What is wrong with the fundamentals?

Greetings to all.

Here is my question…

A buy and hold investor has historically been someone with capital who wishes to invest money into properties and collect good returns over the long term…Right???

Over the years I made a good living in Detroit rehabbing properties for out of state investors, however, all of that began to changed after the crash of 2008. Investors packed up and left…Of course this made since for the buy and flip investor since values were gone and access to simple hard money was no longer in place…However, from my estimation of things this should have made the area far more attractive to the buy and hold investor since the inventory of available properties increased, the rent values held firm, and the demand remained strong and in some instances due to the foreclosure wave the demand increased.

However, despite what seemed to be favorable conditions, buy and hold investors did not buy in en masse. Why not?

The way I understand the basic idea of buy and hold is as follows:

A. You have capital or access to capital
B. You want greater yields than what equities or bonds can generate
C. You arent looking to cash in overnight
D. You want something relatively safe

If you can buy a Bank owned duplex for $5,000 out the door

Invest no more than $15,000 in total rehab all inclusive

Have the units leased out for $600 each very quickly

Have a property manager deal with the property and tenant.

What is missing???

Why isn’t a place like Detroit the best place in the world for someone looking to buy and hold??? Am I missing something???


I owned property in Detroit up till early 2006, but the problem with Detroit is there continues to be a mass exidious from Detroit Yearly!!!!

If you take the population numbers from 1975 when the population started to fall and follow it through 2009 the city of Detroit has already lost 1.6 million people, and at the current exit rate there will be no one living in the City of Detroit by 2030.

Right now Detroit continues to lose roughly 45,000 people every year, and even though Detroit has had an aggressive business development program and has tried everything they can think of to change the exidious nothing has seemed to work. Now when 45,000 people leave, Detroit loses about 15,000 potential renters and for the last 10 or 15 years investors have been 90% of the property buyers in Detroit!

When you have no renters the property has no value! I can probable drive the spokes of Detroit today and point out properties my fellow investors rehabbed in years past, which sits today empty and deteriorating! I had a few properties I sold in 2005 that are empty today!

I hope this explains the reason investors won’t touch Detroit now, it’s likely everyone loses money at some point!


You’re missing the “Have a property manager deal with the property and tenant” making any sense economically.

Midtown around Wayne State University is steadily improving with new high tech companies and jobs moving into the city. So is downtown with companies like Quicken Loans moving thousands of office jobs from suburbia to downtown. Blue Cross just moved downtown and filled an office tower in the RenCenter. They also have the best movie production tax incentive package in the country, so it’s rep. is getting better as more and more movies are being filmed there plus they offer plenty of jobs.

The problem with Detroit is crime. It’s like the old Wild West with cowboys. Crime is out of control when you get into those areas with the $15K houses. Police won’t even show up to a lot of these areas and will just take a report over the phone. You’re pretty much on your own.

Quality tenants get fed up with it and leave. The property manager will charge more than its worth to stay on top of it. If you consider yourself Annie Oakley and can draw a gun pretty fast, you might like it. You really have to live there for a few months to know what it’s like.

I suspect that there are fewer buy and hold investors all over the country than there should be, considering how low both prices and interest rates are.

It’s not just Detroit where tenants are a problem. If there are no jobs, then people don’t have salaries and can’t pay rent. No rent, and how is the landlord going to pay the mortgage?

Banks are not wanting to lend, so financing real estate has become a problem.

But Detroit… crime rate, corruption, court system that favors the tenants to the sharpest point of socialism (poor tenants, evil landlords trying to take away their place to live, that they have a right to). Detroit is going down the toilet and from here it looks like prices have no where to go but down even further.

If someone figures out how to make money in Detroit, more power to them, but it is far too risky for me.

The key to rental success is jobs. It is not the price of houses or cost of labor etc. People need to have jobs to pay rent. Detroit is high in unemployment.

I think the fear of an continuous, and unabated exodus from Detroit is rational from an external perspective considering the hatchet job done on the city by the national media, however, Dave you are from Windsor which means you have a closer view of things and as you have indicated, there is a core transformation underway which will certainly lead to a reversal of the current flight trend.

Of course I do not expect optimism alone to draw the average investor into Detroit…

I think the problem is that by the time the average guy realizes that Detroit is making a comeback the prices will change, inventory will decrease, and …it won’t be the opportunity it is right now…

How so? What is changing?

I think she’s referring to the new office jobs in downtown and midtown. Yes, Detroit is better during the day than it was a decade ago. To the tourist, it looks safe to walk around during the day and it is. I’ve walked around many times during the day without a scratch, though there are some pretty aggressive panhandlers that can piss you off. There’s a lot of interesting roaring 20s Art Deco architecture that’s worth seeing. It’s great place to visit.

But, once the night comes, almost everyone gets on the I94 to drive to their home in the suburbs. That’s when most of the robberies happen, you get carjacked at the gas station, you hear the guns popping and have to watch out for stray bullets, and there’s complete lawlessness because the city is broke and can’t afford proper policing.

That’s the key problem with rentals in Detroit and why these properties are so cheap. People who work in the city during the day don’t want to live in the city at night because of the lawlessness. Metro Detroit has over 5million people, but the city has under 800,000 (once had over 2million). The people didn’t leave the area. They just moved to the suburbs. In the suburbs, you still have some of the richest people in the United States. Somerset Collection Mall in Troy is like the shops on Rodeo Drive where you can buy thousand dollar dress shirts. The money from the days of the auto barons is still in the area. Amalgamation of Wayne county or even the tri-counties with the city into a supercity like Los Angeles might be a solution, but it’s very unpopular with the people and will never happen because there isn’t a governor bold enough to step in and impose something so unpopular.

Another issue is the additional 2.5% income tax slapped onto city residents, which I don’t even want to discuss.

New office jobs in downtown and midtown isn’t going to raise the value of those $5,000 duplexes in the city by renting them. They won’t touch those places with 20 foot pole.

Everything is changing…

Historically, the auto industry has not only been the foundation of the City economy, it was in truth the staple for the entire region.

In the not too distant past everyone in the city seemed to work in a plant, for the local government, or in another industry which was directed related to or heavily supported by the auto industry.

There is a direct correlation between the diminishing auto industry and the shrinking population of the City of Detroit. The collapse of the auto industry had a collapsing effect on the City of Detroit, which is why when the auto industry received Federal attention the City gained the same attention and when the plan for a Auto bailout was conceived, in truth it was not only the car companies in line to receive the bailout it was “Detroit”.

Detroit is in the crosshairs of a plan to reinvent American industry and Cities. Detroit is poised to become the beacon for American renewal…Don’t take my word for it…

Judith Rodin, President of the Rockerfeller Foundation was here in April to discuss this very subject. In a lecture entitled “Reinventing
American Cities for the 21st Century” she outl;ined the process which included all of the actions which are already underway including taking aggressive action toward attracting the “intelligent class” back into the city, Detroit is now looking forward to a 1.5 billion dollar investment into the Detroit Medical Center which will create thousands of jobs for the young and talented. Henry Ford Health Systems is matching this with its own capital investment in the same area of the city. The city is in the process of copmpleting a bike trail around the “Midtown” area
and the City is building a light rail system in Midtown. As Ms. Rodin indicated this model for renewal includes the presence of a thriving University as an achor which is the role played by Wayne State University which was the very venue of her speech.

Detroit is redeveloping from the core outward.

There are plans in the works now to build a new Basketball-Hockey stadium for the Pistons and Red Wings which will be located in the Corridor between Midtown and Downtown…

The plan to attract the young, talented, culturally diverse, into the city is working…

Look for yourself…


Now, as an investor it seems wise to look at trends and get in early…Once Detroit turns this corner it will make all other opportunites of the recent past look like peanuts…

None of which will work until they get rid of the unions, the crime. and the government corruption…

Its amazing comparing say Detroit to Dallas. Here unemployment is low (compared to most other major metro areas), we have continued growth and demand for housing (though not as good as several years ago of course), and people are still moving here daily. We have everyone from illegal aliens moving into the poorer areas within the city of Dallas, to engineers looking for a good job and a nice house in Plano (a nicer suburb). It is a complete reverse scenario of Detroit.

To the contrary…It is working very well…This is a link to a news article from todays Detroit Free Press

Southwest Detroit, Midtown thriving
Urban renewal experts analyze how they do itBy JOHN GALLAGHER


Here is the thing, other investors never left the city and they are making money by having a good knowledge, a solid plan, and a willingness to buy when things seemed bleak.

Someone could buy this three bedroom duplex for 15k it is less than one mile from Midtown… Don’t let the blood in the streets deter you…


I am not a realtor and I am not trying to advertise this property…I am putting the picture up to make a point,…The opportunity is there and the fundamentals are sound.

Do you mean that literally?

Yes, she did

Here’s an article from the Detroit News posted on one of the forums. For 2008, 70% of the murders in Detroit were unsolved because the police are inadequately funded. There’s little deterrence to being a vigilante. That’s why you hear guns popping at night and you’ll see “blood in the streets”.


Getting away with murder is the norm in Detroit
Police chief calls city’s closure rate ‘abysmal’
Charlie LeDuff / The Detroit News

At least 7 in 10 people who committed murder in this city last year have gotten away with it.

The most generous interpretation of 2008 homicide warrants and convictions supplied by local law enforcement officials shows that in more than 70 percent of homicide cases no suspect has been identified, arrested, charged or convicted of a killing.

“The reality is, we have a reputation in the state that if you want to commit a crime, come here,” said Kym Worthy, the Wayne County prosecutor who said she does not challenge the analysis. “The chance of arrest is quite low, the chance of prosecution is quite low. What does that say about the commitment to the public’s safety?”

The Detroit Police Department reports 375 people were murdered in 2008, revising its number up from 306 after a Detroit News investigation into those statistics earlier this year. The Prosecutor’s Office ruled 13 of those killings as justifiable or self-defense, lowering the number of criminal homicides to 362.

According to The News’ review of warrants requested by the Detroit Police homicide squad last year, at most 70 cases ended with at least one person being sent to prison for murder or manslaughter. Another 31 homicide cases still are being prosecuted.

In another 22 cases, the prosecutor refused to issue an arrest warrant, instead returning the case to detectives for lack of evidence. In six cases, a defendant was penalized with only fines or probation after being charged with premeditated murder. And in another six cases, defendants pleaded to lesser crimes such as armed robbery or accessory after the fact.

And of those 2008 murder prosecutions, Detroit Police Chief Warren Evans estimates that as many as 10 percent were actually committed in prior years. That means that as many as three of four killings committed in Detroit in 2008 may end without a killer being brought to justice.

As a comparison, Oakland County reported 29 homicides last year. In all but one case, the defendants were sent to prison for murder. The other was sentenced for manslaughter, said Jessica Cooper, the Oakland County prosecutor.

“Is it hopeless?” asked Evans, who took command of the department seven weeks ago. “No. But do we have serious challenges? Absolutely.”

Workload is huge
The closure rate for homicide –– defined by the FBI as a case when at least one person is arrested and turned over to the prosecutor for prosecution –– in 2008 was an " abysmal" 33 percent to 35 percent, Evans said. The national average, according to the FBI, is 62 percent. In Los Angeles –– a city with five times the population and three times the police force of Detroit –– the homicide closure rate was nearly 70 percent.

“In the end, it is what the police do that makes a difference as to whether a homicide is solved,” said Charles Wellford, a professor of criminal justice at the University of Maryland who has studied homicide in Detroit and Los Angeles. “There is no big city with a clearance rate as low as Detroit’s.”

The Detroit Police force, for its part, is underfunded and understaffed, said Evans, who was recently named the third Detroit police chief in a year. The Prosecutor’s Office maintains that its budget has been slashed by a third over the past six years, leaving too few prosecutors and investigators to handle the load.

“I only have one part-time homicide investigator, if you can believe that,” Worthy said.

There also is the “no-snitch” phenomenon in Detroit, which means citizens often are either too frightened or too hardened to cooperate with police. And even in the rare cases when a suspect does make it to trial, there have been unpredictable elements of judge and jury.

Take the case of Deandre Woolfolk. In January 2008, Woolfolk and two confederates participated in a drug-related drive-by shooting in Detroit, killing a 15-year-old girl. Woolfolk was read his Miranda rights before he gave his confession on videotape, according to court documents.

Nevertheless, Woolfolk, who police say belongs to a deadly drug cartel, successfully argued later in court that he had earlier asked for a lawyer but detectives had denied him access. The judge released him in late February 2009.

Woolfolk, 20, now sits in the Oakland County Jail, accused of beating a man to death in early August at a Southfield nightclub.

The witness, Anthony Alls, who told police he saw Woolfolk deliver the deadly blow, was gunned downed two weeks later on Woodward as he left a barber shop. Alls was an applicant with the Detroit Police Department. There are no witnesses or arrests in his killing.

“It is absolutely horrible,” said Gary Brown, a former deputy chief of police and current City Council candidate. “Today, I’m packing my gun just to go to CVS. The city is not safe. The city is out of control. And anyone who lives here knows so.”

Evans said that during his brief tenure as police chief, he has discovered:

• An evidence property room in chaos.

• A crime lab shut down due to incompetence.

• Computers in squad cars that don’t work.

• A new $2.5 million camera system in patrol cars that does not function.

The department cannot recoup the loss on the cameras because it never purchased a warranty, police have said. The system known as Compstat, a crime data and computer mapping system used by most major cities to identify crime hot spots, was discarded.

“No one has a clear understanding why Compstat was abandoned,” said John Roach, the new police spokesman.

As many as 200 officers in the 3,000-person department who work behind a desk need to be returned to street patrol, Evans said. Those who work the streets often work with defective equipment, he added.

Detroit languishing
Detroit homicide investigators are overworked, handling as many as three times the caseload of their counterparts across the country. One detective, exchanging his candor for confidentiality because he fears reprisal from his superiors, recalled having to take a bus to a crime scene because there were no working pool cars. Predictably, experienced detectives have been retiring.

“We’re going to have to analyze crime patterns and deploy our resources accordingly,” Evans said. "We’re going to have to develop a relationship with the community. That’s how you solve murders. Through witnesses. Eyeballs.

“Look, the only thing I’ve been longer than a cop is black. I understand people’s feelings about the police. We’re going to have to work to let them know we’re on their side.”

His recipe for solving Detroit’s crime problems mirrors that used in Los Angeles by William Bratton, the police commissioner hired by Mayor Ken Hahn in 2002.

Bratton, a former New York City Police commissioner, went to Los Angeles when crime was high and the morale in the Police Department was low. The department had been placed under federal oversight after it was discovered that rogue police officers had framed innocent citizens, stolen drugs and beaten suspects.

Employing an obsessive focus on crime data, Bratton cleaned up the City of Angels. Last year, Los Angeles reported 382 homicides –– just five more than Detroit. Violent crime is down 50 percent and the LAPD was removed from federal oversight last month. Bratton has resigned effective Oct. 31.

Detroit, on the other hand, has languished under federal supervision since 2003, for among other things using excessive force and illegally detaining witnesses. The department made little headway under the stewardship of Kwame Kilpatrick, the disgraced former mayor who was sent to prison for perjury, among other things. It also was revealed recently that Kilpatrick had a personal relationship with the federal monitor.

The governmental oversight, meanwhile, has been extended to at least 2011.

At the same time, the number of murders may climb well above 400 by year’s end, said Evans. To make matters worse, he said, 50 to 200 people involved in murder and serving prison time will be paroled into Detroit this year by the state Department of Corrections.

“It’s getting worse,” said Evans. “But it will get better. It has to.”