Detroit homes are DIRT CHEAP people are literally giving them away. Why aren't investors owning whole neighborhoods are this rate??
So now the even more naive question... What's the worst that can happen if I take one of the $50 houses??
The worst that can happen is the taxes.
Houses are cheap in Detroit because it has lost about 60% of its population from its peak in the 1950's. The supply of houses greatly exceeds the demand. Further, the city has very limited funds. So it has a very hard time providing basic city services in many areas.
The worst that could happen? You can't find any tenants. The place decays. The city dozes it and sends you a bill for the work along with the tax bills. And many of those really cheap places come with years of back taxes being owed.
Don't get me wrong. Detroit is trying to turn itself around. And it seems to be having some success. There may be investment opportunities in some areas. But don't look at those dirt cheap houses with truly understanding the location where that house is.
Jon Holdman, Flying Phoenix LLC
$50 house comes with...
- $1000s in rehab (if not 10s of $1000s)
- $1000+/yr insurance
- $1000+/yr property taxes
Add in little things like crime rates, bad schools, copper thieves and landlord unfriendly regulations, and you're playing with fire.
Not saying it can't be done. But there are a myriad of reasons they've been trying to give these homes away for last 5+ years.
So I once thought that too. You probably have to put a good amount of money to bring it up to liveable condition, maybe $30k or more. Let's say you get tenants but the tenants that come and go continually trash the place and you have to replace the carpet, paint, appliances, etc. If you are going to buy, I would suggest that you live in the area and can keep good tabs on the property and have a personality that can handle the drama. Even if you get a good property manager, most likely they will move on to higher priced properties with less drama. From my experience, you can lose a lot more than your initial investment.
People give away boats too, perfectly nice boats, because it costs a whole lotta money to maintain them even when they sit empty all winter or don't get used in the summer. Boats don't appreciate, and some houses in some areas don't either. They just require continuous maintenance. Getting a cheap boat might seem like a great idea at the time, just like a $50 house. Ask me how I know ;)
My buddy has one house in Detroit. Last tenants spilled 5 gallon of paint on all the hardwood, stile the copper and stole the furnace.
I don't know why people buy in Detroit proper when houses in the same price range can be found in the suburbs. There are some areas that are ok to invest in, or so I have heard..
Al Neal has it right. Best thing to do is to find someone on the ground that can inspect the house. There is an auction coming up, best thing to do is make sure the house is occupied. Even if they are squatters you have a good chance that there is copper in the walls. New Home Depot kitchens and sanding and staining the hardwood floors can go a long way. There has been a lot of improvements in Detroit, if you find a block that has a lot of rehabbed houses you have a good chance to succeed. Good luck
There has been progress in Detroit, but certain areas can be troublesome. There can be a lot of time and effort put into these cheap homes and some are additionally not in stable neighborhoods. A $50 property does sound a little too questionable and many additional expenses will be needed as mentioned above. To those looking to buy in the city, I would say working with the right team or really knowing the area and having experience are crucial factors.
Try the new Detroit Land Bank auction above. 2 houses per day with conditions. Look the prices and remember that includes 10s of thousands in addition to fix. These are houses in ok-ish areas. Downtown and midtown are now seeing rents over $1/sqft, even $1.50, which is a breakthrough for rentals here.
In areas of blight, houses are worth negative money. The city can't afford to bulldoze them fast enough.
Detroit metro is an area with around 6 million, and includes some of the richest cities per capita in America. There are lots of smart investors here, trust me. Anyone who thinks they can get a great deal from a distance without a local presence and knowledge is hallucinating, IMHO.
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