, a strong return with no immediate need to adjust the lease.
Annual Taxes: $1,800 (current due: $1,615.05).

Property Details:
Built in 1941
1,355 sq. ft. with 755 sq. ft. basement
Zoning: R1 Residential
Lot Size: 0.107 acres (40 ft x 116 ft)

Neighborhood Highlights:
Proximity to DMC Sinai Grace Hospital
Access to local fresh food markets (Glory Super Market, Princess Superette Market)
Area well-known to our property management team.

Investment Positioning

This property delivers immediate income with minimal upfront effort. It is already tenant-rented at an above-average price for the area, eliminating the need for significant capital expenditures or lease renegotiations. Its affordability and stable income make it an excellent addition to MTMA’s portfolio, aligning with our strategy of acquiring undervalued assets with robust cash flow.

This truly speaks to the acquisition expertise of our Team.

The post SFR Acqusition #12 – 18037 R. Acquired with a Renter, Raised to $1,000 Immediately! first appeared on Diary of a Real Estate Fund Manager .