Detroit, MI

What are everyone’s thoughts on Detroit, MI to buy and hold rental properties?

From the few articles I’ve read, it sounds like Detroit’s going even further down the toilet than it already is…Might be a loooooooooong hold process…Holding costs could kill ya’…

Detroit?! :shocked Homeowners who bought 20 years ago are still waiting for appreciation to kick in.

I saw a bumper sticker “Will the Last One to Leave Detroit Please Turn Out the Lignts”. I think that says it all!


Then again, Seatlle was famous for the same bumper sticker when Boeing shut down a long time ago…Who knows?..It may be an okay market in 20 years…or 30…

I think you will be a fool not to invest in detroit right now, there is great bargain here, i just bought a house in a decent area for 5,200 and only need 4,000 worth of work even if you cant sell it it will be good cash flow for a long time

Do you plan to fix it now and rent it out for whatever you can get, or leave it vacant for a while?..Do you have copper plumbing inside that might disappear in the meantime?..Detroit can be a vicious city…

Here’s my take on Detroit. This may be hard for many people to wrap their minds around right now but hear me out…

Right now…as I write this the U.S. Auto Industry is at a milestone marker.
Before I continue let me give you a little of my background.

15 years ago I started a used car dealership in Mass. I bought NOTHING but Honda’s and Toyota’s because they ran great, and people would not hesitate to buy one with over 100,000 miles. I still own this dealersship and keep my fingers in the business on a weekly basis. Here’s what I’ve noticed in the last 5 years…

Toyota, as consumer reports confirms, is having major quality control problems RIGHT NOW. The 3.5 liter engines in Camry’s suffer from piston slap so badly that I no longer buy them. Numerous other items have become problem areas too. Don’t believe it?? Google search…Toyota Engine Sludge. These motors develope sludging problems so bad that by 60K miles the entire engine can require a $8000 replacement. Toyota fought this every step of the way, and finally lost a class action lawsuit that MADE them extend warranties on these motors to 100K miles. Read the google search…want to see some new American car buyers in the making??? Look no further than someone who has a $25K Camry with 60K miles on it and is told they need a new engine. Remember, I’m a Toyota guy, love 'em, but reality is reality especially if your buying and selling this stuff USED. I SEE these problems, I don’t just READ about them.

Honda, better than Toyota, but ton’s of automatic transmission problems, and head gasket problems.

Ford’s Fusion just replaced TOYOTA’s Camry as the number 1 ranked car after 3 years of ownership. Toyota no longer will be granted “top pick” awards solely based on previous model history. THAT IS BAD FOR TOYOTA, and a sign of a deeper problem.

Here’s my theory…Detroit has never come so close to losing the whole show. That will get your attention better than anything. Look at the cars GM and Ford have coming out over the next 5 years. That, combined with monumental shifts in quality from the big 3 will evenually
lead buyers back to American makers cars. I know, I know, my friends CAN NOT believe “Mr. Toyota” is now telling them to look at Ford’s, but in all honesty, the Japanese makers are NOT as good as they once were.

When Ford and GM rebound, which they will, Detroit (the city) will not be far behind. I think buying a home for less than you can get a used car for is a no lose bet. The seeds are in the ground, their starting to spout, Detroit will not go down with out a fight. It will take years for Americans to believe that U.S. car companies make a car as good or BETTER than Japan. I can tell you in no uncertain terms, they DO, and it’s just a matter of time before word of mouth starts to spread.

Alan Mullaly (Ford CEO) is an Aeronautical Engineer by training. I learned a VERY interesting fact the other day from a friend who works at the local Ford dealereship. Apparently Mullaly has instituted a new program for all Ford Technicians. ANY OF THEM. Let me repeat this…ANY OF THEM, at ANY TIME are REQUIRED to call FORD’S Engineering Services Division with ANY problems they see coming into dealerships on customers cars. Let me explain how BIG this is… By encouraging these mechanics to identify and notify the factory of problems, changes can be made in designs or materials IMMEDIATELY. This is a BOEING trick of the trade. Mullaly came from BOEING. When commercial airline builders ID a problem in the field at the maintainance level, it is immediately communicated to the factory so they can redesign, fix, or replace a known problem part BEFORE it goes out into 1000 airplanes. This is RADICAL thinking for an American car company. Watch these guy’s, they’ll be back… BIG!


I agree with what you said 100%. However, there are several other factors to consider. For example, I believe that we are headed for a HUGE recession. In my opinion, anyone that still believes the housing market or the economy are headed for a soft landing is smoking something illegal. The American consumer is tapped out and has almost no way to recover. The home equity wealth of the past few years is rapidly disappearing and many are upside down. There will be far fewer people able to refinance their homes every year or two to finance their lifestyle. That will certainly cut into their ability to buy an expensive new car. Couple that with the fact that the unions and excessive government regulations have pinched American corporations to the point that they can no longer compete in a world economy. I’m not saying that Ford and GM are going out of business, but I think that they will be in dire straits for many years to come.

Once China follows through on their threat to dump the dollar as their reserve currency, the United States will be flooded with dollars which will cause runaway inflation. That could literally happen any time. What will the Fed be able to do to combat that inflation? TALK! That’s about all they have left. Raise interest rates and the recession will get much worse. Lower interest rates and feed the inflation. They (and we) are screwed. Combine that with a world wide liquidity crisis; the subprime fiasco; an 11 month inventory of homes; and a couple of million foreclosures in the next year or two and that might be a problem for Detroit.

My point is that the entire economy is VERY fragile. When we slip into a serious recession, Detroit will suffer even more than they are now and the mass exodus will continue. Is it nice to buy rentals cheap? Yes, if you can find a tenant and have positive cash flow? As more people leave, there will be more rentals (greater supply) and fewer tenants (lower demand). Not a great situation.

Detroit has become the latest fad. I can’t begin to tell you how many solicitations I’ve gotten lately from people wanting me to go to Detroit to buy property. In addition, I’ve received a ton of personal e-mails from newbies that have been solicited and think this is the next great opportunity. I think that smells like a fad and we all know how fads turn out.

Finally, Detroit is a huge risk that at best will take years to play out. Why speculate on Detroit when there are such a huge number of more stable areas where houses can be bought equally cheap and where no-one will have to “turn out the lights when the last person leaves”?


I agree Mike.

I personally think that the coming recession will be historic in it’s severity. I also agree that there are easier places to make money than Detroit, but, if I was it that area, I’d be buying like a drunken sailor.

When, not If, the recession hits, here’s how I see it playing out for the U.S. auto makers.

First…Absolutely no doubt in my mind the Dems take the White House and the Majority in the next election. This is critical, because unlike George Bush who, for right or wrong has decided to let market forces determine who makes cars in this country the Democrats will NEVER let Ford or GM go under during their watch. (I’m not making a political statement on any one side, it’s just a fact) So, the U.S. car makers WILL survive a recession. This country has stepped in TWICE to rescue Chrysler, you throw in a tasty recession and there is no way on earth their letting Ford or GM go under. NOT HAPPENING. The last time this all played out the U.S. Goverment Guarenteed Chryslers loans and the banks opened the flood gates with money.

As is true with all things, this too shall pass. Remember, China NEEDS this country as much as we need China. When you bring hundreds of millions of your people off farms and into cities to work in factories you better have something for them to build. If you don’t, where do they go? The farm is now a factory, the facory workers are all buying stocks on the Shangehai exchange, and you have a beautiful little dog that just chases it’s tail.

I tried to explain this to my 7 year old son the other day. This is what I came up with…

The United States is a spoiled rich kid who is used to getting everything he wants. Junior (USA) doesn’t save his money because his rich father(CHINA) just keeps replacing the kids money whenever he spends it. Whatever the kid buys everyone else in the world wants too, the father owns the factories that make these items. So if daddy cuts off junior, junior cuts off daddy.

It’s a mess Mike, but the bottom line is this. This country ain’t going anywhere. It’s still THE GREATEST economic machine in the history of the world. I made a prediction here a while ago that seems to be playing out. “There will come a time in this country when just mentioning that you invest in real estate will solicit the same response as telling people you enjoy a glass of bleach with your eggs in the morning.”

And THAT, will mark the BOTTOM of the market.

Buy it when NO ONE else wants it. Very boring, but very profitable!!

A serious suggestion: take a good hard look at the tenant pool in Detroit before you decide whether or not you want to do buy and hold rentals.

I know this for a fact. And just talked about this with my dad Saturday. I bought an '03 Accord in March. With less than 60K, I needed a new transmission. Uh, that’s why I bought the car because they run forever…so I thought. Good thing I didn’t listen to wifey and forgo that extended warranty.

Yep, saw that look this weekend. I was asked what am I into now (I’m always into some kind of business) and my response was looking into aquriing some property. They asked have I not been looking at the market. I said “yep” and left it at that. No sense in trying to explain I will only buy if the numbers work.


If you plan on keeping the Honda after the transmission is fixed this will keep it running perfectly for 200,000 ++ miles…

The problem with Honda’s automatic transmissions is they hold only 3 quarts of tranny fluid. The torque converter holds more but that doesn’t come out unless you pull the trans out of the car. If you drain your transmision only 3 quarts come out. Plus Honda does NOT use any filter. So make sure you change your trans fluid EVERY YEAR. I tell all my customers to do it every spring. MAKE SURE you buy ONLY HONDA transmission fluid. I can not stress how important this is for these cars. In one quart of transmission fluid approximately 2/3 is additives put there by Honda to work with THEIR transmission parts. Honda dealers charge about $4/ qt for the stuff so it’s not a cost issue.

The problem with todays cars are that people don’t want to HEAR anything coming from under the hood. Quiet is viewed as quality. So the builders insulate the hell out of the engine compartment which traps an incredible amount of heat under the hood. During summer driving with the addition of an A/C compressor running, temps build and tranny fluid breaks down. By changing that fluid every year in the spring your Honda will have fresh, clean fluid to fight through the summer with.

I’ve seen Hondas that have been regularly serviced with Honda trans fluid go over 500K miles on the original automatic transmission.

Think about it… do you know anyone who changes their trans fluid every year??
Your new transmission is going to cost that warranty company $2000!!

$12 worth of Honda transmission fluid once a year is one hell of a bargain.

According to the 2% rule that propertymanager lives by one could find great deals in Detroit. With this being said I am wondering why Detroit wouldn’t be considered a rental investors dream?

According to the 2% rule that propertymanager lives by one could find great deals in Detroit. With this being said I am wondering why Detroit wouldn't be considered a rental investors dream?

Supply and demand is the concern. There is no 2% if you can’t find a tenant to rent the property or rents decrease due to the increasing number of rentals and a decreasing number of tenants. When the jobs aren’t there, people move. You can’t rent without tenants.


I know many an investor that is just making a killin in the detroit market right now. Regardless of home ownership levels, people still need some basic elements. They need FOOD, Water, and a place to live, right? Well, several investor friends of mine are snatching up properties for literally pennies on the dollar and renting them out.

Just making money hand over fist in cashflow income selling on lease options while giving people time to rebuild their credit history.

I get very suspicious when I hear that people are making a killing! You don’t make a killing in the rental property business unless you have hundreds of units. Moreover, if your friends are truly making a killing in Detroit, why aren’t you? Don’t you want to make a killing too?


Ok, I guess I was under the assumption that people still needed a place to live. I didn’t think Detroit was becoming a barren wasteland. Looking at census information it seems as if the population has been growing in recent years.

Check out CNBC today. Apparently Detroit’s death has been greatly exaggerated. Quicken loans just moved 4000 jobs to down town Detroit. The State is offering incentives for businesses to move there that are mind boggeling.

There is no way on earth that Detroit stops exsisting as a manufactoring and engineering power house. You guy’s are missing the big picture here.


MULTIPLE 4,000,000 sq. ft. plants that turn out cars by the thousands. Great engineering schools, railways, power plants, underground gas lines you could drive a car through. ect, ect. No one is walking away from that amount of investment. Who’s going to invest all that money in another part of the country, and for what??


Here’s my prediction…anyone who buys a $2000 HOUSE in Detroit will look like a freakin’ genius in 10 years. What are you going to do with $2000?? Cripes the land alone will be worth more than the structure on it!!! Bulldoze it!! IT DOESN’T MATTER. YOUR BUYING DURING A PANIC!!!

$20,000 WILL BUY YOU 10 HOMES IN DETROIT. Put that same money in a money market account and check back in with us in 10 years and see who won. Got a 5 or 6 year old kid?? Take $8000 and buy 4 houses with it in Detroit. Forget renting them, Tear 'em down, because by the time your 5 year old is 18 he’ll be going to college with the money those lots will be worth.

Here’s a tip. Housing is CYCLICAL, so is THE CAR BUSINESS, put the two together and watch an economy hit the skids. Now the great thing about cyclical businesses is THEY CYCLE, that means they go up, and go down. Detroit is down for now, it won’t be forever. This has happened in that city at least 3 times since I’ve been on this planet. Comes back everytime. Never under estimate how short people’s memories are.

At those prices renting the houses is a moot point.

Looking at census information it seems as if the population has been growing in recent years.

Detroit’s population dropped 8.4% between 2000 and 2006. That doesn’t sound like a growing population to me.