Detroit

[kiwimoa]

My wife and I are looking at investing in Detroit. We have been able to source property in Wayne county, some say to avoid this area and I have also been told, like anywhere, there are good streets and there are bad streets.... but we dont live in the states and so only have agent pictures and google maps to view the properties/streets.
All the properties I have seen are 'section 8' and already rented.
Any advice in rental properties in Detroit would be appreciated.
cheers in advance

 

[miles2152]

I don;t reside in Detroit, but I can tell you that investing in section 8 housing requires a lot of attention. Sure you are getting paid a portion from section 8, but these houses are usually have been lacking maintenance and will likely require more supervision. We used to do monthly inspections on our section 8 homes and dreaded every visit because we knew there were going to be problems. My advice to you is hire a buyers agent. You need someone familiar with the area to provide you some insight.

 

[InspectDetroit]

Detroit Investment Property

Buying a investment property in Detroit can be a great choice, or it can be a nightmare depending on where you buy and who's managing the property. I always advise Investors to get someones opinion on the property, location and property manager before they buy.

Some Realtors are out for a quick sale so make sure they have a good reputation and ask for some past client referrals.

There are a lot of property managers that aren't professional and don't have the proper license to even handle property management. Make sure they have been in business a while, Google their name and see what you find... Do your research.

I always advise clients to buy a three bedroom brick home on a well maintained street. But no matter what you buy have someone other than the Realtor or
Property Manager give you their opinion on the property and location.

Bottom line is to deal with experienced professionals or you could get seriously burned!!!

Good Luck

 

[Dave_Velasco]

Getting someone who is a professional expert on the place is the best thing you can do. From a real estate firm, you can get trustworthy agents (if you trust real estate agents). Aside from the fact that you won't spend much effort on getting information about the place, the agent will be the one to handle all other needs that you want to see and know.

 

[atlantarealtor]

Personally, why would you invest in Detroit? I understand the property is dirt cheap, but the future business to bring people to the city for any return is limited. All they ever had was car companies- do you know many people that are still driving Chrysers? I don't mean to be mean about the city, but on return, you need to consider the economic climate to make sure you get decent tenants. Choose somewhere like Texas, Phoenix, or Atlanta, much more potential for return, although slightly higher in the front run.

 

[Tandem Realty]

I hear the market is better in Detroit, and there are some nice interesting urban gardening communities that are cleaning up the city.

Mayor Dave Bing has done a great job. My wife and I own a condo in Rochester.

 

[Atlbroker]

I would simply compare the taxes in Detroit v. Atlanta which is a huge factor in determining your bottomline. Wayne county has extremely high taxes.

 

[kkruse2]

Investing in Detroit

Hi, It's Karen here from Australia. I have 5 investment properties in Michigan, none in Detroit (surrounding cities),but have been to Detroit, I also know other investors who have properties in Detroit.
Be very, very careful if you invest in Detroit. DO NOT BUY OFF THE INTERNET, you will see a lovely house on the net, big mansion for a few thousand dollars. What you don't see is the surrounding houses which are burnt out, or maybe that street may be ok but 2 streets down it's a nightmare. Also, it gets absolutely freezing in Michigan over winter, these beautiful old houses are a nightmare to heat, old windows, old boiler furnaces, plumbing which may be shot. A tenant can't afford to heat these houses in winter, so your rent doesn't get paid but the heating bill does, that's if you can get a tenant in the first place, renters will avoid these houses because of the heating costs. Your chances also of having your house ripped off is very high, your furnaces will be taken, plus your hot water heater and the copper plumbing will be ripped out of the walls, all of this will be sold......you must have your house boarded up well by a security company if it's vacant....plus try and get decent insurance on the house, good luck on that one. I have been doing this for 2 years, I buy outside of Detroit, decent area's which are still cheap, I have an excellent property manager etc. If anyone is interested in chatting, I can give you good advice, get in touch. It would be good to talk to other investors.
cheers
Karen

 

[Drew Drew]

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.