BiggerPockets

Make sure you do your due diligence where you are purchasing, there are VERY specific areas you would need to buy in. We have seen many people buy in the wrong area and get burned. Just be careful! Good luck!

Max, I am not from Detroit, so I would have to find a property manager to take care of it.

I was just thinking of buying a couple as a gamble more than anything else.

You don't have to buy within the city limits of Detroit. There are cheap properties in some of the suburbs around Detroit. Take the city of Wayne.

Here's a couple you could probably get for 10k or so. Typical homes build in the 40's to house "Arsenal of Democracy" workers at the nearby Willow Run industrial Complex during WWII. 3/1, 1000 sf, basement. The kind of housing baby boomers grew up in after Daddy came back from war.

http://www.realtor.com/realestateandhomes-detail/3595-Winifred-St_Wayne_MI_48184_M36624-06719

http://www.realtor.com/realestateandhomes-detail/5024-Winifred-St_Wayne_MI_48184_M37858-74565

Gotta do your DD. The second one has high back taxes looks like. Just examples though.

The demographics and crime stats in Wayne beat the hell out of any neighborhood in Detoit. Wayne is a city in decline, but nothing like detroit. And there are other suburbs that have been "whacked" pretty bad. This is just one area I am familiar with.

Uncle Phil

Hi Kevin, No I already own a few properties. I was just looking at some units from $5k-$10k and figured it might be worth the gamble. $10k isn't a big risk to me. But of course I'd rather spend $25k on a sure thing if the ROI is good. Any advice you have on Detroit would be appreciated!

John, suggestions on places in Midwest for $10k?

Visit Detroit to see the actual situation in there or also you can ask someone you know living in Detroit to know if what are the current trends in rental properties.

Pontiac is just a mini Detroit. So is Flint.

PG

Jay,

I'm sorry you've had a bad experience with Detroit, but I've seen a number of investors just like you who have had a very bad experience. I've also seen a lot of investors who have had a lot of success.

In the end, it always comes down to mistakes that are made with the investment. The big ones I see are neighborhoods where you are buying, hiring competent management companies, propertly screening your tenants, and keeping the properties maintained properly.

If you don't hit on these critical items, you are going to have trouble, there's no doubt in my mind.

I've seen so many investors be drawn to Detroit thinking they can't lose because the prices are so cheap...well there's a reason that house is $10,000...nobody wants to live there, and the people that do, are the exact types that don't pay and won't respect your property. This is not the path to success in Detroit...

The biggest mistake I see made is focusing on PRICE.Price is important but it what you get for the price in what area that is KEY.

What I have heard from Detroit is they have very high property taxes there.I have heard in the thousands and thousands for one of those cheap 10k houses.You find this as well in Atlanta with very high taxes and assessments and appeal backlogs that go for miles.

I would save your money and leverage yourself into larger deals in better areas.

For instance if you have 50k to play with buy a 10 unit in a better area.

In my area in war zone Atlanta you can find 10k houses listed by the hundreds for sale in crap areas.What smart investors do is look at outlining areas instead where you might see 5 properties for great buys that you have to act fast.

When the market comes back the nicer areas will recover first usually.If you have an old junky house on land you have a development play.In Atlanta these junk houses might sit on small parcel .18 to 1/4 acre and the topo is hilly.

I can land a house for decent rent and get 1 acre or more in the burbs.More exit strategies,less crime,less taxes,etc.

I might offer really cheap for one of those war zone properties and then try to wholesale it with a full disclaimer and let someone else take the risk.

Phil,

With all due respect I stand by what I said. I've driven every street in Pontiac…are there bad areas? Absolutely, but we're not buying in those areas. To say that the entire city is a drug infested, gang ridden, ghetto is not at all correct. I send my wife and daughter out on a daily basis to look at properties in Pontiac, and if I thought it was as unsafe as you paint the picture to be, there's no way I would be doing this.

I've looked at the properties you showed, and they're not bad. I'm sure Wayne is a great area to be investing in as well, but quite frankly I'm finding very similar if not better properties in Pontiac, and the rental market is very strong there. I'm not familiar with Wayne's rental market so I cannot comment on it.

As to your question why Pontiac, here are just a few reasons…

First off, the stigma of Pontiac holds prices down making investments in the city very reasonable.
Taxes are very reasonable on a 3 bed/1 bath 1000 sq ft home
The rental demand in Pontiac is very high. We have had no trouble finding paying good quality tenants. In fact right now our occupancy is at 100% on the 8 properties we are currently holding (with paying tenants I might add)
Lastly there are a number of great things happening in Pontiac right now:

-52 new businesses have gone in downtown with the rise of the Phoenix project
-General Motors has a stamping plant and their Powertrain Engineering within the City, and they have their Lake Orion assembly plant within a 10 minute drive.
-Hewlett Packard just announced a new facility coming to Pontiac which will add 250 new tech jobs.
-Pontiac has just announced $13.9 million will be spent renovating 31 homes and adding major developments in the downtown area.
All of this is not to mention that Pontiac sits right in the center of Oakland County which is a big bonus compared with Wayne County if for nothing else because of the unemployment rate.

I can go on and on about the city of Pontiac…and I'm sure you can go on and on about the gangs, drugs and violence. Again, I extend the invitation to show you some of the neighborhoods we're investing in. You can come meet the neighbors, see the people out walking their dogs, and see the sense of community. Again, this is a far cry from the picture you have painted.