60 minutes show on the crisis in america of boarded up homes ruining neighborhoods or is it an investors opportunity

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What is your opinion are these large swaths of boarded up homes we see in the mid west upper rust belt ruining these cities or are they an investors dream opportunity to get into the RE game for ridiculously low price points Vis a Vi the historical norm..

Say a 1k house in Detroit that sold 10 years ago for over 100k.. Or  a home in much of Ohio or northern Indiana that sold for 80k ten years ago and can be picked up for 10 to 30k today and many of these areas are not war zones...

what is the answer to these perplexing problems.  Should the government who spends billions protecting endangered salamanders and or spend Billions on Super fund sights.. Would not these urban blights be considered a Super fund site.. ON top of the obvious. there is the social criminal aspect and all the money we spend trying to protect the citizens of these areas.. As opposed to spending millions on little endangered bugs etc. 

Any one have a thought on what should be done with these properties. Should the feds step in and start bulldozing them.. thereby creating jobs and Open spaces that could grow gardens and other productive type of uses.. Instead of foster crack houses and other assorted crimes...   

The easy answer is population growth. I say pick 10,000 immigrant families that want to come to America to invest their money, minds, labor and place them in Detroit for example. You could sell the home for a song on condition they will live in and fix it. In exchange for U.S. residency as the quid pro quo. You would see the home depots and the rest jump in. 10 years later, and you get a totally revitalized city.

It's definitely sad to see places fall apart, but even savvy investors would have to buy and hold I mean hold for a long time because if your population has dwindled who are you going to rent it to? I think as long as we have this problem there should not be any homeless people.  Put them in the houses under the condition that they change their life, find work, and give back to the community.  If you ask me that's not much to ask for; in return they would be getting a free home and a new lease on life.

Federal govt should loan the state to do it without any hope of being repaid.   Emit domain it and bulldoze the entire area.     I can't think of a productive use for the land though.    Gardens maybe for prisoners, nobody else will put the effort in.

Re immigrants/homeless.    Never would work.    

I just wonder if Sixty Minutes happened to mention the fact that these areas of blight have voted almost without exception for the same party for decades?  To solve a problem you almost always have to identify the source of a problem and the fact that one party has ruled over the demise of city after city has to be faced as one (major) source of the problem.  

there was and still is a mentality in Detroit going on that residents were not paying their water bills for whatever reason and then the case was made that water should be free.  Property taxes are not paid and the city ignores it.   And you think people are going to just change?  Leigh has it best.  These homes,  while beautiful at one time,  are so old and outdated, its probably best to bulldoze and start over.  What do they do with these people then? 

You can buy those homes for cheap but I think you have to pay all the back taxes on them as well.   What makes you think anyone wanting to rent one of these homes will be reliable? 

Detroit has been on the decline since I can ever remember.   The are just islands of decent areas,  but it's like driving through Iraq to get to one. 

@David Roberts  

  I did not mean to single out Detroit there are areas like these in Every major city in the mid west and upper rust belt...   And same with the west not as bad as it was but it was pretty bad in central CA PHX inland empire Vegas there for a while with the amount of vacant foreclosed homes.. I think the difference is with these mid west eastern cities with very few exceptions of inner city regentrification these areas are just done... No way to bring them back.. It will be interesting to see how this all plays out..

what is sad though is the less than honorable house flippers that flip these inner city warzone properties to foreigners left and right and make a killing doing it... And to a certain extent newbie CA investors who don't know what they are doing ...

I saw an Anthony Bourdain show where he went to several of the areas in and around Detroit doing his food show. Part of the segment went to some of the areas that Jay was talking about in the 60 Minutes documentary. They had dinner with the local firemen and discussed what it was like. The firemen said that most of the time that if there was a fire in one of those areas that they did not bother to respond. The danger was very high and the houses were generally abandoned. Bourdain talked with some of the Community Organizers who were attempting to revitalize the areas, but the almost complete lack of job opportunities and either active or perceived war zone like stigma surrounding the areas kept people from even considering the effort to “make it better”. Being a chef, Bourdain was shocked that there were no stores or supermarkets within a reasonable distance of the areas he visited, but there were several fast food places that managed to stay in business.
Until there are jobs for people to try to make their life better, then there will be no revitalization.

Even as most folks write off those areas, there are people who still try to get some sort of positive forward progess and that is what is good about the US.

http://youtu.be/IYcZmjqKvjU?list=UUZ-UdHPFCThKfe4ns0s3Gaw

@Paul Granneman  

 I saw that Bourdain show.... its a sad commentary on a once great city that is for sure... so as it relates to BP and cash flow investing... it has also created a huge opportunity for profiteers to take advantage of those that think they are buying this cute little brick bungalow only to find out   Opps not such a good idea... I have heard that the police and fire departments will move residences ( owner occ's) to safer place's since they cannot defend or service those areas as you stated... its not a war zone its third world literally in some of these areas.

This is a video from a drive on the eastside a couple of months ago. 

http://youtu.be/IYcZmjqKvjU?list=UUZ-UdHPFCThKfe4ns0s3Gaw

@Al Neal WOW. That is crazy ... how many percentage wise in there do you think are still occupied?  Are houses around that part of town even sellable with people who would buy them, or even investors?

Thanks for sharing... 

I would say not even 10%. Those areas are ready for bulldozers and redevelopment. There are numerous neighborhoods in the city that look the same or worse. Detroit has over 40 sq. miles of vacant land. There are some better areas in other parts of the city that investors can buy in.

What would you do if, while traveling in a faraway land, you happened across an abandoned city? 

I can name communities in California, such as Bodie, Calico, Hinkley, Randesburg, etc. 

A ghost town, with perhaps a few straggler residents remaining behind, is just that. For a small real estate investor, buying property in the trailing edge of progress makes no sense. 

In these communities, the economic fuel, whether mining, industry or government subsidy, eventually peters out and the economic engine seizes up and is dead silent. 

The solution, in the short run, is to throw the baby out with the bath water, until which time an economic catalyst is generated by commercial interests, whether industry, technology or natural resources capitalists. I suggest debating that elsewhere.

For the real estate investor, especially the new or would-be property buyer, I encourage you to begin by following the old saying that "the trend is your friend". Learn the business of real estate and become an investor. Once accomplished, you can then ponder the wisdom of becoming a trendsetter.

Some problems cannot be resolved.  A city with housing stock to house 2 million that only has 600k residents is a problem that cannot be resolved with 10,000 immigrants or giving homeless people houses or urban homesteading programs.  The only real solution I can see is to spend the money to take many of the properties owned by holdouts via eminent domain, and simply bulldose entire blocks and even entire neighborhoods.

I actually wrote a thesis on urban homesteading programs, with an emphasis on that in Minneapolis, MN.  These programs work extremely well at their original intended purpose, but start to fail when political considerations come into play.  

They were originally intended to stop the spread of blight, with a secondary intent of maybe someday returning properties to the tax rolls.  And so the deal was something like, "We'll give you a city owned house for a dollar, and no property taxes for 5 years, as long as you live there for those 5 years.  And you have to show that you have the financial wherewithal to actually renovate the building."

That worked well.  Young, reasonably educated and employed people got houses and renovated them.  Some neighborhood decline was reversed, and after 5 years the city starts getting property tax payments again.

But then...

Why should we give houses to yuppies!  Lets put income limits in place and help the struggling working class!! (And then you get people who cannot afford to renovate>)

What about the original residents of these neightborhoods!  We can't gentrify them out!  Let's restrict participation to those who already live here!  (No new blood, no new money, no drive to improve the neighborhood or the schools.)

What about the homeless?  Why so many white people?  Etc, etc.

Urban homesteading ended up failing because governments got greedy.  Instead of accepting the limited but important benefit or arresting blight, they tried to accomplish their laundry list of PC objectives, overloaded the programs, and they failed.

I just watched @Al Neal's video.  Thanks for sharing.  What a true eye opener. It is like driving though a ghost town.  I know about Detroit but have not followed it so closely.

Wow'!  This is symptomatic of a much bigger issue.  Where is the local government? What programs are there to stimulate the population growth?

 These houses may be cheap however without jobs and property economic infusion both by the government and other private entities, there will be no one buying or renting.  

For investors looking quickly turn profits on their investment, I would advise that they turn away.  

On the flip side, it is such a shame to see  a community with potential to thrive looking like that.

Say a 1k house in Detroit that sold 10 years ago for over 100k.. Or a home in much of Ohio or northern Indiana that sold for 80k ten years ago and can be picked up for 10 to 30k today and many of these areas are not war zones...

@Jay Hinrichs  Good topic!

In my market in NW Indiana, the prices have come up to the point where there really aren't any $10-$30k houses available that are not in war zones. There are houses available in that price point, but they are in an area where I wouldn't want to invest.

If there are houses that cheap that are not in war zones, then that's an investor dream come true, but if they are in a declining area, then that's a nightmare for the city to deal with.

The problem that happens over long term is that not all investors are alike. If an area is predominantly occupied by investors/landlords, then over time the quality of the area will decline, because a lot of landlords don't screen the tenants and will let anyone move in who has money available. I can only control who I put in my property. I can't control who moves in next door.

I would much rather lose a deal to an owner occupant than an investor, because that is a positive sign for the area as a whole. Some of the areas that I invest in, cities give down payment assistance, credit towards college education to an owner occupant and that's a huge positive for me, because in the end the quality and quantity of owner occupants will determine the direction a neighborhood moves into.

There are some neighborhoods in my area where the houses were selling for $80-$100k few years ago and now no one will even touch them for $5k. I really don't know if there is much an investor can do with that area. Land isn't worth anything. Prices will always be driven by demand and supply. There is tooo much supply in war zones and no where enough demand. Some cities in my area are being proactive and bulldozing boarded up houses and I think that's probably the best route to take. 

Vacant land in these areas will be worth more than a boarded up house on that piece of land because it cost money to demo these houses.

What possible government economic infusion could return Detroit to the population it was built for?  Apart from a world war demanding the immediate construction of massive amounts of military rolling stock, I can't think of one.

The city is a third the population it was at its peak.  Its reason for existence has, if not disappeared, greatly diminished.  Government funds spent on anything other than right-sizing the city will be good money after bad.  

They need to bulldoze half the city, and offer the land for free and tax free to anyone who wants to build a factory, warehouse, distribution center or other job creator.

I think Detroit needs industry to come back.  You can put all those homes in but there isn't the economy to support it.  Dan Gilbert and Mike illitch are trying to help but quicken loans and little cear are. 

I worked with the Michigan Economic Development Corporation on a project a few years ago.  They told me that never in the history of the US has there been a larger exodus of people from an area.  Even less people left during Katrina than left Detroit after the housing crash.  They put programs in place to draw people and businesses back to MI.  They have various programs for start ups and/or business who move their HQ to MI including grants, loan programs, equity funding, tax breaks.  

@Jay Hinrichs  

Thanks for the post.

The market and supply and demand determine what houses are "boarded up".  If demand increases dramatically what how quickly these houses will be fixed up and sold for a profit!

Most of the "boarded up" houses you speak of are in neighborhoods where investors are interested in taking the risk because they don't believe the reward is there.  

Detroit's got all types of problems which prevents homebuyer and investor interest.  I think if you fix those problems, you'll also fix the "boarded up house" problem.

All of the places I'm investing where there were many foreclosures are doing quite well and I haven't noticed a single "boarded up house".  "Boarded up houses" are in "boarded up neighborhoods" which are in "boarded up cities".  Start fixing the city and neighborhoods and the houses will no longer be "boarded up" because it will become worthwhile for homeowners to live there and investors to invest.

Originally posted by @Matt Rosas:

The easy answer is population growth. I say pick 10,000 immigrant families that want to come to America to invest their money, minds, labor and place them in Detroit for example. You could sell the home for a song on condition they will live in and fix it. In exchange for U.S. residency as the quid pro quo. You would see the home depots and the rest jump in. 10 years later, and you get a totally revitalized city.

 I agree, but I would add residents as well. 

Originally posted by @Nicholas Jasmine:

It's definitely sad to see places fall apart, but even savvy investors would have to buy and hold I mean hold for a long time because if your population has dwindled who are you going to rent it to? I think as long as we have this problem there should not be any homeless people.  Put them in the houses under the condition that they change their life, find work, and give back to the community.  If you ask me that's not much to ask for; in return they woIuld be getting a free home and a new lease on life.

 I love this idea.  I do extensive volunteer work with homeless people and I could see a program like this working, but only with extreme flexibility on the part of those implementing such a program. I believe [from personal contacts] that the percentage of mentally ill among the homeless is MUCH higher than reported. Many of them truly CAN NOT handle the pressures of a regular job.  Many of those who can, well, they wind up getting fired for being "weird." I do not know of anyone who truly enjoys the suffering of homelessnes.

Estimates are that about 35% of the homeless in the U.S. are Autistic. A group of other Autistic adults, along with myself, are working out a program[ among others, it's more a holistic approach] where Autistics can create their artwork [jewelry, paintings, etc.] and our groups will be helping with the marketing, etc. so that people can make a sustainable income from their work.

Including other, non[Autistic individuals would be awesome combined with your suggestion could prove to be no less than a miracle for tens or hundreds of thousands of "uniquely wired" individuals. 

Just want to point out another great benefit to Bigger Pockets illuminated by this thread, is the fact that you can have a thread like this with people having very objective and civilized thoughts and discussion on such a topic. On any other site or blog, this would have boiled over into a ranting, thoughtless political debate. Kudos to all for keeping it civilized. :)

Other than that, just wanted comment that I don't think artificially inflating the population via immigration or the homeless, will rejuvenate anything. A declining population is just a symptom of much larger systemic underlying issues, it's not the cause.

If increasing population = improving economy, than there are about 100+ countries with a higher population density than the USA, that should be theoretically thriving right now. Most not any better than Detroit.

Originally posted by @Al Neal:

I would say not even 10%. Those areas are ready for bulldozers and redevelopment. There are numerous neighborhoods in the city that look the same or worse. Detroit has over 40 sq. miles of vacant land. There are some better areas in other parts of the city that investors can buy in.

 Wow, that video was so crazy--it got to the point I was actually surprised to see an occupied home.  Detroit is literally a ghost town in many areas, SMH. 

I recently watched a really good documentary on the issue, called Detropia (available on Netflix).  Also, photographer Kevin Bauman has a website, 100AbandonedHouses.com, where he's posted the hauntingly beautiful pics he's taken of the city's countless vacant properties.

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