Turnkey provider Strategy Properties is poised for success as the Motor City’s fortunes continue to turn around.
When Michael Jordan looks around his hometown of Detroit, he just can’t help seeing opportunity and growth.
Jordan is the founder and president of Strategy Properties, a turnkey real estate investment company. Strategy buys and renovates residential properties in high-demand Motor City neighborhoods, particularly three-bedroom homes near desirable schools. The company recruits and screens tenants and then manages the properties on behalf of other investors.
Demand for Strategy Properties’ product has been strong. In a typical month, Jordan and his team complete at least 20 turnkey deals on behalf of both domestic and international investors. To keep pace, the company has grown from a staff of three to 15, not counting construction and field crews.
The opportunity in turnkeys is large, but Jordan has been careful to pursue steady, managed growth. The focus is on making long money, he said, not quick money. That’s why Strategy always buys good houses in good areas.
“Every property we buy, we buy with the philosophy that if it’s good enough for us to buy, it’s good enough to pass along to clients,” said Jordan, who contributed to a new book, “Success Blueprint,” with success and motivation expert Brian Tracy.
‘You See Development All Over the Place’
The Great Recession hammered Detroit’s economy and housing market. According to the Washington Center for Equitable Growth, the median home value took a hit of $50,000. Median household income went from $24,000 to $19,000.
Looking forward, though, Jordan is bullish on Detroit’s future. The new administration at City Hall, led by Mayor Mike Duggan, has adopted a long-term plan and created a culture where city employees are more responsive to residents’ concerns.
Anti-blight efforts have helped clean up many distressed neighborhoods. The city has demolished 8,600 homes since 2014, and is on pace to remove 5,000 in 2016 and 6,000 in 2017.
The construction of the $2.1 billion Gordie Howe International Bridge, set to open in 2020, will bolster Detroit’s shipping and logistics industry and is expected to create thousands of jobs. Billionaires Dan Gilbert, founder of Quicken Loans and Rock Ventures, and Mike Ilitch, who started Little Caesars Pizza, have also invested in a string of downtown real estate projects. The city’s heart is beating ever stronger.
“When you come to Detroit,” Jordan said, “you see development all over the place.”
Several major corporations—General Motors, Ford and Lear among them—employ thousands of workers in the Detroit metro, creating a need for housing.
“Detroit is really a solid market,” Jordan said. “You have a lot of roots here, you have a lot of industry.”
Jordan knows about local roots. He grew up in Livonia, a Detroit suburb, and went to Detroit Catholic Central and the University of Detroit Mercy, where he received a full scholarship as a basketball player. He ended up transferring and earned his degree at the University of Michigan.
Even as he was pursuing his college education, Jordan was running his own real estate business, which he started at age 19.
Jordan has been in the business of real estate and renovations about 15 years, a mix of new construction and flips. He got into turnkeys in 2010.
“When the market crashed,” Jordan said, “we started seeing opportunity.”
Unlike higher-priced markets like New York or the Bay Area, it’s possible for investors to buy a quality property in Detroit at a decent price and generate healthy returns. Clients can enjoy the benefits of a tangible asset with a generally predictable cash flow, especially when held over a three- to five-year period.
“It’s a good, solid way to know what you’re going to be making on a monthly basis,” Jordan said.
While Strategy Properties is focused on helping clients first, Jordan is also proud of the impact his company has had on Detroit’s neighborhoods.
Strategy has taken homes that needed some loving attention (and maybe some HVAC and plumbing work) and given them new life. In doing so, the company has helped boost the city’s property tax revenue and the values of surrounding homes.
‘You Still Have to Have Your Hands in It’
What’s the key to doing well with turnkey properties? “It’s the details that make someone successful,” Jordan said.
First, investors must perform due diligence on any properties before purchasing, he said. Make sure there are no foundation problems or other major issues. It’s a good idea to have a standard checklist of things to review before the acquisition of any asset.
“I always tell my investors that it is very important to cover all aspects of your real estate investment and hedge your risk by being detail-oriented,” Jordan said. “For example, insurance is a way to protect your asset against unforeseen issues, and if you have an insurance company like REIGuard that is a specialist nationally on investment property insurance, that is incredibly important to be able to protect your asset.”
Turnkeys are passive investments, but that doesn’t mean investors can forget about them, Jordan said. It’s imperative that investors stay involved in the management of those homes. Smart owners remain in regular communication with their property managers and respond quickly when those managers reach out.
“You still have to have your hands in it,” Jordan said. “Know your property managers.”
A turnkey property’s property managers should also have systems in place for addressing late payments quickly and making sure tenants are keeping up with any utility payments they’re responsible for.
A systems-based approach has also helped Strategy Properties with its renovations. Because the company has a standard procedure for acquiring and rehabbing houses, without over- or underspending, Jordan and his team can consistently produce solid turnkey properties.
But Jordan ultimately credits Strategy Properties’ success to his practice of treating clients in an exemplary way.
“One of the keys I learned early was to work straightforwardly, work hard and work honest with people,” Jordan said.
There are a lot of turnkey operators out there, and not all of them are looking out for investors’ best interests. By running his business in an honorable way, by consistently doing the right thing, Jordan and Strategy Properties have won over a legion of repeat customers.
And that’s also what he likes about the business of real estate investment generally.
“The sky’s the limit,” Jordan said. “The potential’s there to do whatever you want to do, so long as you’re straightforward and ambitious.”