Ultra-Cheap rented in Detroit?
Boston, MA · Member since 2008 · 149 posts · 57 votes
Ultra-Cheap rented in Detroit?
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Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
15yWhy Detroit? If price is a factor you can buy in many cities across the US for under 10k off the mls. But are you prepared to deal with consistent break ins, copper theft, broken windows, and vandalism? Not saying you cant do it I do it but it is not for everyone. Sure you can pick one up for 10k put 5k in it and rent it for 600$ but after two months they dont pay you need to evict and then deal with having a empty house that will get trashed and youll be rehabbing the house all over again. I might buy in Detroit but ONLY after personally seeing and driving the area, talking to other investors who are working there everyday, and having a good management company with good references lined up. Lots of people think it will be easy picking up a 10k house and renting for 600$ but unless your local the odds are set against you succeeding.
28 Replies
- Residential Landlord · White Lake, MI · Member since 2010 · 12 posts · 6 votes15y
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!
- Real Estate Investor · Milwaukee, WI · Member since 2011 · 103 posts · 22 votes15y
People are still renting in Detroit? News to me. I know you can get incredibly cheap and abandoned for all time kinds of properties, but I'm surprised to hear that there are places that are rented.
Watch out though, you are still in Detroit, of all places. Make sure you are staying out of the warzones, make sure you would be willing to actually collect rent at night, unarmed, and make sure it will stay rented.
- Boston, MA · Member since 2008 · 149 posts · 57 votes15y
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.
- Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes15y
Why Detroit? If price is a factor you can buy in many cities across the US for under 10k off the mls. But are you prepared to deal with consistent break ins, copper theft, broken windows, and vandalism? Not saying you cant do it I do it but it is not for everyone. Sure you can pick one up for 10k put 5k in it and rent it for 600$ but after two months they dont pay you need to evict and then deal with having a empty house that will get trashed and youll be rehabbing the house all over again. I might buy in Detroit but ONLY after personally seeing and driving the area, talking to other investors who are working there everyday, and having a good management company with good references lined up. Lots of people think it will be easy picking up a 10k house and renting for 600$ but unless your local the odds are set against you succeeding.
- MI · Member since 2011 · 228 posts · 75 votes15y
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
- Real Estate Investor · Fishers, IN · Member since 2009 · 408 posts · 196 votes15y
Steve, buying in Detroit on price alone is a fast way to lose your investing capital. I was part of a company for three years that did quite a few Detroit deals. We made sure we only bought in certain zip codes with a close attention to taxes and either buying on a warranty deed or knowing the full picture of our purchase. If Detroit is your first entry into real estate, please do your due diligence. There are plenty of fantastic opportunities in Detroit but you generally find those closer to $25K in very specific neighborhoods.
You mentioned $600 a month in rent. Make sure you know your carrying costs of a rental in Detroit. After taxes, insurance, property management and repair escrow, you generally are looking at $500 a month carrying costs. At that point is it really worth paying $10K for $100 a month?
- Boston, MA · Member since 2008 · 149 posts · 57 votes15y
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!
- Boston, MA · Member since 2008 · 149 posts · 57 votes15y
John, suggestions on places in Midwest for $10k?
- Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes15y
Steve,
We are currently setting up a number of turnkey properties just north of Detroit in Pontiac Michigan. We won't even look at the properties you're talking about because they are nothing but trouble. The bottom line is that properties in this price range are in war zones and people don't want to live there. I cannot tell you how many investors have come to me after "taking a gamble" on properties like these and now have nothing but losses to show for their efforts. They're looking for help, but there's really not much that can be done with these properties.
A much better strategy which we employ is to increase your price point a bit and buy properties in good areas where people actually want to live. We're doing this with a lot of success. Our properties are in the range between $35k - $45k and are renting for between $750 - $900 per month. The vacancy rates are lower, the properties are in nice neighborhoods making them very easy to rent, and at this price you can have a fully rehabbed property.
- Virtual Assistant · Ogden, UT · Member since 2010 · 2 posts · 0 votes15y
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.
- sherwood, Oreghon · Member since 2011 · 14 posts · 4 votes15y
I did 200 plus hard money loans in detroit before the market cratered. this is a purse trash flow play no equity apprecaition should be expected by the better properties I had 2 I foreclosed on put 10k into each only to have them fully trashed in one year and no rent paid. I let them go for tax's and lost 100k large. I would not invest in detroit in any capacity personally just lost to much money there.
- MI · Member since 2011 · 228 posts · 75 votes15y
Pontiac is just a mini Detroit. So is Flint.
PG
- Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes15y
Phil, I disagree with your stance on Pontiac. Like many urban areas across the country, Pontiac has its problems, but there are also very nice areas of Pontiac which make excellent opportunites for rental properties. I'd be happy to bring you on a tour of some of the stuff we're putting together and show you where we're investing in Pontiac. You'd probably be surprised, just like most folks who have the same initial reaction.
I have the same feelings towards Detroit...I know less about the Flint market, but I suspect you might find similar opportunities. There are some very good areas to be investing in Detroit. But there are a lot of crappy areas. You have to know the market, and it's this knowledge that generates the returns you desire.
To simply write off an area based upon what you think is the case is naive, and in many cases you'll be missing out on a very big opportunity.
- Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes15y
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...
- MI · Member since 2011 · 228 posts · 75 votes15y
Todd,
Read my post again. I didn't write off anything. I said that Pontiac and Flint are mini Detroits. A true statement. Same basic demographics, low income, high poverty, high crime urban environments. Lots of black/hispanic gang activity, absentee fathers, single welfare moms, gun fire in the night...etc.
Of course there are better neighborhoods. But why go there? Plenty of cheap rentals in the detroit suburbs without the ghetto mentality. I gave a couple examples above.
I ain't naive. I grew up in the detroit area and worked in Pontiac/Detroit. This is back in the 70's. Bad then, can't imagine what it's like now.
Here's what some people say about Pontiac:
http://www.city-data.com/forum/michigan/1284201-relocating-pontiac-area-need-suggestions-please.html
Take it for what it is, opinions. But, sounds like a mini detroit to me.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes15y
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.
- MI · Member since 2011 · 228 posts · 75 votes15y
Wayne County (where Detroit is located) is bad for taxes. I don't know the tax situation in Oakland County (where Pontiac is). The latter has a lot of affluent suburbs to support the tax base.
- Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes15y
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.
- MI · Member since 2011 · 228 posts · 75 votes15y
Todd,
I'll bet your not selling the properties in the good areas of Pontiac you speak in the 10k range.
Notwithstanding the points you make in answering my question "Why Pontiac", what type of neighborhoods in Detroit, or Pontiac have say 5-10k proprties for sale? Answer, the neighborhoods i mentioned in my previous post.
So I'll rephrase my question. Why spend 40k for one of your properties located in the few "nicer" areas of Pontiac or Detroit, which are surrounded by ghetto, when you could get very decent/average properties for that amount in the nicer suburbs outside? like Dearborn, Westland, Livonia, Auburn Hills, Southfield...etc., and for higher rents?
- Investor · Holly, MI · Member since 2009 · 95 posts · 23 votes15y
As an investor in the metro-Detroit area I would also agree with avoiding the 10k deals in the city. If you are going to take a gamble and invest there at least spend a few hundred and fly in and check out the neighborhood. As mentioned throughout this topic there are better opportunities in the metro area...I personally invest in Romulus, Taylor and Ypsilanti (Washtenaw County)and have great renters paying $900 plus rents in houses that I have less than 35k invested. There are plenty of these deals in the area.
Todd and Kelly are doing business right in the city of Pontiac..I would definitely recommend them if you are looking for a turn key property. - MI · Member since 2011 · 228 posts · 75 votes15y
William,
I was born in Ypsi-tucky. What area of Ypsi do you invest? I know Ypsi township has been hit hard. All through the Ecorse Rd corridor.
OTOH, I like the area of Ypsi right next to Ann Arbor down Wastenaw Ave. Also Pittsfield.
Romulus? The area southwest of the airport seems like it would be a good blue collar middle class rental area.
I'd avoid the area of Romulus north of the airport. Between south side of Vanborn Rd and Ecorse Rd, and btwn Wayne Rd and Middle Belt Rd. Might as well be Inkster.
Phil
- Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes15y
Phil,
These properties are not surrounded by ghetto...you need to get that out of your head. In fact, that's the main reason I like Pontiac, because when you invest on the fringes, you're surrounded by homes in Bloomfield Township, Auburn Hills, Lake Orion and Keego Harbor. These are all very nice areas in oakland county, and again, very far from what you describe as the ghetto.
I think the other key point you're missing is that we're not selling properties...we're selling turnkey investments. There is difference, and for an out of state investor, there is substantial value in what we're offering beyond the value of the property. Our properties are bought, renovated, and tenanted with a property manager installed. These are truly turnkey properties that will begin collecting cash flow immediately upon purchase.
The properties you showed are not renovated, not tenanted, and do not have competent property management installed...so you're not comparing apples to apples. The properties you showed are both listed right around $12k. By the time you make repairs (likely $10k - $15k) add up your holding costs and closing costs, you will easily have $25k - $30k in to the property. Now if you plan to sell this as a turnkey property you will also have to install a tenant and a property management compnay. Add in your profit, and the property will likely sell in the same $35k - $40k range that we're dealing in.
- Residential Real Estate Broker · Pompano Beach, FL · Member since 2010 · 5 posts · 0 votes15y
I invest in Detroit, there are good and bad areas, definitely stay away from war zones.
$10k for a tenanted property sounds really low. Our 3 bedroom tenanted properties in nice areas sell for $24-$34K.
I will echo what the others have said and do not expect appreciation, you are strictly buying for cash flow.
- MI · Member since 2011 · 228 posts · 75 votes15y
Todd,
You can get fully renovated properties in West Dearborn for 35-40k. Zip 48124. There is a guy on BP that sells them. And I'm not pushing Dearborn. But it's a far cry better than Pontiac. Better schools, safer...etc. And there are NO bad neighborhoods in West Dearborn.
Ask most people in the metro area where they prefer to live, rent or buy a home, West Dearborn or Pontiac. That will greatly effect the future appreciation and marketability down the road.
Don't get me started on "Turnkey" packages. I learned my lesson in Memphis.
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