BiggerPockets

So I'm new to the game, and I'm from Michigan considering making my first investment of a foreclosed home to rehab.

Looking at the free foreclosure database it seems like there is just a ridiculous amount of homes that are foreclosed in Michigan right now. About 7,200 which is far more than any other state, even though there are many states with larger populations.

It really seems like with so many houses being foreclosed, I worry about being able to sell my rehabbed home... just seems like so much competition with so few people actually looking to buy.

I'm curious as to what some of you real estate veterans feel about this.

I think Lefty is on the right track here. I have REOs in inventory right now for less than $5K in the Detroit area. Just think of the rental possiblities, I now understand the rent roll formula.

For me personally, I was looking at REOs in Bay City Michigan and there are just a ton of homes for sale in that area in the $25-$35k range.

Many of these houses are 3-4 bedrooms 1-2 bathrooms that are in areas where houses in good condition are listed for $55-$75k.

So I can see the potential there, but there are just so many Repo's and I'm not sure how long these houses are sitting for $55-$75k.

The key to being successful in ANY market is that you must become an expert in that market. Of course, I always recommend investing in your back yard (if possible) as opposed to someplace else.

I do not live in Michigan and have no personal knowledge of the market. However, a quick google search will show that Detroit has been losing population since 1950 - THAT's 67 years they've been losing population. Why are properties so cheap...because they've got more housing than people! Considering that the US is on the verge of a recession - possibly a BIG recession - the auto industry is probably in for a very bad stretch. Moreover, now that government regulation and the unions have priced Americans out of the world market, any increase in the American auto industry may provide more jobs outside the US than in Detroit. When there are a lot of properties on the market and few takers, the prices drop like a rock. Can you buy them and just rent them out? Maybe, but as the economy worsens and more foreclosures occur, can you make money as inventory increases and rents drop?

Mike

I've heard rumors that the tenant landlord courts in Detroit are 150% on the side of the tenant.

That the city owed utilities are extrememly difficult to work with. They simply will not correct errors.

That the sludge on the very bottom of the tenant pool is all that exists in Detroit. If there are no jobs, then your tenants are on welfare.

However, it's a huge city and it probably has areas that are better than most. So at the very least, I wouldn't even think of buying without spending some serious time there, checking things out.

Just a guess: the nice areas of town don't have houses available for $20,000.

I live 40 min. north of Detroit. There actually is a lot of opportunity here. Believe it or not there are a lot of out of state investors putting there money here because the numbers are so good.

PNW is right if your doing deals in low income areas (Detroit, Pontiac, ect..) you really must know the area inside and out. there are great streets and terrible streets. I know people doing very well in Detroit buying nice brick homes 35-40k very little rehab selling to people that are happy to pay much more for a great home. On at least 5 of the last 7 houses I worked on for an investor in Pontiac $15,000 houses in (Oakland County) I have had people knock on the door and ask when they can rent the house (during demo)! These houses rent for $750+ the Pontiac rental market is great right now.

Detroit also has some of nations most affluent suburbs. The Airport is planing to add 60,000 jobs, Lots of jobs being created in the medical field, In Clarkston they are building a $400+million dollar medical campus right now, New casinos in Detroit, Lots of new commercial building.

Don't get me wrong we are in a depressed economy here and things are tuff but people are still getting married still having babies and still buying there first house. And if they have lost there house to foreclosure they still need to rent. 93% of people are still working.

Don't believe all the doom and gloom. Lots of people making a lot of money right now in this market.

Im on the other side of michigan in berrien county. We have a very saturated market but actually prices are on the rise! I can't justify the prices they have tagged the majority of the real estate with and the market at this time is sitting because a-not enough QUALIFIED buyers b-not enough population to fill housing available c-very PICKY buyers (and i dont blame them) d-we too are losing a lot of our labor force due to the ecomony and overseas labor availability. :violin:

If you are looking into buying the property between the 25 and 35k range you need to do some research. I dont know if you have a friend who is a realtor, if not you should find one. That person will save you a lot of time with just a few clicks.

What are the comps in that area? How long did those properties stay on the market? What does the competition look like? If i hold it, what are the taxes going to be if it is now a rental? Can i get it to make a positive cash flow?

In my area, houses going that cheap are in the less desirable areas of the county (druggies, gangsta's...) (unless you get very lucky)

Good luck!

My family moved from Flint Michigan to Cali back in 1990. Main reason for moving, job. Many of the car factory were closing down, it became a ghostown. Without jobs, can't buy or rent.