Buy and Hold in Detroit? Your Opinion

Investor · Memphis, TN · Member since 2013 · 171 posts · 49 votes

does anyone think Detroit and its surrounding areas will recover.. Right now I am looking on zillion and the prices for these homes are crazy! I just seen a home for sale for $1,300 that sold for $160,000 in 2008.. In real good condition, would it be a great place to hold properties since their residents are wanting to purchase?

Please give your opinions on this

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Tom A.

Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes

13y

Originally posted by Ali Boone:

The problem with Detroit, aside from it's consistent declining population, is the tenants. I know too many investors who have had so many expenses due to meth labs and non-paying tenants that you would end up actually paying out on that $1300. That's bad. It doesn't go for all areas of Detroit of course, as I'm sure there are plenty of nice areas, but it does go for any area with $1300 houses.

Michigan is extremely tenant-friendly, meaning it can take forever to get rid of bad tenants, all the while you are not collecting rent from them and paying out on their misbehaviors.

Detroit meth labs? No. Other drugs, sure but Detroit isn't a meth lab city or a meth user city. Got to go to the sticks for that.

I've never even heard of a contaminated meth lab house in Detroit. A quick check of the DEA's National Clandistine Laboratory Register shows about 1000 meth houses in Michigan since 2004. It lists just one meth house in the city of Detroit, back in 2008. http://www.justice.gov/dea/clan-lab/clan-lab.shtml

I also don't agree with the description of Michigan as an extremely tenant-friendly state. It's really more down the middle. Some courts and some judges may be more tenant-friendly or more landlord-friendly but getting an eviction isn't hard.

I'm sure there are some horror stories, but this is a good example why investors need to really know where they're investing lest they believe things are better (or in this case, worse) than they really are.

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Brunhilda Smith
Bessemer, MI · Member since 2013 · 4 posts · 0 votes
13y
If you could get several houses in a small area to make sure the neighborhood doesn't go downhill it could work. Also, if you could get other investors to go together with you to maintain nice neighborhoods. I've heard there are groups doing this now, but have no idea where.

On the contrary, if you have one beautiful mansion among some burnt out and falling down houses with bullets flying, nobody will want to rent or buy.

Detroit isn't good for absentee landlords, in my opinion. A person needs to live there to stay on top of things.
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Aaron Yates
Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes
13y
@Account Closed , I am also still looking into Detroit. Surrounding areas are doing fine in most areas. It's in the City Limits that things are hay wire.

I'm actually meeting with a management company tomorrow night to discuss more with them about finally venturing into Detroit.

But due diligence is a must. As @Brunhilda Smith commented, no matter how nice your house may be, if it's next to a dump, no one will want to live there.

Then again, everyone needs a place to stay. But I myself am aiming for the nicer areas so I can have less worries. My agent had rentals in Detroit and got out last year after witnessing two armed guys from the court and 10 lackies going with him to evict some tenants. The tenant still wouldn't leave until the giant shoved a gun in his mouth and made him leave. These are the areas I don't want to have anything to do with.
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Bryan H.
Investor · Willow Spring, NC · Member since 2013 · 788 posts · 285 votes
13y
Originally posted by Cameron Ellis:
I just seen a home for sale for $1,300 that sold for $160,000 in 2008..

Can you show me an example of this? Is the building burned to the ground?
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
13y
I didnt know Detroit even existed anymore!!!!! That city is like the black plague, I would stay far away. If homes are that cheap its for a reason, nothing good will come from it. There is a catch as I doubt a home that sold for $160k 5yrs ago is only $1,300. It must have major damage and other issues.
Curt Davis - KAIZEN Realty538 Reviews
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Adam Roberts
Investor · Fort Worth, TX · Member since 2012 · 209 posts · 37 votes
13y
I bet @Joe Delia will have a solid opinion on this thread.....
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Cameron Ellis
OP
Investor · Memphis, TN · Member since 2013 · 171 posts · 49 votes
13y
@Aaron Yates wow, tuff eviction process.. I'm expecting to get up their at the end of the month and take a look at some properties. I have a associate at acquisition company selling their properties $7500 a door. @Bryan H. Search zillow in the $1000 range 2 or 3 properties will pop out in that criteria.. I even seen a couple for $1(Trashed)

Even though Detroit is going through hard times now, I can bet they will recover..
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Rob K.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Originally posted by Cameron Ellis:
does anyone think Detroit and its surrounding areas will recover..

The surrounding areas have/are recovering. Prices in the suburbs are going up like a gas pump. The city of Detroit itself is in the worst shape it's ever been in. Will it get better? Who knows? My opinion is that it will only continue to get worse. I wouldn't buy anything within the city limits. The suburbs outside of Detroit are nice and some have made a complete comeback.
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Joe Delia
Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
13y
Surrounding areas has recovered and is rocking and rolling. I don't know many people who make money in detroit, the ones that do know the market and blocks.

Calling Detroit "The black plague" could be seen as very racist considering the city is at least 95% black, and it's leadership has been black since the 50-60s. I disagree that it's a "black plague", it's actually rebounding in midtown, corktown, business district, others that I'm not really familiar with. As I said on other threads, detroit is too massive, to generalize.

I personally have family in midtown, they built an apartment off their house and rent it to wayne state med students, it's 750 sq ft and they're getting $1300/m. I have clients looking at high rise condo's on jefferson, the woodwork and attention to detail in these condo's is amazing. The views of belle isle and the water are phenomenal.

These threads really should be designated for those who live in michigan and know what they're talking about. Every time detroit is brought up, someone from memphis has something to say. It's like clock work.
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Aaron Yates
Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes
13y
@Joe Delia is right. Detroit is huge and people not familiar with Detroit really cant comment on wheteher to buy or not. lots of things are changing in certain areas of detroit. in fact they just started to tear down some abandoned homes finally
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
13y
Joe,

The term " Black Plague " was meant in the sense of how bad the city has become with vacant homes and crime along with the collapse of GM. I am not the one who put a racist label on it though I see how you could see it that way.

I am glad your having success in that city. You might be able to buy up the whole place as its all for sale and cheap too.
Curt Davis - KAIZEN Realty538 Reviews
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Jon W.
Flip and Buy/Hold Investor · Rochester Hills, MI · Member since 2013 · 245 posts · 105 votes
13y
@Joe Delia ...well put. I work with a guy from Detroit who knows the different neighborhoods and streets. He is very specific with his investing and does well down there with his rentals. Although, it comes with many headaches.
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Abbott Mary
knoxville, TN · Member since 2013 · 36 posts · 2 votes
13y
I could see an experienced, savvy investor who knows Detroit inside and out making a bunch of great deals buying at such low prices there. For me though, it would just be a newbie speculating, saying "But LOOK at these prices!!!!," and praying for appreciation.
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Dave Payerchin
Rehabber · Columbus, OH · Member since 2013 · 30 posts · 7 votes
13y
We sell a lot of Columbus Ohio turnkey properties to international and out of state investors. Some of our investors are requesting turnkey properties in Detroit but we don't have a solid supplier there. I can see that the numbers can be very attractive, but I also agree that without having solid local support, it can turn cumbersome fast.
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Joe Delia
Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
13y
Originally posted by Curt Davis:
Joe,

The term " Black Plague " was meant in the sense of how bad the city has become with vacant homes and crime along with the collapse of GM. I am not the one who put a racist label on it though I see how you could see it that way.

I am glad your having success in that city. You might be able to buy up the whole place as its all for sale and cheap too.

I don't invest in detroit, like i said i don't know the market. The whole place isn't for sale cheap either. None of those areas I mentioned are for sale for cheap. There are neighborhoods in detroit where homes go for 1,2,3 miliion+.
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Christopher Coleman
Involved In Real Estate · Kansas City, MO · Member since 2013 · 90 posts · 9 votes
13y
The thing I just don't get is paying 3-4K in property tax a year for a house that was purchased for 10K or less. The local govt is out of control in Detroit and acting like an anchor on any possible recovery.
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Tom A.
Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
13y
Property taxes in Detroit are out of whack. Usually too high, but I know people who are paying 1/10th of what they should.

A couple days ago the city announced they'll be doing the first citywide assessment in decades.

Detroit to reassess all property values

They've previously maintained the fiction that they're doing rolling assessments but they just haven't had the staff do make more than a token effort, and they benefit by leaving assessments too high of course.

You can challenge the assessment, first with the city and then with the state if necessary. You will eventually get a more reasonable assessment but there is a cost for getting an appraisal and going to the state tribunal on investment property. It also has been taking a couple years, but you will get reimbursed for past over-payments retroactive to the date of your challenge to the city assessor.
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
I wouldn't touch Detroit with a 10ft pole. Especially not any properties that are selling for $1300. There is most definitely a reason they are that cheap. Don't you think everyone would be buying them if they were that good of a deal?

The problem with Detroit, aside from it's consistent declining population, is the tenants. I know too many investors who have had so many expenses due to meth labs and non-paying tenants that you would end up actually paying out on that $1300. That's bad. It doesn't go for all areas of Detroit of course, as I'm sure there are plenty of nice areas, but it does go for any area with $1300 houses.

Michigan is extremely tenant-friendly, meaning it can take forever to get rid of bad tenants, all the while you are not collecting rent from them and paying out on their misbehaviors.
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Paul J.
Investor · Los Osos, CA · Member since 2013 · 78 posts · 25 votes
13y
You need to know it well and travel there often. Detroit is such a nuanced city, we are not talking good neighborhood/bad neighborhood, we are talking 1 block with a tight community and well looked after homes, and the next one over with looters and scrappers literally stealing bricks off the fronts of homes. I worked there as a telephoneinstallation and repair technician for 8 years and I wouldnt consider purchasing a home in the city without a lot of driving by, day and night, to see what that particular block is really like. i was once dispatched to a home to fix the telephone and when i got there, there were half a dozen teenagers hanging out in the house that told me 'oh nobody lives here' - the customer had moved and failed to cancel the service call and that quick, the house was broken Iinto and squatted in.

If you really want to find the good deals and make a run in metro detroit, the first step would be to move there and spend 6 months driving around...
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Tom A.
Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
13y
Originally posted by Ali Boone:

The problem with Detroit, aside from it's consistent declining population, is the tenants. I know too many investors who have had so many expenses due to meth labs and non-paying tenants that you would end up actually paying out on that $1300. That's bad. It doesn't go for all areas of Detroit of course, as I'm sure there are plenty of nice areas, but it does go for any area with $1300 houses.

Michigan is extremely tenant-friendly, meaning it can take forever to get rid of bad tenants, all the while you are not collecting rent from them and paying out on their misbehaviors.

Detroit meth labs? No. Other drugs, sure but Detroit isn't a meth lab city or a meth user city. Got to go to the sticks for that.

I've never even heard of a contaminated meth lab house in Detroit. A quick check of the DEA's National Clandistine Laboratory Register shows about 1000 meth houses in Michigan since 2004. It lists just one meth house in the city of Detroit, back in 2008. http://www.justice.gov/dea/clan-lab/clan-lab.shtml

I also don't agree with the description of Michigan as an extremely tenant-friendly state. It's really more down the middle. Some courts and some judges may be more tenant-friendly or more landlord-friendly but getting an eviction isn't hard.

I'm sure there are some horror stories, but this is a good example why investors need to really know where they're investing lest they believe things are better (or in this case, worse) than they really are.
2 Reply
Joe Delia
Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
13y
Detroit is a meth city ? I've heard it all. Michigan is tenant friendly? Ok... Care to put some links together backing these claims up?
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Bill Ham
Commercial Landlord · Macon, GA · Member since 2013 · 79 posts · 33 votes
13y
Keep in mind that real estate appreciation is heavily based on job growth. You have jobs you have appreciation. No jobs, little appreciation.

Safe bet is go where there are jobs.
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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
13y
Is this the same Detroit that the unions bankrupty?

Joe Gore
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Rob K.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Tom and Joe beat me to it. I've never heard of a meth lab in Detroit. Meth is a hillbilly drug. Detroit is full of crack dens and heroin houses, but not meth.

Michigan is not a tenant friendly state. The laws are very straightforward. At the court date, the judge gives the tenants ten days to pay or move. I've never seen it be longer or shorter than that time frame. If that's "tenant friendly", I'd like to hear how it is in "non tenant friendly" states.

These forums have gotten full of gossip and speculation. The whole world knows that Detroit is a ghetto. It seems like it's not common knowledge that the suburbs are nice, clean, and low in crime. For those of you who haven't been to the Detroit area, the suburbs are nice. Probably nicer than where you live. My mom's cousin lives in California in a half million dollar house and can't go outside at night because of gangs. You can buy a 2,000 square foot house in Michigan for under 200k with great schools, low crime, no gangs, the best drinking water on the planet, and four seasons. I can't tell you how many times I've left my car unlocked, my garage door open, or my door wall open all night. No problem.

I guess when you see negative stories about the city in the media, you figure the whole area is like that. It's not the case.
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Stephen Masek
Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
13y
What about Indian Village, Grosse Pointe and the other fancy areas?

A woman who works for one of the car companies told me that she dreads the car show there, as the thugs rip radios and so forth out of the cars on display. I believe her, as she also told me about upcoming features on a new car model which were unknown to the public and had not yet been published in the car magazines or Internet car sites.
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Aaron Yates
Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes
13y
@Stephen Masek , I have lived in Michigan my whole life. I grew up in a town called Clarkston. It's 45 minutes North of Detroit. Car radios get stolen there too. But Clarkston is $$$ now if you were to move their. When I was a kid it was still growing.

Point being, car radios are stolen everywhere. This has nothing to do with whether an area is bad or not. In fact, rich areas get robbed as well but it doesn't make the news like bad areas do.

And as for radios being stolen right at the show... I find it hard to believe especially with all the security they have their. Too many people and LOTS of security. Not to mention that now-a-days it would be very difficult to conceal the radio with the size they are. I have been to many auto shows and never seen or hear of any issues with what you are talking about.
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