Detroit

44 Replies

I'm very new to this and have only recently started researching real estate investment, so please excuse my ignorance (as this post will probably be riddled with it). My childhood best friend and I are in the process of research so that we can go in on a rental property together (him and I both have a little bit of capital to pool together), and as we're searching for a good place for our first property (we're currently leaning towards Houston area), I was wondering if Detroit is worth touching with a 10 foot pole? Thing is that him and I only have about 30-30K in which to invest and we're both college students, so we don't have a steady income with which to take out a conventional bank loan. Just looking for some insight on how to stretch our capital as far as possible. Him and I are anxious to get our feet wet, but obviously want to avoid making any major mistakes. Any insight would be greatly appreciated!

Corey,

I'm fairly new myself but I learn the hard way about misplaced anxious energy. Your doing the right think, ask around. First I would say start in your backyard. If your low on cash it feels good to be able to drive by your investment. Also, if things go not so to plan (and this happens) you can keep an eye on your asset as you learn new ways out of the pitfall. Worst case you can crash in the place...

Detroit is a gold mine for someone with strategies for Detroit conditions and a money pit to anyone with easy money ideas. Here I say really really test your strategy for the market.

Property near colleges have high cashflow potential. Buy something you can easily sublease the rooms with living, dining, basement as common areas with coin operated laundry... JV with someone looking to invest in your area and manage the deal...

My 2 cents. hope it helps.

Korey,

Thank you very much for your input! I've actually been entertaining the idea of investing into my 600 Sqft garage and using that as my first investment venture. Trick is convincing my wife to back me on the idea. I greatly appreciate your advice and will make note!

The last thing you want to do is have an illegal rental where you live.  That has bad written all over it.

@Corey McCue  

Welcome to BP.

Yes. Detroit has tons of opportunities. If you can buy a 30k property in Detroit with a 30% of chance of tripling your money in 5 years, would you do it? 

it comes down to risk mitigation. As an investor, the most important thing for me is 'not lose ALL of my money'. A small amount might be ok when I'm exploring new ventures, but not all of them. 

So, should you invest in Detroit? Depending on what you do to mitigate that risk. There are many ways to do this - knowing the neighborhood intimately, having great local property managers, or being physically there are all good ways to reduce that risk. 

First, I advise new investors to focus on investing within a 2 hour drive of where they live. This will help you stay in touch with the property. Plus, if you invest too far away, you will have to hire a property manager and they are going to cost you 8 - 10% of your gross rental income.

As too Detroit, there are awesomely cheap properties, but unless you know the ins and outs of Detroit; I wouldn't touch it with a 20' pole. Buy a nice house in the wrong neighborhood and you could end up with a headache that makes you wish you had never even heard of real estate investing.

To make Money in Detroit you need to either know the area or have a representative who knows the area.  I would not recommend starting there if you are new investor and out of state.  

@Simon Campbell  is right, find something that is within a two hour drive and start with that.

"If you can buy a 30k property in Detroit with a 30% of chance of tripling your money in 5 years, would you do it?"

Nope because even if it did triple in value in 5 years you would have to count a ton of evictions  and repairs that might make it negative cash flow over the five year span.

That would take the triple the money and reduce it way down. 12,000 a year gross appreciation for the headache that comes with such a property minus selling expenses and carrying expenses the return is way down.

I would rather buy land for commercial development and sell it off. No rough tenants, areas, gang bangers, druggies and all of that stuff.

Houston area and the city of Detroit are worlds apart. Texas has energy and oil sector, huge population growth from migration patters and baby boomers. Detroit is a massive question mark as to their future.

I think you buying something like that where you need to heavily watch over an asset in a rough area is a mistake.

Notice the topic poster has said DETROIT and not other areas surrounding Michigan.

This all makes a ton of sense, and I really appreciate the input. I'm in the process of reading the BP beginner book. Only thing that is enticing about Houston is how far our capital will go there, since we aren't working with too much. I understand that would mean forfeiting a portion to a PM firm, but wouldn't it be worth it to avoid the potential headache of dealing directly with tenants?

Hi Corey,

I was just in Detroit last month and I agree with others that it is a place you should consider only if you don't mind losing some money because it is a very high risk area. I am referring to the Detroit itself and not the outskirts. In Detroit, you get tenants that tend to stay for a month into their lease and leave, big headaches in managing tenants there.

@Corey McCue if you are only looking at managing one local SFR then I do not think that a PM is needed/worth the money. If you do a good background check on the perspective tenants; call prior landlords and get a good security deposit, there is not much management. Good tenants will pay their rent on time. So the only "headache" is the odd ball emergency repair - which the PM is going to call you about anyway. Pay yourself the same 10% and self-manage.

Originally posted by @Corey McCue :

I'm very new to this and have only recently started researching real estate investment, so please excuse my ignorance (as this post will probably be riddled with it). My childhood best friend and I are in the process of research so that we can go in on a rental property together (him and I both have a little bit of capital to pool together), and as we're searching for a good place for our first property (we're currently leaning towards Houston area), I was wondering if Detroit is worth touching with a 10 foot pole? Thing is that him and I only have about 30-30K in which to invest and we're both college students, so we don't have a steady income with which to take out a conventional bank loan. Just looking for some insight on how to stretch our capital as far as possible. Him and I are anxious to get our feet wet, but obviously want to avoid making any major mistakes. Any insight would be greatly appreciated!

With $30K you can't buy anything in Detroit that isn't high risk, or its in an area where the tenant pool is low quality.

Appraisals are an issue in the city, very low chance you can finance anything.  If you had $70K you could pay cash for something that will generate for you pretty good, meaning double digit returns.

I would not invest in Detroit as a first-timer, or doing it remotely.  Its an hands-on market.

IF you were to do it, check the area between Mexicantown and Corktown. You could score a duplex to quad thats 2000-4000 sq ft, and hope Corktown and Mexicantown keep getting people so your investment appreciates from spillover tenants.

But expect some elbow grease to get it livable, and try to have it ready to rent in June and July.  You can snag Medical/Dental/Law/Pharmacy Students, or some of the new Fellows through various foundations who trying to score a cheap place, $400-$600, in the City(requirement to their employment) but don't have the money to live in Downtown, Midtown, Lafayette Park where one bedrooms start at $1000/month, two bedrooms start at $1300.

Check areas off/on of West Grand Blvd, but south of Michigan Ave.

Also,

Right now The North End is in play, thats the area off of Woodward but south of Highland Park. The closer to Woodward you are the better.  I had one set of tenants move out of my place in Midtown where they payed $1500/month to move to that area for an unit that runs $750 this month. I was surprised they would move there but, ran through that neighborhood about six months ago and several homes(8+) were being completely gutted.  I have a quad in that area, but we are 4 blocks off Woodward, so tenant type changing is probably 2-3 years away, or the when the Light Rail Project completes.

If you invest in Detroit.  Walk the neighborhood.  Come back in a week and walk it again.  Walk it at 6 AM-7 AM and 8 PM-9 PM.  Invest in Motion Sensor Lights, and if possible a six foot fence. Glass Block Window anything less than 5 feet from the ground.

I say all this, and I make pretty good money on my Detroit Units. Good Luck.

Looking for someone with feet on the ground in Detroit.  We have an inventory of 300+ two and three bedroom homes in Detroit.  They are priced to sell quick to a wholesaler, rehabber, or landlord.  Most have back taxes between $1000-$5000.  Most need minimal cosmetic upgrades, some need a little more work.  We have been unable to physically inspect each property, so needing a buyer willing to conduct their own due diligence.  They are each priced at $3000, but willing to negotiate on bulk packages.

[email protected]

(734) 480-8624

Originally posted by @Garrett M. :

Looking for someone with feet on the ground in Detroit.  We have an inventory of 300+ two and three bedroom homes in Detroit.  They are priced to sell quick to a wholesaler, rehabber, or landlord.  Most have back taxes between $1000-$5000.  Most need minimal cosmetic upgrades, some need a little more work.  We have been unable to physically inspect each property, so needing a buyer willing to conduct their own due diligence.  They are each priced at $3000, but willing to negotiate on bulk packages.

[email protected]

(734) 480-8624

So you are saying that you have not been able to inspect these properties yet somehow know they just need cosmetic upgrades. 

I'll tell you what.  For $150 for each property I will go to each house and take photos and video of each and also give a detailed report of what would be needed to get them rent ready.  Somehow I bet you won't agree to this.

People like you are part of the problem with Detroit.  I bet these properties are worthless.

So what do you say.  PM me some of the addresses of these properties and I will do a drive by.  I want to see some of these properties that you claim don't need much work.  Prove it to me, I want to see them,

I dare you to send me some addresses.

i was thinking the same scott. Detroit can't give those houses away and they want me too pay 3k over the house,  per house. Nope

@Scott K.

There is no such thing as "worthless" real estate.  The perceived value depends on what you plan on doing with the property and the profit you are able to make from it.  I have seen lots with no houses on them selling for $3,000 in these areas, so I know the price point is not too high.  I have ran area comps to get ARV on a handful of them in order to get a general idea for what we would do with them.  Instead of going through all the trouble of inspecting each and every property individually, we opted to offer them to landlords, flippers, and investors in the area that can do the due diligence themselves and make a reasonable offer for purchase.  Even with back taxes and some work possibly needed, there is plenty of room for profit on most of these properties, whether you plan on renting them out or rehabbing and flipping.  There likely are some lemons in the bunch as well, but that's why we're looking for someone who is active in the area and knows what they're doing.  There are plenty of properties to pick from, so whoever gets to the list first will obviously have the best selection.  From your response, it appears that you are more of an inspector than an investor.  I would entertain the idea of using your services, if you are serious about it, but for the time being, I am looking for someone interested enough in purchasing the properties to do the due diligence themselves.

Originally posted by @Scott K.:
Originally posted by @Garrett McCallister:

Looking for someone with feet on the ground in Detroit.  We have an inventory of 300+ two and three bedroom homes in Detroit.  They are priced to sell quick to a wholesaler, rehabber, or landlord.  Most have back taxes between $1000-$5000.  Most need minimal cosmetic upgrades, some need a little more work.  We have been unable to physically inspect each property, so needing a buyer willing to conduct their own due diligence.  They are each priced at $3000, but willing to negotiate on bulk packages.

[email protected]

(734) 480-8624

So you are saying that you have not been able to inspect these properties yet somehow know they just need cosmetic upgrades. 

I'll tell you what.  For $150 for each property I will go to each house and take photos and video of each and also give a detailed report of what would be needed to get them rent ready.  Somehow I bet you won't agree to this.

People like you are part of the problem with Detroit.  I bet these properties are worthless.

So what do you say.  PM me some of the addresses of these properties and I will do a drive by.  I want to see some of these properties that you claim don't need much work.  Prove it to me, I want to see them,

I dare you to send me some addresses.

Originally posted by @David Roberts :

i was thinking the same scott. Detroit can't give those houses away and they want me too pay 3k over the house,  per house. Nope

I am so sick and tired of these scumbags doing this.  These people make me sick.

Yeah what a deal LOLOLOL idiots

3 post and from Florida.  hmmmmmm

Originally posted by @Scott K. :
Originally posted by @David Roberts:

i was thinking the same scott. Detroit can't give those houses away and they want me too pay 3k over the house,  per house. Nope

I am so sick and tired of these scumbags doing this.  These people make me sick.

Yeah what a deal LOLOLOL idiots

 You see that response though? You've gotta at least give him a little credit for being a good salesman. Hahahaha

Originally posted by @Scott K. :

3 post and from Florida.  hmmmmmm

 So I guess you have been on this forum since it started and were never new to any type of online community?

What a great welcoming committee...

Originally posted by @Garrett M. :
Originally posted by @Scott K.:

3 post and from Florida.  hmmmmmm

 So I guess you have been on this forum since it started and were never new to any type of online community?

What a great welcoming committee...

why have you not gotten a detailed report form each property?

Yet you say they don't need any major repairs.  Either you think we are all idiots or you are a scammer.

Do they have any plumbing left?

Is the furnace there?

Is the HWT there?

How bout the electrical?

Did they steal the windows?

Again my in box is empty.  I have told you for $150 for each property I will detail what needs to be done to get them rent ready.

You responded but didn't say anything.  I am calling you out.

Give us the addresses of these bombed out dumps that only need a little rehab.  LOL

Originally posted by @Garrett M. :

There is no such thing as "worthless" real estate.  The perceived value depends on what you plan on doing with the property and the profit you are able to make from it.  I have seen lots with no houses on them selling for $3,000 in these areas, so I know the price point is not too high.  I have ran area comps to get ARV on a handful of them in order to get a general idea for what we would do with them.  Instead of going through all the trouble of inspecting each and every property individually, we opted to offer them to landlords, flippers, and investors in the area that can do the due diligence themselves and make a reasonable offer for purchase.  Even with back taxes and some work possibly needed, there is plenty of room for profit on most of these properties, whether you plan on renting them out or rehabbing and flipping.  There likely are some lemons in the bunch as well, but that's why we're looking for someone who is active in the area and knows what they're doing.  There are plenty of properties to pick from, so whoever gets to the list first will obviously have the best selection. 

Garrett, you don't get a warm welcome because your first three posts on BP are shilling worthless properties in a city awash in worthless properties.

C'mon Garrett, you ought to know better than to say "There's no such thing as "worthless" real estate." Detroit has by some estimates 40,000 abandoned houses. There were 40,000 decisions made that it made more financial sense to walk away from the property rather than pay the taxes or invest in rehabbing them. A property with no current income, no reasonable expectation of future income given rehab costs well in excess of the ARV, and a constant cash burn due to property taxes is worth at best, ZERO, and more accurately, a negative amount.

In which Detroit neighborhoods did you see vacant residential lots selling for $3000? There's very little market for raw single family residential land. And there's no way you have homes in those areas that are hot because you obviously have a collection of crap properties. There's no way that you're selling houses for $3K that meet this description: "Most need minimal cosmetic upgrades, some need a little more work" in any area, good, OK or war zone.

I call BS on your description of the homes, of the areas, of the comps, of the vacant land transactions, of the potential profit and of your entire sales pitch (which the mods will likely delete shortly since you need to post in the marketplace area and pay for access to such).

What you likely have are the sloppy seconds (or thirds or fourths) from some REO tape that everyone with a clue discarded as being worthless. So please stop trying to pawn this crap off on unsuspecting people, and please stop telling those of us on the ground here in Detroit your fantasy tales about these worthless properties. The sooner the Detroit Land Bank Authority takes them over for back taxes the better, in this case.

Tom N. 

My apologies if my presentation wasn't taken well.  I didn't realize there was a marketplace for posting available properties.  I will remove the post myself if that was what created the sh*tstorm of negative feedback.  I am simply looking to connect with some people who are out there in the trenches in Detroit actively doing deals.  I may need to use services from someone like Scott, but personally don't prefer the attack dog approach that he takes. Maybe that's how you have survive in your neck of the woods.  I'm working with my partner to get some properties moved and make some money.  There are no scams, no smoke and mirrors, and no side shows.  But there is some research and work to be done on the part of the buyer interested in what we have.

I am still organizing the list of properties so that it's easier for someone to go through and pick what they like and don't like.  

Scott, I have your PM and will send you a list shortly.

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