Detroit Dirt Cheap Houses Worth it?
Member since 2020 · 101 posts · 32 votes
Detroit Dirt Cheap Houses Worth it?
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Investor · Boca Raton FL · Member since 2017 · 255 posts · 188 votes
5y@Ibrahim Yamini you don't want to deal with this kind of property, trust me I've been there.
Most of the houses sold for less than $5000 are owned by the Detroit land bank, some of them are even sold for $1000 and you can buy vacant lots for as low as $100! but it just doesn't make any sense financially. I had a discussion with a land bank official a few years ago who explained to me that out of the thousands of tax-delinquent houses foreclosed by the county and sold at auction every year, only the ones that no one bid on are transferred to the landbank... it means you really get the worst of the worst... + there's a trick, the LB will sell it to you for a low price... in exchange of your signature on a development agreement leaving you with a 6 months to 1 year to do extensive (and expensive) repairs to bring to properties up to code. Most of the time, the repairs will cost you more than the retail value of the house.
I'm not even talking about the quality of tenants you will drag on in these lower-class C-D areas, $800-$900 rent per month looks great on paper until the tenant stops paying and messes up the place.
I also agree with what has been said by others here, the Detroit come-back is not going to spread in all the neighborhoods, some of them will never come back, while others will provide you a great upside.
Being out of state bring a whole another level of complexity, my advice would be to find a house in a B area in Detroit or in the suburbs, ideally with only cosmetics repairs needed (you don't want to open the walls on a house built in the 30's), find a good property manager, put a good debt in place and repeat the process.
Best of luck!
12 Replies
- Developer · Detroit, MI · Member since 2020 · 24 posts · 44 votes5y
I’m buying a $1000 house this week! I will put $35k-$40k of rehab (labor and materials) into it and rent it out for $800 per month. After expenses, I’ll take home $500/month. They are tough to come by but every now and then, you can still find properties 5K and under that make sense.
A lot of properties in that price range require substantial repairs. You'd get a better ROI purchasing a property that's tenant occupied.
Buying land to build on is a long term investment that could take years profit from. - 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Most OOS investors fail to realize that Detroit was geographically built for 2 million people, but currently has less than half that population.
Some areas of the city, maybe 1/3, are coming back strong, another 1/3 is so-so and the last 1/3 is no mans land.
How long you have sit on a piece of land before you can profit on it, depends on where you buy.
Logical Property Management4.9458 Reviews - Member since 2020 · 101 posts · 32 votes5y
Thanks for the info! I would love to try this out but I think I’m going to focus on livable properties that require little to no rehabs until I gain more experience
- Realtor · Detroit, MI · Member since 2018 · 387 posts · 129 votes5y
@Ibrahim Yamini. Yes this strategy can work. Just be prepared for the rehab cost and major updates needed
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Drew Sygit:
Most OOS investors fail to realize that Detroit was geographically built for 2 million people, but currently has less than half that population.
Some areas of the city, maybe 1/3, are coming back strong, another 1/3 is so-so and the last 1/3 is no mans land.
How long you have sit on a piece of land before you can profit on it, depends on where you buy.
there was a nice article in National Geo a few years back showing a return to nature for those areas of Detroit that simply will NEVER come back in our lifetimes or kids or grandkids you points are exactly correct .. when you have a city that developed land / lots for 2 million in habitants and then over 1 million left over time you have surplus worthless land .. there are large old paper subdivisions in CA like this that were platted in the 20s and never developed its taken 100 years but they are finally starting to bring that land back into open space type designations parks etc.. I see this happening in Detroit more city open space the question will be how will the residence that live there treat it burn down the houses and leave rubble for years upon years or clean it up and then keep it clean dont go dumping stolen stripped cars or their daily trash when they dont want to pay for garbage service :)
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Jay Hinrichs depends how strong city leadership is.
Logical Property Management4.9458 Reviews - Homeowner · Dallas tx · Member since 2021 · 3 posts · 1 vote5y
I remember when south Dallas was really cheap and people used to be afraid of investing bc of it. A 10K home was my first investment here. I bought it and spent 5 K to update it a bit. It didn’t need much like some of those Detroit properties you’re talking about. it started putting money in my pocket soon after that.
A lot of the homes in this area were just neglected and people thought it was a bad neighborhood because it was lower income but it made me lots of money and I rent it to this day with the same tenant. The area Gad totally rebounded and I like to think at least a little because of me .
I’ve seen those Detroit Peoperties , they’re really nice and big. St. Louis was the same and just about as cheap. It seems to have rebounded though. I’m curious to know what the difference was. I’m sure all Peoperties are trash and un investable until someone with good ideas and willingness to polish them up come in and give them care and return them to value.
Also remember even if a city is 1/2 of 2Million , it still has a lot of people. surrounding country areas cannot compare with the conveniences of the biggest denser populated area. People want to live closer to the city where it is more convenient. Maybe you try one home and if it goes well you can begin to buy the rest of them and ignite a rebound of the area. You would be the first and the first is always at the advantage in business theory right?
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Adrian Aguilar:
I remember when south Dallas was really cheap and people used to be afraid of investing bc of it. A 10K home was my first investment here. I bought it and spent 5 K to update it a bit. It didn’t need much like some of those Detroit properties you’re talking about. it started putting money in my pocket soon after that.
A lot of the homes in this area were just neglected and people thought it was a bad neighborhood because it was lower income but it made me lots of money and I rent it to this day with the same tenant. The area Gad totally rebounded and I like to think at least a little because of me .
I’ve seen those Detroit Peoperties , they’re really nice and big. St. Louis was the same and just about as cheap. It seems to have rebounded though. I’m curious to know what the difference was. I’m sure all Peoperties are trash and un investable until someone with good ideas and willingness to polish them up come in and give them care and return them to value.
Also remember even if a city is 1/2 of 2Million , it still has a lot of people. surrounding country areas cannot compare with the conveniences of the biggest denser populated area. People want to live closer to the city where it is more convenient. Maybe you try one home and if it goes well you can begin to buy the rest of them and ignite a rebound of the area. You would be the first and the first is always at the advantage in business theory right?
One exception to your thought process many times in those areas that decay like that Commercial LEAVES and the nice NEW shopping gets built where there are nice new homes and incomes that can afford to shop.. what a lot of these areas is left with is the corner liquor store .. you know the ones that have Bullitt proof windows and sell cigarettes' one at a time.. As a Data point we are now seeing this in High priced markets with ultra liberal cities not prosecuting crimes of less than 1000. People know it and are shop lifting like crazy knowing they are immune. Walgreens has closed 17 stores in San Francisco which has no homes in no areas for 10k.. LOL.. I look at a City like Jackson MS and same thing you drive through South Jackson were you can buy inexpensive rentals.. and virtually 90% of all the commercial is boarded the last grocery store in the neighborhood closed about 7 years ago.. now all the residence have to drive at least 10 miles or more to shopping and all the nice new shopping is north and East of these areas.. commercial follows the money and low crime..
- Investor · Boca Raton FL · Member since 2017 · 255 posts · 188 votes5y
@Ibrahim Yamini you don't want to deal with this kind of property, trust me I've been there.
Most of the houses sold for less than $5000 are owned by the Detroit land bank, some of them are even sold for $1000 and you can buy vacant lots for as low as $100! but it just doesn't make any sense financially. I had a discussion with a land bank official a few years ago who explained to me that out of the thousands of tax-delinquent houses foreclosed by the county and sold at auction every year, only the ones that no one bid on are transferred to the landbank... it means you really get the worst of the worst... + there's a trick, the LB will sell it to you for a low price... in exchange of your signature on a development agreement leaving you with a 6 months to 1 year to do extensive (and expensive) repairs to bring to properties up to code. Most of the time, the repairs will cost you more than the retail value of the house.
I'm not even talking about the quality of tenants you will drag on in these lower-class C-D areas, $800-$900 rent per month looks great on paper until the tenant stops paying and messes up the place.
I also agree with what has been said by others here, the Detroit come-back is not going to spread in all the neighborhoods, some of them will never come back, while others will provide you a great upside.
Being out of state bring a whole another level of complexity, my advice would be to find a house in a B area in Detroit or in the suburbs, ideally with only cosmetics repairs needed (you don't want to open the walls on a house built in the 30's), find a good property manager, put a good debt in place and repeat the process.
Best of luck!
- Homeowner · Dallas tx · Member since 2021 · 3 posts · 1 vote5y
Originally posted by @Jay Hinrichs:
Originally posted by @Adrian Aguilar:
I remember when south Dallas was really cheap and people used to be afraid of investing bc of it. A 10K home was my first investment here. I bought it and spent 5 K to update it a bit. It didn’t need much like some of those Detroit properties you’re talking about. it started putting money in my pocket soon after that.
A lot of the homes in this area were just neglected and people thought it was a bad neighborhood because it was lower income but it made me lots of money and I rent it to this day with the same tenant. The area Gad totally rebounded and I like to think at least a little because of me .
I’ve seen those Detroit Peoperties , they’re really nice and big. St. Louis was the same and just about as cheap. It seems to have rebounded though. I’m curious to know what the difference was. I’m sure all Peoperties are trash and un investable until someone with good ideas and willingness to polish them up come in and give them care and return them to value.
Also remember even if a city is 1/2 of 2Million , it still has a lot of people. surrounding country areas cannot compare with the conveniences of the biggest denser populated area. People want to live closer to the city where it is more convenient. Maybe you try one home and if it goes well you can begin to buy the rest of them and ignite a rebound of the area. You would be the first and the first is always at the advantage in business theory right?
One exception to your thought process many times in those areas that decay like that Commercial LEAVES and the nice NEW shopping gets built where there are nice new homes and incomes that can afford to shop.. what a lot of these areas is left with is the corner liquor store .. you know the ones that have Bullitt proof windows and sell cigarettes' one at a time.. As a Data point we are now seeing this in High priced markets with ultra liberal cities not prosecuting crimes of less than 1000. People know it and are shop lifting like crazy knowing they are immune. Walgreens has closed 17 stores in San Francisco which has no homes in no areas for 10k.. LOL.. I look at a City like Jackson MS and same thing you drive through South Jackson were you can buy inexpensive rentals.. and virtually 90% of all the commercial is boarded the last grocery store in the neighborhood closed about 7 years ago.. now all the residence have to drive at least 10 miles or more to shopping and all the nice new shopping is north and East of these areas.. commercial follows the money and low crime..
These are all good points. Just remember each Pearson has his own limitations and life perspective. Don’t let what any one of us tells you discourage an idea you might see great value in pursuing.
I got into investing in these lower income neighborhoods out of necessity and lack of capital(Ie. I didn’t have much money to invest at 25 yrs old) but after alot of hard work it turned out great for me. If I had only known about leverage and not used only cash to purchase homes I might have had way more than I do now. The good thing about this forum is that you have all the info you need here and more perspectives . It’s been done before .
- 5yJoe HammelBusiness MemberReal Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
@Ibrahim Yamini
These are the houses that give all Detroit a bad name. All those Detroit horror stories start $50k and under.
Metro Detroit has plenty of Great investing locations with great ROI and cash flow but they come with higher price tags.
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