Hard Money Lenders in Michigan

The tax line that catches out-of-state buyers

Michigan has a reputation as cheap Midwest cash flow, and in parts of the state the prices support it. But the tax bill a buyer inherits is almost never the one printed on the listing, for two separate reasons. Start here, because it is the most expensive thing to learn late.

1. The rental loses the Principal Residence Exemption. A house lived in by its owner carries the Principal Residence Exemption under MCL 211.7cc, which exempts it from up to 18 mills of local school operating tax. A rental never qualifies, so a landlord pays those mills on top of everything the owner-occupant paid. The PRE is not the same thing as the Homestead Property Tax Credit claimed on a state income tax return; it is the PRE that a rental loses.

2. The taxable value uncaps after the sale. Since Proposal A in 1994, Michigan taxes property on its taxable value, and increases are capped each year at the lower of inflation or 5 percent while the same owner holds it. When the property transfers, the cap comes off: under MCL 211.27a the taxable value resets to the state equalized value, half of true cash value, in the year after the sale. A seller who has owned a house for twenty years may be paying tax on a taxable value far below half of what you are paying for it.

Put the two together and the first full bill on a long-held house bought as a rental can be a multiple of the seller's. Estimate it as half of the price you expect the assessor to accept, times the full non-homestead millage for that parcel, and use that figure in a DSCR ratio. Michigan has a working assessment appeal process through the March Board of Review, but you argue from the correct starting number.

Michigan landlord law, in short

Unpaid rent: a seven-day demand for possession before filing in district court (MCL 600.5714). Evictions run through the district courts; in Detroit that is the 36th District Court.

Security deposits: capped at one and a half months' rent (MCL 554.602), and the landlord must mail an itemized list of damages within 30 days after the tenancy ends or return the deposit.

No rent control. State law bars local governments from controlling rents on private residential property.

Local rental rules. Detroit requires rental properties to be registered and to pass inspection for a Certificate of Compliance, and many other cities, Grand Rapids and Lansing among them, run their own rental certification. Budget both the cost and the calendar time before a unit can legally produce income.

How our lending partners size a Michigan loan

Fix and flip, rehab and bridge pricing starts at 12.99 percent plus 2.99 points. Borrowers who have paid off two loans with the lending partner in good standing can qualify for loyalty pricing of 10.99 percent plus 1.99 points. Loans start at $50,000, the minimum credit score is 600, and the loan can cover up to 100 percent of cost (purchase plus rehab) but no more than 70 percent of after-repair value, whichever binds first. Leverage depends on the projects you can document from the past three years. Property must be non-owner-occupied and held in an LLC or corporation.

For a rental, the DSCR program lends from $75,000 to $2 million, up to 80 percent of value on a purchase or rate-and-term refinance, with no minimum credit score.

A Grand Rapids example: a house worth $300,000 after renovation supports up to $210,000 at 70 percent of after-repair value. If purchase and rehab cost $225,000 together, the investor brings about $15,000 plus closing costs, and the seller's transfer taxes at resale. The lending partner's team confirms terms for each property, and the lender decides.

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