Karen - you're right on target with investing in the city of Detroit itself. What you see on the internet is high risk, high reward and not for most.
There are very good areas in the city of Detroit, but you'll rarely see these on the internet because property wholesales & flippers can't make enough quick money on them. Check out "Midtown" and the "New Center" areas. These areas are supported by Wayne State University, the Detroit Medical Center and several private sector initiatives. I hear there's a waiting list for housing in those areas! The catch is - buying in those two areas (and several other scattered pockets in the city) is not cheap. You won't find a turnkey rental for $30k, $40k or even $50k.
There a MANY great opportunities in what we call the Ring Suburbs of Metro Detroit - cities that border Detroit. You can acquire turnkey rentals for $25k-$50k that rent for $800-$1200/month. AND you don't have too many worries about the properties being stripped when vacant. You do need a management company on top maintenance though, as the Ring Suburbs have much more aggressive code enforcement as compared to the city of Detroit.
Miles2152 - Section 8 will now kick tenants out of the program if they don't maintain a property in the condition it was upon move-in. We have few additional maintenance issues with Section 8 tenants - most related to lawn maintenance actually. We've been successful at contacting Section 8 to require tenants to make repairs for issues they caused and even got one tenant kicked out of the program.
Inspect Detroit - just got to know this company and they are right on with their advice about property managers. Michigan requires a property management company to have a brokers license - you'd be surprised how many don't!
Dave_Velasco - nothing against real estate agents Dave, but many of them are clueless when it comes to rentals! They want to advertise them for rent in their MLS system, but how many tenants contact a Realtor to find them a rental home? Doesn't happen much in the Detroit area except at the higher demographics. Very rare in the city of Detroit and the Ring Suburbs where most rents are under $1500. Also, agents think their syndication setup via MLS will get properties rented. We did a study of a prominent local real estate brokerage that claims to syndicate their property listings to 100 real estate websites. We found that 10 of the sites were "dead" and of the remaining 90, only 18 supported rental property searches. What's more, out of the top 20 real estate traffic sites, only 8 supported rentals, 2 of which are exclusively apartments, and they were only on 2 of the remaining 6. As a property management company focused on rental properties, we syndicate to 35 sites, and 6 of the 6 top 20.
AtlantaRealtor - please research Detroit before being so negative
The auto industry here is growing rapidly now that they've shed legacy costs via bankruptcy (also because of the tsunami in Japan). The auto industry here has a shortage of engineers! What do you think that's going to do for wages - which is the BEST leading indicator of housing prices and rental rates. Also, Oakland County (part of Metro Detroit) has a AAA rating from Wall Street and is one of the 5 richest counties in America!
Tandem Realty - there are MANY private initiatives investing in Detroit's turn-around
Bing's done a good job, but he could be doing a great job. City may still get taken over by the state, which would probably expedite the turn-around as it would circumvent the political in-fighting.
Atlbroker - that's a bit of a narrow view of real estate investing! The bottom line is ROI - tempered with proper expectations of vacancy, repairs, vandalism and appreciation. Besides, the Detroit Lions would beat the Falcons this year if they played!
Okay, now that all that is out of the way.
Kiwimoa - Section 8, while nothing to avoid, is not something to bet the farm on when buying a rental. Many of the homes advertised on the net have Section 8 tenants simply because the sellers know that's what foreign investors are looking for. Many use questionable tactics to put Section 8 tenants in their homes - bribing Section 8 caseworkers, offering free flatscreen TV's or cash kickbacks to tenants, etc. Keep in mind the Section 8 tenants in these properties can only sign a 12 month lease - meaning they could be gone in a year. Then who knows how long the property may sit vacant - and the longer it does the chances of it being stripped increase.
Furthermore, if you can find a reliable Realtor or property manager, before you buy a property always have them provide you with whatever transaction history of the property they can pull off public records via the MLS. You'd be surprised how much these flippers make on a lot of properties! We've got nothing against capitalism and making money, but steep & immediate increases in prices should be looked into for satisfactory explanation. We're assisting a California investor right now on straightening out the mess he got himself in with two properties here. One's in the city of Detroit, the other in a Ring Suburb. He got really "taken" on both properties. He bought each for about $18k, but the flipper only paid $1000 and $2500 for them and didn't do ANYTHING to improve them! They put VERY questionable tenants in them on Land Contracts with very little down. We figure the only reason they did the Land Contracts was to get someone in the properties so they could sell them, and avoid having to fix the properties per city rental codes (a land contract in Michigan gives ownership interest so the property is technically not a rental). Ironically, our client bought these flips off a California-based real estate "guru". In our opinion, the guru is a snake and someone to avoid. Our clients two deals were only setup to entice a sale and were almost guaranteed to fail. What true professional does that?
Getting back to your Wayne County properties - there are some very attractive Ring Suburbs in Wayne County we endorse - Redford, Dearborn, Dearborn Heights (VERY strict code enforcement). There are also cities in the next ring that are attractive: Inkster, Garden City, Westland and Livonia (bit more expensive). We don't deal in the cities south of Detroit (Melvindale, Allen Park, Lincoln Park, River Rouge and Ecorse),but there's bound to be some attractive deals there.
Wow - didn't mean to be so long-winded, but I hope it's helped all here.