Thoughts on Buy and Hold in Detroit

40 Replies

Hello,

Detroit! Good, bad, or ugly for buy and hold rental property? I'd love to hear your story. 

I'm researching markets for my first investment and I obviously want to go where the math makes sense. 

If you are a Detroit investor - How long have you had your property(ies)? How is the job growth? Are you a local or out of state?

Since I'm in California, one option is to find a reputable turnkey company. On that note, anyone have experience with turnkeys? I feel like they're too good to be true, but maybe I'm wrong. 

Thought or suggestions are greatly appreciated. 

Thanks!  

-Brenda

Hello Brenda,

Let me be the first to respond and say Detroit has it all and like any market, if you do your do diligence you can be on the better side of good vs ugly.  I am actually from Detroit and I reside in Los Angeles as well. So being a distant landlord is absolutely possible.

I started investing in 2006 off and on and now I am looking to rev things up and get back to investing in the market. Feel free to send me a colleague request and we can discuss more.

Hey @Theodore B.  

Thanks for responding! Good to know that someone can vouch for investing in Detroit. What do you feel is number one when it comes to due diligence?

Hey @Rosalina Brenda Berk  

I think you are on the right track by asking questions about where you are looking to invest. I also think you should first look for a great, dependable property manager.

Originally posted by @Brenda Araujo:

Hello,

Detroit! Good, bad, or ugly for buy and hold rental property? I'd love to hear your story. 

I'm researching markets for my first investment and I obviously want to go where the math makes sense. 

If you are a Detroit investor - How long have you had your property(ies)? How is the job growth? Are you a local or out of state?

Since I'm in California, one option is to find a reputable turnkey company. On that note, anyone have experience with turnkeys? I feel like they're too good to be true, but maybe I'm wrong. 

Thought or suggestions are greatly appreciated. 

Thanks!  

-Brenda

Hi Brenda,

With the right group of people on the ground, the numbers can be made to work in any market.

I see a lot of opportunity in Michigan.

Thanks

Wow the number 1 thing...that is a tough one, how  about I give you the number 3 things as far as due diligence when buying property, probably not just in Detroit but anywhere

1. Clean Title- U want to check for back taxes owed as well as liens on the property, i.e. water liens

2. What are the taxes- My rule of thumb right now is not to exceed $2,000 annually in property taxes for Detroit properties. I want to keep more of my money than give it to the taxman/lady

3. Does your investment property have a good neighbor- I can't even count the times where I have had problems and could not get someone over to check out something on a property of mine and because I knew the neighbor of my property and they knew I lived out of state they were willing to help me out. I don't take advantage of it, I pay them for their time, but their eyes and assistance here and there is worth its weight in goal.

I think if you can tackle those things on the front end, you may be off to a pretty prosperous investing career.

The question is the answer. It is good, bad and ugly in Detroit. It all depends on your risk tolerance. If you're looking for cheap properties your looking at some extensive rehabs in some undesirable areas. You have to find a medium.  A reasonable house in a decent neighborhood that is owner occupied and looking to sell. It should need low maintenance and light rehabbing. You need a great team in place to that are more partner than employee. You should start with a realtor who knows the ins and outs. Where to go in and where to stay out. The number one thing on due diligence is to take your time. 

Thanks everyone for your input! The general consensus (as with any property in any part of the country) is to do your due diligence. For now, I'm going to research markets that are closer to me geographically and also out of state markets where I actually know some people. 

Have a great weekend. 

Brenda

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Originally posted by @Theodore B. :

Hello Brenda,

Let me be the first to respond and say Detroit has it all and like any market, if you do your do diligence you can be on the better side of good vs ugly.  I am actually from Detroit and I reside in Los Angeles as well. So being a distant landlord is absolutely possible.

I started investing in 2006 off and on and now I am looking to rev things up and get back to investing in the market. Feel free to send me a colleague request and we can discuss more.

 Hey Theodore I from Detroit as well moved to the Carolina's. My cousin buy's Detroit properties from the Auctions rehabs them and hold his properties.  You do have do your work.  There is pockets  to invest as well. I have a contact with good properties as well. 

@Brenda Araujo 

If your looking to simply give your money away get nothing in return then Detroit is your city.   Someday this once incredible city might recover but until then you have many other markets that would provide you a better option.  This city for the mostpar t has left a bad taste in many peoples mouths. 

Good luck

You might see a better return with Power Ball!!!

If it's ok I would love to connect with everyone on this post.  I love my city I just need to connect with right people.

  • @Curt Davis  --By any chance do you or have you owned property in the City of Detroit?  I think like any city there are pros and cons, and detroit may not be an appreciating, invest in the bubble market like it is in Los Angeles, but it does not mean your throwing your money away.  I mean if I can get a property for 1500, rent it for 600/month and have minimal repairs in a decent area, then I will throw my money away all day in that type of market Detroit or not.

I started investing in Detroit 2 years ago.  I probably started investing there about a year too early.  I am seeing big changes in the blocks I invested in and my cashflow.  Hopefully the momentum continues.     One major struggle for the city is the cost of car insurance and the weak public transportation. If that began to normalize there will be a real opportunity for growth population outside of the downtown area. 

If deals like that really existed then everyone would buy them.  There is no such thing as a decent area when  the purchase price is less then a Mac Book computer!!!

@curt davis  i hit the report button,  by mistake, so if u get anything, it was unintentionally I was just trying to reply...but hey I say to each their own, we all find what works for us, but I just learned to not comment much on things if I have not had the experience or done the research to see if its neither here nor there.  I do wish you luck in whatever market you invest in.

Unless someone is on the ground in Detroit it's hard to know the good deals from the bad. The housing stock can still look good even in a bad neighborhood, until vacancy goes up, the houses get scrapped and burnt, and then it's obvious it's a bad area. A lot of investors have lost money in Detroit. It's not for the new investor, the casual investor, the ignorant investor or the idealist investor.

There are some great neighborhoods in Detroit for investment as well as ones I'd live in myself. Certain areas of Detroit are really hot right now. Some people have made a lot of money recently due to appreciation, and the cash flow can be good if you invest correctly.

That said, I really don't care to have many out-of-state or out-of-country investors buying property in Detroit. They do a number of things which hurt the city and the people who live here. 

One, blinded by ROI promises, they buy crappy houses in crappy neighborhoods from shady turnkey companies. The investment doesn't perform, the far away investor cuts their losses and abandons the house, the neighborhood which was struggling to begin with is blighted by another abandoned house.

Two, buying on ROI, even if they have a decent house in a decent neighborhood, either they or their property management company cut corners and don't maintain the house properly and it starts to look "rental-ish" in a neighborhood with lots of owner-occupants.

Three, they or their property management company fails to adequately screen tenants, resulting in a trashed property that the investor may not reinvest in to fix up to neighborhood standards, becoming a blot on the neighborhood.

Four, the property management company may blatantly rip off the investor, pocketing the rent, the repair funds, and renting out the now crappy house to any derelict who can pay a few hundred dollars a month.

Astute local investors don't usually make these mistakes.  They tend to keep a closer eye on their investments and have a stake in the future of the area since they invest there, live nearby and know what's happening in the city.  They aren't going to let things slid into disrepair and react by reallocating their investment capital to a city 1000 miles away.

So rather than dispute the comments like the ones by @Curt Davis or own local Debbie-downer when it comes to Detroit (Scott K, where are you?), I'll partially agree with their take on it and hope the investment activity tilts more toward locals and away from the block of long-distance investors who really aren't a net positive for the city I love.

Originally posted by @Brenda Araujo:

Hello,

Detroit! Good, bad, or ugly for buy and hold rental property? I'd love to hear your story. 

I'm researching markets for my first investment and I obviously want to go where the math makes sense. 

If you are a Detroit investor - How long have you had your property(ies)? How is the job growth? Are you a local or out of state?

Since I'm in California, one option is to find a reputable turnkey company. On that note, anyone have experience with turnkeys? I feel like they're too good to be true, but maybe I'm wrong. 

Thought or suggestions are greatly appreciated. 

Thanks!  

-Brenda

Why does it need to be in the city?

The inner ring suburbs is the place to be right now.  People are getting scammed into buying garbage Detroit properties.  PM and I can help you find great deals in the burbs.  All in for 35k and rents for 700-800,

This is a very unusual thread. It contains the wisdom of @Tom A. explaining that there is both opportunity and peril in Detroit (probably not unlike most other urban centers) and Scott K. posting comments without being totally negative. I complement you @Brenda Araujo you seem to have a rare talent for starting threads. You should do so more often.

Originally posted by @Tom A. :

Unless someone is on the ground in Detroit it's hard to know the good deals from the bad. The housing stock can still look good even in a bad neighborhood, until vacancy goes up, the houses get scrapped and burnt, and then it's obvious it's a bad area. A lot of investors have lost money in Detroit. It's not for the new investor, the casual investor, the ignorant investor or the idealist investor.

There are some great neighborhoods in Detroit for investment as well as ones I'd live in myself. Certain areas of Detroit are really hot right now. Some people have made a lot of money recently due to appreciation, and the cash flow can be good if you invest correctly.

That said, I really don't care to have many out-of-state or out-of-country investors buying property in Detroit. They do a number of things which hurt the city and the people who live here. 

One, blinded by ROI promises, they buy crappy houses in crappy neighborhoods from shady turnkey companies. The investment doesn't perform, the far away investor cuts their losses and abandons the house, the neighborhood which was struggling to begin with is blighted by another abandoned house.

Two, buying on ROI, even if they have a decent house in a decent neighborhood, either they or their property management company cut corners and don't maintain the house properly and it starts to look "rental-ish" in a neighborhood with lots of owner-occupants.

Three, they or their property management company fails to adequately screen tenants, resulting in a trashed property that the investor may not reinvest in to fix up to neighborhood standards, becoming a blot on the neighborhood.

Four, the property management company may blatantly rip off the investor, pocketing the rent, the repair funds, and renting out the now crappy house to any derelict who can pay a few hundred dollars a month.

Astute local investors don't usually make these mistakes.  They tend to keep a closer eye on their investments and have a stake in the future of the area since they invest there, live nearby and know what's happening in the city.  They aren't going to let things slid into disrepair and react by reallocating their investment capital to a city 1000 miles away.

So rather than dispute the comments like the ones by @Curt Davis or own local Debbie-downer when it comes to Detroit (Scott K, where are you?), I'll partially agree with their take on it and hope the investment activity tilts more toward locals and away from the block of long-distance investors who really aren't a net positive for the city I love.

I'm right here Tom.  Funny that this thread pops up today.  I am in the process of helping 2 people that are out of state investors to get their properties back on track.  There are so many scams out there.

1st lady got scammed into buying a 3/1 boring house in the burbs for over 65k.  OOOOOPS.  The property management company to killing this women and its not even close to be ready to rent.  So me and the partner are taking over the management of this property.  We had to gut the basement since it was water damaged from the storms last summer.  They did a terrible paint job and left the interior doors unpainted.  It just has a bad look to it.  So we will have a renter in it by the 1st for about 750-800.

2nd lady.  Has 4 total properties.  3 are in Detroit and 1 is in the burbs.  The PM has told this lady that 1 of the Detroit properties is occupied by a squatter.  We drove past it today and it has 3ft of snow drifts all over.  Clearly no squatters.  Another property is in the process of eviction.  Well again we drive over and find that the snow has not been cleared or walked in.   This lady is still paying the PM a monthly charge even though 2/3 in Detroit are not being rented.  The PM is not making any effort to get them rented and is not even clearing the snow so this lady doesn't get sued.

The 4rth property this lady has is in the northern burbs.  It is a nice 3 bd/1.  With a big eat in kitchen and a nice large front living room.  on a corner with a 2 car garage.  This should be a very very easy rentable property for no less than 800.  Also they said they rehabbed the place.  I inspected this property today and all they did was paint (a bad job) and put some vinyl down in the kitchen and laundry room.  Also did the walls of the bathroom.  So they did a horrible job.  The tub is not properly water tight and will be a huge problem in the future.  They left the original cabinets and the chipped up counter top.  Also the walls have been patched very badly and just painted over with out sanding. 

So people this is what you get when you deal with "turnkey" scumbags that are ripping you off.  So this lady has 4 properties and only 1 is rented at the moment and she still pays the PM the monthly fee.

These people should be hung in the town square.

I will help this lady start earning some money and do a fine job for her.

So send me a PM if you need some help with bad properties and terrible PM's that are ripping you off.

Yeah I am a Debbie Downer as you call it because unless you have a huge bank to deal with Detroit is to be avoided.  But not the burbs.  That's where the money is.

I speak the truth about Detroit its not my fault its a dump in 70% of the city.

Well, to the best of my knowledge! Investing in Detroit be good! The properties being sold dirt cheap.

Originally posted by @Jeff Rabinowitz :

This is a very unusual thread. It contains the wisdom of @Tom A. explaining that there is both opportunity and peril in Detroit (probably not unlike most other urban centers) and Scott K. posting comments without being totally negative. I complement you @Brenda Araujo you seem to have a rare talent for starting threads. You should do so more often.

But the problem Jeff is these people are not talking about the great areas of the city.  They see the 12k properties and think "how could I go wrong)  They are getting sold properties in bad neighborhoods that people are leaving.  I was just in 2 of them today.  Boarded up house everywhere.  Its ok I had my gun with me.  Hell we saw a cracked out dude walking across the street today that was tripping and had a football helmet lol it was funny as hell

I have never found the need to carry a gun in the City but I will concede that even though there are boarded up houses in some areas I visit I avoid the more difficult areas. I am sure you never see people out in public who are high or drunk in an area as upscale and affluent as Madison Heights. (For those who are not local I am being facetious.)

my partner thought about detroit, real estate is cheap but of course you have social issues there, lots of welfare. We decided to stay in our home market that has a lot of blue collar, hard working people that we can owner finance property to. 

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