[worldwidetraveler]

(04-16-2014 12:44 AM)speakeasy Wrote:  

If houses can be had for a few thousand what is the real risk? If you plan to hold it for the long-term you should see some return. I really can't see homes getting any cheaper than that in a major American city.

The thing is, if everyone thinks it's a good idea to buy in Detroit, it's already too late to buy. When everyone thinks the idea is crazy is when you buy. There was a time when downtown Los Angeles was as scary as Detroit. This wasn't even too long ago, I'm talking late 90s, maybe even early 2000s. It was a place you got the hell out of after sundown. Only people living down tehre after dark were crackheads and a small community of artists in lofts.

Now no normal income person could even afford to live there. Yuppies and hipsters moved in, rents are in the stratosphere, trendy bars and restaurants opening up all the time and it's the place to be. If someone had said to buy downtown L.A. property in the 90s everyone would've thought you were crazy. But for those that did, they are sitting on a sweet equity cushion.

I would say the risk is continuing to paying property taxes , insurance, and upkeep on a house that you can't rent out. You don't want that house vacant otherwise say goodbye to any copper pipes, siding, windows, etc...

Just because it costs a couple thousand dollars doesn't mean that is all it will ever cost.

[Hotwheels]

The problem with Detroit isn't the downtown area so much as it is the spaces between downtown and the suburbs, so it really isn't comparable to LA's downtown revitalization. Downtown is far from perfect, but it is growing and is not a warzone.

For the most part you are looking at huge swaths of single family homes, not multiuse buildings that can be it's own ecosystem. A dead area between downtown and the burbs.

Interestingly, the metro area of Detroit actually has over 1 million MORE people than it did in 1950. It is the city itself that has crumbled largely due to ineffective governance, easy mobility and high taxes. People fled the city to the suburbs to escape the taxes and the highway system made it easy to commute.

Detroit was never able to annex the suburbs like many cities, so saw it's tax base evaporate.

The only way to repopulate the dead areas will be with inexpensive housing to offset the high taxes, or lowering the tax rate.

Or, doing like neighborhoods such as Palmer Woods have done; Have their own security and services which the residents pay for, much like a condo association. Even with that the property values are much lower than in the nicer suburbs. Nothing like the rest of the city however.

I could see a group of investors buying a large tract and essentially making a gated community go, however the returns would probably be much less than about any other city in the country so whats the point short of philanthropy?

[Joga Bonito]

(04-15-2014 06:34 PM)BostonBMW Wrote:  

What about outside of Detroit. I'm talking Dearborn, Royal Oak, Grosse Pointe, and Saint Clair Shores?

While RE is more expensive, how is the rental market in communities immediately outside Detroit?

If you want a downtown loft in these areas it'll cost you but still be much cheaper than a bigger city like Boston.

Royal Oak- downtown lofts can run up to $3500 or maybe even a little higher, with the most logistically sound complexes trending above $2000. Still you can find a good studio/1 BR for between $800-$1400, but since this is probably the most popular area to go for events and nightlife, you'll really have to be vigilant to secure a spot in that price range as vacancies are pretty low. Outside of downtown, you can easily can spots from $500-$800.

Grosse Pointe- extremely affluent area that is mostly for families. You can rent out an upper or lower unit of a duplex for between $700-$1000 in many cases. There are some apartments in this range as well, but not really a good area for a younger bachelor.

Dearborn- pretty cheap outside of downtown with spots starting around $400(for a whole apartment) in less desirable areas for all reasons including crime. Obviously you wouldn't want to live in those places, but a loft downtown would start around $1300 for a one bed. Several hundred more if you want more than 1 bed so about $1700 starting off for 2 or more beds.

St Clair Shores- a one or 2 bed would run you from $600-$1000 in most cases. Fairly cheap for renting.

Overall, if you don't mind not living in a trendy area then living here can be really cheap. You can really stack here and still have a nice apartment to bring chicks back to. I'm currently paying about $750 for a nice place with hardwood floors and utilities besides electricity included. I'm also about a 10 minute drive from the major nightlife areas so it's not too bad of a trade off.

[jamaicabound]

I think a good strategy in Detroit or any city is if there's a ghetto near a lakefront or government building or theatre or some sort. If you buy now when its crappy, eventually any decent location area will eventually be gentrified and nice. You could be collecting rent all along teh way getting your mortgage paid and when it does turnaround you either have a much nicer place or can sell for 4x your value, actually in detroit it would probably be muhc more than 4x if an area ever turned around.

I'm in Chicago, I was thinking about buying some property in Pilsen, which is a hispanic area but just southwest of the loop, its already getting hipsters and stuff but property value is still pretty cheap. If you really wanted to go out on a limb I'd consider south loop or bronzeville or even maybe little village. Even lawndale which is west of desirable areas. Nice areas of CHicago slowly are spreading out west and some of these buildings are nice 3 flat stone and brick historic buildings. If you could get in now not only will value go up if it continues to gentrify west and south but you also have a beautiful hisstoric building which if the area was decent could go for a million plus.

With all these sketchy areas however you have to eithr live in the property or have a great tenant who will keep an eye out for you. Otherwise as your putting stuff in and the neighborohod sees deliveries comming your going to be cleared out of your appliances, copper wire, have squatters in the house, etc

[samsamsam]

(04-16-2014 12:49 AM)worldwidetraveler Wrote:  

(04-16-2014 12:44 AM)speakeasy Wrote:  

If houses can be had for a few thousand what is the real risk? If you plan to hold it for the long-term you should see some return. I really can't see homes getting any cheaper than that in a major American city.

The thing is, if everyone thinks it's a good idea to buy in Detroit, it's already too late to buy. When everyone thinks the idea is crazy is when you buy. There was a time when downtown Los Angeles was as scary as Detroit. This wasn't even too long ago, I'm talking late 90s, maybe even early 2000s. It was a place you got the hell out of after sundown. Only people living down tehre after dark were crackheads and a small community of artists in lofts.

Now no normal income person could even afford to live there. Yuppies and hipsters moved in, rents are in the stratosphere, trendy bars and restaurants opening up all the time and it's the place to be. If someone had said to buy downtown L.A. property in the 90s everyone would've thought you were crazy. But for those that did, they are sitting on a sweet equity cushion.

I would say the risk is continuing to paying property taxes , insurance, and upkeep on a house that you can't rent out. You don't want that house vacant otherwise say goodbye to any copper pipes, siding, windows, etc...

Just because it costs a couple thousand dollars doesn't mean that is all it will ever cost.

Exactly. You can't just walk away from it. Plenty of instances where people have "walked" away from something or so they thought and ended up having to pay back old bills, etc. Sometimes they have been forced to bring a home back up to code. I can't find the article, but I remember reading something that a man thought he had given the home back to the bank, the bank never accepted it. It got stripped etc. The town required the man to bring it back to code and pay back taxes etc.

I guess if you want to plan for worse case, you buy it with an llc. Maybe budget money to tear it down. I am not a lawyer but the LLC might give you some protection to just walk away.

But if you are going to take a flyer - might as well bet on some stocks.

[Hotwheels]

Detroit is going to be auctioning houses online.

http://www.buildingdetroit.org/Home

First batch is in East English Village which if google maps is up to date is NOT an area that has had most of the homes leveled. Blocks look full of houses and trees.

Bids start at $1000.

[BostonBMW]

(04-16-2014 08:51 AM)iWin Wrote:  

(04-15-2014 06:34 PM)BostonBMW Wrote:  

What about outside of Detroit. I'm talking Dearborn, Royal Oak, Grosse Pointe, and Saint Clair Shores?

While RE is more expensive, how is the rental market in communities immediately outside Detroit?

If you want a downtown loft in these areas it'll cost you but still be much cheaper than a bigger city like Boston.

Royal Oak- downtown lofts can run up to $3500 or maybe even a little higher, with the most logistically sound complexes trending above $2000. Still you can find a good studio/1 BR for between $800-$1400, but since this is probably the most popular area to go for events and nightlife, you'll really have to be vigilant to secure a spot in that price range as vacancies are pretty low. Outside of downtown, you can easily can spots from $500-$800.

Grosse Pointe- extremely affluent area that is mostly for families. You can rent out an upper or lower unit of a duplex for between $700-$1000 in many cases. There are some apartments in this range as well, but not really a good area for a younger bachelor.

Dearborn- pretty cheap outside of downtown with spots starting around $400(for a whole apartment) in less desirable areas for all reasons including crime. Obviously you wouldn't want to live in those places, but a loft downtown would start around $1300 for a one bed. Several hundred more if you want more than 1 bed so about $1700 starting off for 2 or more beds.

St Clair Shores- a one or 2 bed would run you from $600-$1000 in most cases. Fairly cheap for renting.

Overall, if you don't mind not living in a trendy area then living here can be really cheap. You can really stack here and still have a nice apartment to bring chicks back to. I'm currently paying about $750 for a nice place with hardwood floors and utilities besides electricity included. I'm also about a 10 minute drive from the major nightlife areas so it's not too bad of a trade off.

Info much appreciated. I don’t want to derail the thread, so if you don’t mind, I’ll respond to the Detroit/MI thread in Travel about life out there, chicas etc.

I have been looking at Detroit Metro for both investing in RE and possibly moving out there, so your info hits both points nicely.

I know that there are people interested in Detroit RE and I do think that it will increase, however I am deterred by the city for the following reasons:
- Taxes are high/City services are low.
- We’ll need 5-10 years for any potential large scale gentrification to kick in.
- Cost of holding RE is high. For a buy and hold investor like me, I’ll need to rent out and start cash flowing asap.

I am sure that the medium term returns are indeed there for folks, who are investing in DT right now, there is too much uncertainty with respect to where Detroit is headed. I hope that the city turns around and when/if it does, those who have invested right now, deserve every penny of equity that they have built up.

[renotime]

(04-15-2014 11:59 PM)worldwidetraveler Wrote:  

(04-15-2014 02:22 PM)renotime Wrote:  

I think seller financing is the way to go if you are going to invest in Detroit.

Buy a house for 10k and sell it for 40k at 12 percent with no money down. Let the borrower do all the repairs because it's their house.

You now get a check in the mail for once a month and you don't have to worry about fixing toilets.

Do this with a self directed IRA and all your profit is tax deferred.

Just some thoughts...

You have to be careful how you set this up because there are usury laws in place.

If you sell the house and take back a mortgage, you have to follow foreclosure laws if they don't pay. It typically takes takes 7 months to foreclose on a house.

One month to post in a newspaper within the county and a 6 month redemption period. After that you need to evict if they are still in the house which is another 30 days. Bankruptcy will stop the foreclosure. You will need to get the trustee to allow you to start the foreclosure again which takes time.

That is why banks will try to give them some cash for keys.

You can do a land contract which tends to have a 30 day like eviction process. You still have to watch out for usury laws.

I would also check out some loan servicing companies that will take care of receiving payments and end of the year financials.

Banks typically sell off their non performing assets instead of trying to get a borrower to pay. It's simply not in their business model to work out an exit strategy with the borrower.

If you work with the borrower before they buy the house and try to determine what they are able to pay it is less likely you will have to foreclose on them.

On top of this, if a borrower has put a lot of money into a home they are much less likely to default on it.

I currently own two seller financed properties. They are mobile homes. Neither of them have any equity in them at all. The borrowers were unable to get loans from a bank.

And yet I receive a check once a month without fail.

I highly doubt I will ever have to foreclose because both borrowers have put a lot of money into their respective properties.

You are right, though. There are risks.

But I think it's far less risky compared to rentals.

[worldwidetraveler]

(04-16-2014 11:05 AM)renotime Wrote:  

Banks typically sell off their non performing assets instead of trying to get a borrower to pay. It's simply not in their business model to work out an exit strategy with the borrower.

Well, they were sort of forced to work with the buyer for some time. I think that has changed now.

The banks that sell off the notes will also service them. Just because they sell them off doesn't mean they are out of the picture.

If the note goes bad, the bank may get it back. I don't believe they will be selling off a bad house loan which is why they will go through foreclosure and try to sell the house in order to make up what they loss. That is if anyone doesn't outbid them at auction.

You are right, they typically don't care for the home owner and I never said they were working out an exit strategy. I said that they will pay 2k to the home owner to get the keys now instead of waiting 6 months. I would do the same every time.

Quote:

If you work with the borrower before they buy the house and try to determine what they are able to pay it is less likely you will have to foreclose on them.

It depends on what you mean by working with the borrower. Accepting smaller payments will be seen as you restructuring the loan to many judges which is why most banks won't accept partial payments.

Quote:

On top of this, if a borrower has put a lot of money into a home they are much less likely to default on it.

Great in theory but even if you sell with sweat equity, in mind, that doesn't mean they will follow through with it. You don't know how much they will put in after you sign over the deed regardless what they say will happen.

Quote:

I currently own two seller financed properties. They are mobile homes. Neither of them have any equity in them at all. The borrowers were unable to get loans from a bank.

I love seller financing. I have always targeted properties I could get some equity. Back in the day, it was mainly foreclosures and I would go after properties with multiple loans and negotiate them down. I have worked with quite a few banks during that time.

Quote:



And yet I receive a check once a month without fail.

That may change once you start hitting the neighborhoods with houses that cost a couple of grand.

Quote:

I highly doubt I will ever have to foreclose because both borrowers have put a lot of money into their respective properties.

I don't know if mobile homes are the same thing when it comes to foreclosures. Is it?

Quote:

You are right, though. There are risks.

But I think it's far less risky compared to rentals.

Depends if you want to wait 7 months to start getting payments compared to 30 days for an eviction.

People lose their houses all the time even if they have money in it. Job loss, medical issues... I had a family relative get a free and clear house. It was given to her. She put in hard wood floors, painted and made it look pretty good. She lost it to taxes of all things. Hell, in the end, she couldn't even pay her water bill.

I don't see it as less risky. In fact, I see it as more risk if you take back a mortgage and note just because they have control over the house for a long period and there isn't anything you can do about it. You are taking on more risk because you don't want the day to day grind of a rental. I would also do the same for the right property.

[jamaicabound]

For any of you who would actually consider moving to detroit or michigan in general there are sum great tax breaks if you move a business there

[kavakid]

Los Angeles has great weather. People are leaving states that are cold for southern and western states with year round good weather.

[jordypip23]

[kavakid]

The woman being evicted, she put her kids through college, but she didn't pay the taxes that pay for the local schools.

I feel sorry for her, but the taxes pay for schools. Her adult children can find alternative means to go to college, like student loans.