Rehabbing and Refinancing, Is this still alive in Detroit, MI? Please weight in.

Greetings everyone,

I have a general question about the Detroit Market\Rehabbing and refinancing as a whole.

Right now I have a deal lined up that will pay me around 15K once we close, and I have the idea of buying a nice little rehab home for 5K cash, with the end goal of holding it long term as a rental.

My loan officer states that It will be VERY hard to buy a home at 5K, then refinance it for 55K due to the fact that I paid 5K cash for it.

Is this type happening nationwide as a result of the Housing crunch? Is there anyone doing this is areas that are depressed economically?

This would be a great strategy as there are so many solid houses in my investment area that are going for 5K that may only need 8K max worth of work…

Please let me know your thoughts and experience.



What you paid for the property is irrelevant. Only the appraisal and your ability to pay back the loan are relevant.

If what you are saying is true, that you can pick up a house for $15k after repairs and it is worth $55k then you should have no problem getting financing from private lenders.

Tell your loan officer to take a hike. He can’t make money if he doesn’t make loans. Find someone who wants the money.

How hard is it to find tenants in such a depressed area?

I always say that you need to deal with people in the business of real estate… not retail real estate people for this same reason. Your loan broker is dealing with lenders that lend to retail customers not investors. He is running into a seasoning issue. If you buy a house and try to refinance in less than 12 months the mortgage company will only use the purchase price not the appraised price. This only applies to retail mortgages. A mortgage broker that deals with investors knows the companies that will actually use the appraised value. You need to find a mortgage broker that advertises at your local real estate investor’s club, not the guy in the paper.


Thank you for the insight. I had been thinking that now is the time to switch to private lending and to increase my creativity in real estate investment.

Detroit is actually 80% renters so finding tenants is NEVER a problem.
The market rental rates for a 3 family brick, home are between $675 for a quick rental and $800 on the average.

I am a Detroit native and I know the neighborhoods very well. I also would never buy in an area that I wouldn’t live in. The funny thing is its right across the street from the $125K homes… (Detroit works in pockets of good\bad areas.)

Bluemoon you are correct. I just have to take some time off work (I work he afternoon shift) And visit the R.E.I. meeting.

Thanks for the advice and motivation.