Why aren't you buying in Detroit?

Rehabbing, Fix and Flip, Rental Properties
1

I am going to be honest here and say that I cannot understand why folks are passing on the Motor City.

If you could buy a 4 unit property for $15,000. Rehab it for $20k and pay about $1600 a year in taxes and have only $2000 per year in maintennance…and then collect $600.00 a month per apartment --Why not buy this property anywhere…Including Detroit?

I don’t have the cash myself or I would be doing this right now…But after reading so many of you speak of cash flow properties I cannot understand why more people would not buy in a market which has very strong rents and cheap properties…

Mr. Rehab

2

The city keeps raising fees and taxes. The courts are anti-LL. Homes are cheap for a reason. I don’t know any Detroit LL who says it’s a great place to be. I even know one who had to go into bankruptcy because she couldn’t up with the increased costs of doing business and stagnant rents.

3

The key to rental success is employment. If people have jobs they can pay rent. The unemployment rate in the USA is 9%. In Detriot is is twice that. In May it was 19%. People are not bad, they just don’t have income to pay rent.

4

[[[[…I cannot understand why more people would not buy in a market which has very strong rents and cheap properties…]]]]

Because I don’t want to live there.

I have not had good luck with an assortment of management companies, and it’s difficult to get property management in bad areas.

On my list of places I never want to live, Detroit is top of the list.

5

I don’t know how serious this is, but there was talk from the Obama administration of completely bulldozing large sections of Detroit, Flint and other cities under eminent domain law and letting them go back to nature, because they aren’t viable anymore as population centers. (no, I’m not making this up).

6

I owned quite a few properties in Detroit and Flint and considered my self lucky to get them all sold in 2005.

My problem which most of my fellow investors in Detroit did not recognize was the population of these area’s is decreasing yearly, so there are fewer and fewer renters in the market and eventually would be no buyers.

If you have not been to Detroit lately take a ride down any one of the streets that make up the main spokes and take a look at the blocks and blocks of total devistation, building after building decaying rapidly.

That is why investors have been getting out of Detroit and Flint, when there are no jobs and I think now the unemployment rate in Detroit is in the low 20% range, and people leaving which means fewer and fewer renters which means that buyers are decreasing and investors are looking for greener pastures.

You could not give me properties in Detroit, or pay me to take them.

7

Bill and others,

Unfortunately, the media has offered a terrible misrepresentation of things here in Detroit. Yes, we are in fact suffering, however, the city is also recovering and is definitely a great market for landlords.

While it may be counterintuitive to think that a city with high unemployment is also one where it is very easy to find tenants, this is absolutely true. The greatest hurdle that a LL may encounter when looking for tenants in Detroit is finding someone who has the first months rent and security deposit. If a LL is willing to “work” with a prospective tenant on this issue I can guarantee that any vacancy will be quickly filled.

The propblem I think many investors are having is that they do not tailor an investment strategy toward the realities in a unique market. There are plenty of good deals in Detroit, however, the approach would have to be targeted.

Why go through the hassle? Well because you can buy income generating properties for 10 cents on the dollar here.

8

This is GREAT. This is why we join this site. All real estate is local. There are people making money in every market, but every strategy doe not work everywhere. Mr. Rehab knows how to make money in Detroit. I don’t. Always find people doing it and copy them. Don’t listen to anybody that can’t because it does you no good. Keep up the great information.

9

Ok, let’s address some hard and fast fact’s.

  1. US Census for Detroit Michigan year 2000 population 951,270 but the 2006 US Census estimate of population is only 871,121 a whopping 8.4% decrease of population.

  2. A population loss of 80,149 people!

  3. The average persons per household is 2.77

  4. This is 28,934 renting or owner families who have vacated Detroit Michigan since 2000.

  5. Persons who own there own home in Detroit make up 54.9% of the population but the state of Michigan average home owner percentage is 73.8%!

  6. The median value of homes in Detroit Michigan is $63,600 but the state of Michigan average value is $115,600!

  7. The median household income in Detroit is $29,526 but the state of Michigan average is $44,667!

  8. The per capita income in Detroit is $14,717 but the per capita income in the state of Michigan is $22,168!

  9. 26.1% of persons living in Detroit Michigan live below the poverty level but the state of Michigan only has a 10.5% average below the poverty level.

  10. In the year 2000 Detroit Michigan had 375,096 housing unit’s of which 72% are homes, 27% are apartments and .05% are mobile homes.

  11. In year 2007 Detroit Michigan had 368,000 housing units indicating that # 7,096 units have been demolished and no longer exist.

  12. In 2007 Detroit Michigan had 368,000 housing unit’s with 22% vacant, that is 80,960 empty units!

That is 80,960 landlords or owners with empty property with no income and a blight on the Detroit Michigan landscape.

So what did you say about Detroit Michigan?

What is the Vacancy Factor for Detroit?

How many people are buying homes in Detroit Michigan?

How do these figure’s effect the Economy of Detroit Michigan?

Until a new industry is established which will support a population increase Detroit will continue to have trouble.

Detroit Michigan had a population estimated at about Two Million plus residents in 1970!

10

Mr Gold River,

Good Morning!!! I would love to address your questions. While you would like to name off negative factors or Detroit, what city do you live in? I am sure that the negative facts of your city might not compare but possibly have similar stats on decline in JOBS, Population, and income.

Needless to say, that is useless information, due to the fact that people ALWAYS need somewhere to stay. What you need to think about is the way you perceive something to be without really digging (researching) into the root of the problem. The JOBS, a temporary issue. Why would the government assist GM thru bankruptcy? This is not typical or standard code for the government is it? Why would car companies go bankrupt when they received funds from the government? Basically to restructure debt and assets, right? OR is it to be able to get assistance from the government to switch gears and start making the “future” cars or should I say electric cars. Millions of Americans buy GM cars don’t they, just like Ford and Chrysler cars, right? Well, how would you get rid of all of the debt and other issues to build new cost effective and efficient cars? Where in the world do you think those cars will be built? I will give you a clue…Starts with a “M” buddy. I will let you take that thought from here and get back to your questions and my answers!

Now, the vacancy factor is a mute point because every landlord knows that you are going to have vacancies. Detroit, might have a higher vancancy rate, but it is anything that you could not overcome. Of course, you definitely need a strategy because without one your properties will definitely be vacant!

Now lets talk about some positive facts…Mainly one, that I believe will interest you…HUD has allocated $263.5 Million dollars to the state of Michigan for Acquisition and rehabilitation of foreclosed or abandoned single family homes for resale to owner-occupants, for Redevelopment of demolished or vacant lots for single family owner occupied housing, for Demolition of blighted structures for future redevelopment, and for Demolition of blighted structures for green space or for immediate redevelopment. Go to the website…www.michgian.gov/mshda scroll down and click on Neighborhood Stabalization Program. Look for the 2009 Notice of Funding Availability. Interesting?

See talki is cheap. Learned that a long time ago. Before you start naming off reasons why you would not, you might want to check to make sure there are not ANY reasons why you wouldn not! As cheap as the property is now, I am DEFINITELY going to make sure I have 100 properties or more before it is all said and done.

I can guarantee you if you pass up on Detroit now, 3 to 5 years from now you will be kicking yourself saying I “COULD HAVE” been a millionaire off of Detroit! Where in the US can you buy property for literally cents on the dollar. Put 10K to 15K into it and rent it for cash flow? BUY AND HOLD now and FLIP later…

Do not PASS it UP! I am telling you…

11

I have been considering Detroit area, but I honestly don’t feel like the curve has started to swing upward yet.

The real question is when is the right time to get in.

Obviously, you don’t want to get in when the market is still on a downward trend. Then you don’t want to sit there on the on bottom wasting money.

I am waiting for the the start of the “recovery”. I still think Detroit has a ways to go.

But, God Bless the LL there helping America!