BiggerPockets

Tony,

It all depends on the land value of the property. A lot in a bad area of a city can be worth less than nothing. Who is going to build a house on a lot in the ghetto when you couldn't possibly build it cheap enough to make money? Likewise, a delapidated house on such a lot is worth less than nothing, because the cost of demolition is more than the lot is worth and the cost to do a complete "to the studs" rehab would be cost prohibitive.

Finally, building codes have changed over time and some lots are too small to allow for bulding under the new building codes. So, if there is a condemned house on the property, once it's torn down, you aren't allowed to rebuild. However, you WILL be allowed and required to keep that lot mowed and cleaned up FOREVER! You couldn't pay me $1,000 to take a property like that!

In other areas, supply and demand haw lowered the price to the levels you've seen; such as $7,000 for a house. If the automakers are allowed to fail in Detroit, $7,000 may be the high end for many of these homes. In a city where the population has been leaving since 1950, who is going to buy a house and what would they do with it? I've seen bumper stickers that say "Will the Last One Out of Detroit Please Turn Out the Lights"!

Mike

Originally posted by Tony Ganino

from Australia it looks very strange to me I see homes for sale starting from $1, take 1 mile out of Chicago central I see a 3 bedroom house for something like $7,000 which seems rather cheap for a location so close to the centre of the city. I am thinking American real estate market must function differently. Fill me in, what is the low down?

Thanks in advance

I used to adjust the vandalism losses at these Chicago houses. I quit working with that company over the areas they would send me into. Aside from the neighborhood, you have to understand something about Chicago politics. What Mike presented as a potential scenario above is daley life....oh excuse me, I meant daily life in Chicago. Don't know how I made that typo there....

I cannot be there to see things for myself, but I see is prices $1 to $30,000 for 3 bedroom houses 1 - 10 miles outside major us cities by populas such as houston, detroit, chicago according to realtor.com. In Australia poplulation sizes that big need space and that causes demand, you could not find a house in Melbourne for less that 150,000 US

On the other Detroit is still experiencing population growth according to the last census and it has stagnated before in history but bounced back. I believe the same thing is occuring now.

Any examples of the rents of some of these cheap houses?