Would you invest $50,000 in Detroit ?
Investor · Detroit, MI · Member since 2016 · 61 posts · 86 votes
I know this has has been asked many times with various amounts....
I am curious what Detroit investors would say.. I have a few directions that I am considering...
But what would you successful, seasoned, experienced Detroit investors say ?? Thanks so much!
In Midtown and Downtown in 2010-2014, 12 or so companies in Midtown and Downtown provided a rental incentive of $2000 for a year or up to $20K for downpayment or rehab money that was forgivable with each year for prorated for 7 years, for only a certain section of town. So that lead an initial charge, then Quicken Loans moved their operations from Livonia to Downtown. Then Aident a seatbelt/car seat supplier moved their HQ Downtown from Wisconsin. GM moved about 5000 technology people Downtown, after bringing 14K inhouse from contracting houses/consultants. Blue Cross Consolidated from Detroit, Southfield, Farmington Hills to Downtown. Microsoft moved its Southfield Office with about 300 employees Downtown starting early 2018. 5/3 Bank moved from Southfield to Downtown. Basically a Billionaire, and 3 or 4 companies got tired of hearing people turndown jobs saying "I'm moving to a Chicago, because its better". So they have been buying the old buildings and updating them to state of the art infrastructure, like smart elevators, gigabyte internet, data centers and co-locations. Downtown major players are Quicken Loans, Blue Cross, GM, DTE, Ally they basically have pumped up their campuses/work spaces.
In Midtown, Wayne State decided in the late 90s to start building student housing. There was another round of building in 2005. Then another round in 2013. With that build out WSU Police asked DPD to become the first responders to 911 around 2006. So response times decreased, visibility increased greatly. So Midtown essentially has its own Police Department(Downtown has a private armed security force paid for by Downtown Building Owners). Midtown is being dominated by WSU, Detroit Medical Center, Cardinal Health, Henry Ford Hospital, and the Illitch's(Little Caesars, Red Wings, Tigers, and now Pistons).
In each of these cases providing workers/residents mean spin-off business have appeared(gyms, coffee shops, bars) or established businesses have made major upgrades(some liquor stores don't have bulletproof glass in midtown, or the bowling alley adding a cafe and event space.
All development is subsidized by tax breaks/credits in all cities. There is much of that. A recent law passed allows developments to capture property tax increases for 10 years or so if the price tag is over $30M. Amazon just opened a warehouse in Livonia with millions in giveaways for taxes.
The Illitch's finally built their new hockey arena, then they convinced the Pistons to leave Auburn Hills to downtown, the practice facility and all 500 employees for basketball operations. The stadium has been built similar to the Barclays or Verizon Center with retail and restaurants available even on none-game days because they are street-level.
All these big money players betting on the city, means small timers started grabbing homes built 130 years ago for pennies(I've paid $22/sq and $31/sq for mine) locate in a hot area get the house clean and updated and make your cash back. Also, a sizable number of boomers are selling their McMansions in the suburbs, downsizing to condos, lofts, or renovating the big old mansions. 5 years ago a 6000 sq ft mansion in Indian Village or Boston-Edison was $60-$150K (look at the absurd price now), yes they needed $200-$500K to get it back up to date but people sold their homes to do it with the cash they earned. I know a few older people that did that, they had season tickets to the Red Wings and Tigers, they use to drive down from Troy, Northville, Rochester, etc, but they retired, kids are grown, and they just wander around Downtown/Midtown and go to games everyday.
Whole Foods, located in Midtown Detroit in 2014, so everyone knows what that means in terms of incomes for the area. So now there is a branding of the "7.2" its the area of Downtown and Greater Downtown where the development is taking place. Its not a tax zone, its simply a branding. There is also "Live 6" which is development of 6 Mile neighborhoods in conjunction with U of D, Marygrove College and pretty much all of Detroit's still strong Middle Class neighborhoods of Bagley, Sherwood Forest, Palmer Woods/Park, Green Acres, University District. This is much more of a small player deal but the price of entry is greater, but it tops out much lower than the "7.2" and its heavily geared towards families with kids. Lots of private schools are in that part of town, but the pricing is less than the suburbs. The school systems in South Oakland County are not much better than Detroit, when you consider tuition at several Catholic Schools in NW Detroit are only 7-12k/year. Younger families such as mine you have to pay for early childhood education in Detroit, or in Bloomfield Hills its the same.
Several national daycare providers opened up in the office buildings, the waiting list are 6 months. My son's daycare is in GM HQ. Several of my neighbors same thing. Rainbow is completing a 3 story facility at the end of my street ready for opening early 2018. its $275/week/kid, and they do not allow State Vouchers(meaning no families getting childcare assistance). All the daycares charge that in the "7.2" and they are turning people away. While we waited for a slot I drove my son to the same company daycare in the suburbs $50/week cheaper and they had multiple slots open at any given time, Prob 1/3 of the families at this place were waiting on a Downtown daycare slot to become available.
I would suggest to anyone to target a Detroit property in near Downtown/Midtown. I challenge what major American City can you purchase a SFH, or a MFH for under $200K within 2 Miles of Downtown/CBD. As a bonus that is less than 2 miles from the riverfront, oh and isn't subject to earthquakes, hurricanes, random fires, and has a access to the largest freshwater supply system in the WORLD.
@Rebekah Keller, I would not personally invest $50,000 in Detroit. I have lived in both Flint and the Detroit metro area and, as the saying goes "they're a good place to be from and not a good place to be."
The problem is that Detroit's literacy rate is abysmal. I don't mean computer literacy, I mean words on printed page literacy. If you are only able to read at a 3rd grade level your chances for job prospects and therefore economic prosperity generally are abysmal.
There are entire blocks where no one has a job. No one knows anyone who has had a job in their lifetime and no one's parents (or possibly even grandparents) ever had a job. I'm not making this up. So, this limits the most basic of social capital to near zero. If you don't know how to dress for an interview and how to act in a professional setting, you can't get a job.
Those with work histories are predominantly ex-UAW folks. Now, there is nothing wrong with making an honest living by manufacturing cars. The problem is Union-Think. What is Union-Think? Simply put it's the notion that if I assert myself I'm "taking jobs away from someone else." That mentality is baked into the culture in both Flint and Detroit in so many places it's not funny.
So, if your population can't read, has no idea what professional behavior looks like, and has a cultural aversion to working harder than the other guy (lest you take his job) you aren't left with much. That's not even factoring in the large numbers of persons with violent felonies and drug histories that would be "challenged" in finding employment in any situation.
Now there are these things called renaissance zones, or at least there were when I lived in Metro Detroit. What are those? Those are areas where business activity is tax free. Those areas are booming in a lot of ways. The problem is it's all artificial. When the tax burden returns to those areas you'll see a slump in economic growth and available employment. There is no real way to predict what that transition will look like, it could be mild or it could be very bad.
All of that said, if you can find a cheap apartment complex in an area that isn't dominated by high crime (good luck) and don't mind dealing with the drama that is low income tenants you might not do too bad. The problem is, that's the exception, not the rule.
Just for illustration purposes. Go spend some time on 8 Mile on the Southfield-Detroit line. You'll see relative prosperity in Southfield. When you hit 8 Mile you'll see everything turn to crud.
You're much better putting your money into a city outside of Detroit, like Southfield, Ann Arbor, or maybe even Troy.
I meant to say "WHERE would you invest $50,000 in Detroit?"
@Rebekah Keller, I would not personally invest $50,000 in Detroit. I have lived in both Flint and the Detroit metro area and, as the saying goes "they're a good place to be from and not a good place to be."
The problem is that Detroit's literacy rate is abysmal. I don't mean computer literacy, I mean words on printed page literacy. If you are only able to read at a 3rd grade level your chances for job prospects and therefore economic prosperity generally are abysmal.
There are entire blocks where no one has a job. No one knows anyone who has had a job in their lifetime and no one's parents (or possibly even grandparents) ever had a job. I'm not making this up. So, this limits the most basic of social capital to near zero. If you don't know how to dress for an interview and how to act in a professional setting, you can't get a job.
Those with work histories are predominantly ex-UAW folks. Now, there is nothing wrong with making an honest living by manufacturing cars. The problem is Union-Think. What is Union-Think? Simply put it's the notion that if I assert myself I'm "taking jobs away from someone else." That mentality is baked into the culture in both Flint and Detroit in so many places it's not funny.
So, if your population can't read, has no idea what professional behavior looks like, and has a cultural aversion to working harder than the other guy (lest you take his job) you aren't left with much. That's not even factoring in the large numbers of persons with violent felonies and drug histories that would be "challenged" in finding employment in any situation.
Now there are these things called renaissance zones, or at least there were when I lived in Metro Detroit. What are those? Those are areas where business activity is tax free. Those areas are booming in a lot of ways. The problem is it's all artificial. When the tax burden returns to those areas you'll see a slump in economic growth and available employment. There is no real way to predict what that transition will look like, it could be mild or it could be very bad.
All of that said, if you can find a cheap apartment complex in an area that isn't dominated by high crime (good luck) and don't mind dealing with the drama that is low income tenants you might not do too bad. The problem is, that's the exception, not the rule.
Just for illustration purposes. Go spend some time on 8 Mile on the Southfield-Detroit line. You'll see relative prosperity in Southfield. When you hit 8 Mile you'll see everything turn to crud.
You're much better putting your money into a city outside of Detroit, like Southfield, Ann Arbor, or maybe even Troy.
I'm seriously questioning when was the last time(48 months) you invested your own money in Michigan. Southfield, Troy, AA?
So please tell me how do you make money on a 3 Bedroom House in Troy, MI with 5K a year property taxes that cost 275K-350K that rents for maybe $2200/mo-2700/mo?
Southfield??? you have to be kidding me, have you been to Southfield below 696 lately?
Ann Arbor??? Again how do you rent or make money on a $200K+ house?, a SFH at that.
I smell a whole lot of BS. Unless your talking about Troy, or AA for new construction yes you can make money, but it cost way more than $50K because a lot in Troy runs $90K
@Christian Hutchinson, look I haven't lived in Detroit in years. (I think I made that clear in my post, but maybe not. Those examples were taken from what I remember during the crash. You may be right to call them out as dated (except perhaps Ann Arbor... I still hear hear of deals there along with Lake Orion on occasion) but it wasn't "BS" in that I wasn't attempting to be deceptive of misleading.
My point was that Detroit, like Flint, has systemic problems that are beyond all hope and no amount of external intervention can save it from itself. I don't intend to put my money there.
If you think I'm wrong, I'd love to hear why and what areas you think are actually worth investing in. We don't have to agree with each other to profit from an honest debate on the matter.
Ann Arbor is a hard market to get into with investment properties. Home prices are high but every now and then you may be able to find a deal that makes financial sense. Ypsilanti has some areas which make for a good investment though.
@Thomas Patterson good to know. It's a university town, so that isn't a surprise.
@Rebekah Keller - it depends on your investing style. You could focus on cash flowing properties and pay straight cash for a property and collect the cash flow. You could invest in section 8 or other government assistance programs that help lower income renters. The pro is that you get a check from the govt, the cons is what if they cut out the program or the tenant looses their assistance.
However if you're an investor that likes to purchase with good debt and pull equity out, then I would stay away from paying all cash for cash flowing homes. It'll be hard to pull equity out when a property is only worth $30K and a lenders minimum is $75K. Focus on areas where there's more stability, higher values and up and coming areas where values are growing fast.
If I had $50K to invest in Detroit then I would focus on the hotter areas and get financing (seller or bank financing). Hot areas are downtown, Midtown, New Center, Grandmont Rosedale just to name a few. I really like the University District. There's a lot of potential there - Please read this: https://detroit.curbed.com/2017/4/5/15191290/fitzg...
Also just google "Detroit revitalization projects" and read the articles.
There's a lot of potential in Detroit, but that's the tricky thing. Some investors invest strictly on the current numbers and sold comps while others are so hopped up on the comeback of Detroit that they are driving the prices up based on future values that may or may never come.
@Christian Hutchinson I liked your story about missing out by investing in a suburb(Madison Heights I think) instead of Woodward Ave in the heart of Detroit.
Please Tell it again for all of the people that are still reading 10 year old newspapers in the barbershop.
A lot of these houses in this neighborhood were selling for $25,000 and less when I moved to Detroit! I bought mine for $16,000 now worth $500,000.
I told people I was investing in Detroit because the appreciation was better than anywhere else but the cash flow was gravy.
@Jeff G. There is money to be made in Detroit right now. I have a deal I'm working right now. Its a big older home in the Woodward Corridor IN Detroit. It will be $250K to get it rental ready, I'll cut the property into 4 units, so I have 4 units between 1500-2000 sq ft. I'll pull between $4100-5300/mo out of the property without effort, with about a $800/mo overhead, lets call it a $1000/mo. So far I feel Detroit is only profitable if you play 30K home deal in the established neighborhoods and hold on tight for the ride, or find a multi-family, or find a bigger home and cut it into a MFH.
Basically anything from Davidson going south, between Rosa Parks and Chene can be profitable if the numbers can work, and the depending the rehab needed on the property. Full disclosure there are complete throw-away blocks in that area, but you can find a deal if you look pretty easily.
Midtown, Virginia Park, North End, West Village, East English Village, Woodbridge, MAYBE Islandview, Corktown, Bagley, are all very profitable and the values are increasing like crazy every month. Everywhere else its Section 8, other Govt Alphabet Programs, or they are high end homes that are not profitable for renting reasons.
In terms of outside Detroit its Roseville, Warren south of 12 Mile, SCS is some parts, Madison Heights, Hazel Park north of 9 Mile, Eastpointe, Oak Park, Redford. In all those areas your typical renter will be a household that makes $30-$65K a year with 1-2 earners with 0-2 kids.
@Richard Dunlop its hurts me talking about losing $300K in such a public forum, but it happened. I could have invested in the Townhomes for $45-$65K in 2009, those homes are selling OVER $300K at this point, and command over $2000/mo in rent. It doesn't end there in late 2014 or early 2015, someone called my about a 8000 sq foot home on Van Dyke right off Jefferson. What is now West Village. They wanted $190K for the house, they basically ran out of money, and it needed another $20K-$60K to finish. Well it would have been nine - one bedroom units in what is now being called West Village. Let me first say I would have had to empty my pockets, my parents, and my inlaws to do the deal, plus raise the the $50K. Which myself and MIL were intrigued by the location and property, but we had another project, and just didn't see where the area was going. She was open to it, but myself and my wife did the numbers and saw 1 Bedrooms were going for $400-$575/mo. We knew obviously the numbers look good, but we were terrified of working with that clientele, plus doubted if we could even get the units rented...Yea we missed on that too, 1 beds are going for $700-900, and those same buildings are going for well over $400K now, and need WAY more work then the place this guy was literally begging us to take.
Does that mean its easy in Detroit? No, but I can not stress how important it is to take a couple hours and just walk or ride a bike through the neighborhood your investing in. The street level feel, will tell you whats going on beneath these numbers. You see if the people in the neighborhood are maintaining the homes, or are they just patch work units that are someone else's ATM. I bought a home at auction for $600 last year in Islandview I ride my bike every few weeks through the neighborhood. 3 blocks over from my house, it feels ready for investment on my street, its not ready. The people on street would too destructive to anyone attempting to fix a home, while the bums on the street 3 blocks over would watch your tools for you while you ran to the store if you bought them a couple of Lucys and a 22, and run off any walking up on your house, and probably call you to let you know.
@Christian Hutchinson, okay, it sounds like some areas have changed a bit.
I have two questions: One, what's driving the growth? Second, is the growth in any way artificial through subsidy or tax breaks?
In Midtown and Downtown in 2010-2014, 12 or so companies in Midtown and Downtown provided a rental incentive of $2000 for a year or up to $20K for downpayment or rehab money that was forgivable with each year for prorated for 7 years, for only a certain section of town. So that lead an initial charge, then Quicken Loans moved their operations from Livonia to Downtown. Then Aident a seatbelt/car seat supplier moved their HQ Downtown from Wisconsin. GM moved about 5000 technology people Downtown, after bringing 14K inhouse from contracting houses/consultants. Blue Cross Consolidated from Detroit, Southfield, Farmington Hills to Downtown. Microsoft moved its Southfield Office with about 300 employees Downtown starting early 2018. 5/3 Bank moved from Southfield to Downtown. Basically a Billionaire, and 3 or 4 companies got tired of hearing people turndown jobs saying "I'm moving to a Chicago, because its better". So they have been buying the old buildings and updating them to state of the art infrastructure, like smart elevators, gigabyte internet, data centers and co-locations. Downtown major players are Quicken Loans, Blue Cross, GM, DTE, Ally they basically have pumped up their campuses/work spaces.
In Midtown, Wayne State decided in the late 90s to start building student housing. There was another round of building in 2005. Then another round in 2013. With that build out WSU Police asked DPD to become the first responders to 911 around 2006. So response times decreased, visibility increased greatly. So Midtown essentially has its own Police Department(Downtown has a private armed security force paid for by Downtown Building Owners). Midtown is being dominated by WSU, Detroit Medical Center, Cardinal Health, Henry Ford Hospital, and the Illitch's(Little Caesars, Red Wings, Tigers, and now Pistons).
In each of these cases providing workers/residents mean spin-off business have appeared(gyms, coffee shops, bars) or established businesses have made major upgrades(some liquor stores don't have bulletproof glass in midtown, or the bowling alley adding a cafe and event space.
All development is subsidized by tax breaks/credits in all cities. There is much of that. A recent law passed allows developments to capture property tax increases for 10 years or so if the price tag is over $30M. Amazon just opened a warehouse in Livonia with millions in giveaways for taxes.
The Illitch's finally built their new hockey arena, then they convinced the Pistons to leave Auburn Hills to downtown, the practice facility and all 500 employees for basketball operations. The stadium has been built similar to the Barclays or Verizon Center with retail and restaurants available even on none-game days because they are street-level.
All these big money players betting on the city, means small timers started grabbing homes built 130 years ago for pennies(I've paid $22/sq and $31/sq for mine) locate in a hot area get the house clean and updated and make your cash back. Also, a sizable number of boomers are selling their McMansions in the suburbs, downsizing to condos, lofts, or renovating the big old mansions. 5 years ago a 6000 sq ft mansion in Indian Village or Boston-Edison was $60-$150K (look at the absurd price now), yes they needed $200-$500K to get it back up to date but people sold their homes to do it with the cash they earned. I know a few older people that did that, they had season tickets to the Red Wings and Tigers, they use to drive down from Troy, Northville, Rochester, etc, but they retired, kids are grown, and they just wander around Downtown/Midtown and go to games everyday.
Whole Foods, located in Midtown Detroit in 2014, so everyone knows what that means in terms of incomes for the area. So now there is a branding of the "7.2" its the area of Downtown and Greater Downtown where the development is taking place. Its not a tax zone, its simply a branding. There is also "Live 6" which is development of 6 Mile neighborhoods in conjunction with U of D, Marygrove College and pretty much all of Detroit's still strong Middle Class neighborhoods of Bagley, Sherwood Forest, Palmer Woods/Park, Green Acres, University District. This is much more of a small player deal but the price of entry is greater, but it tops out much lower than the "7.2" and its heavily geared towards families with kids. Lots of private schools are in that part of town, but the pricing is less than the suburbs. The school systems in South Oakland County are not much better than Detroit, when you consider tuition at several Catholic Schools in NW Detroit are only 7-12k/year. Younger families such as mine you have to pay for early childhood education in Detroit, or in Bloomfield Hills its the same.
Several national daycare providers opened up in the office buildings, the waiting list are 6 months. My son's daycare is in GM HQ. Several of my neighbors same thing. Rainbow is completing a 3 story facility at the end of my street ready for opening early 2018. its $275/week/kid, and they do not allow State Vouchers(meaning no families getting childcare assistance). All the daycares charge that in the "7.2" and they are turning people away. While we waited for a slot I drove my son to the same company daycare in the suburbs $50/week cheaper and they had multiple slots open at any given time, Prob 1/3 of the families at this place were waiting on a Downtown daycare slot to become available.
I would suggest to anyone to target a Detroit property in near Downtown/Midtown. I challenge what major American City can you purchase a SFH, or a MFH for under $200K within 2 Miles of Downtown/CBD. As a bonus that is less than 2 miles from the riverfront, oh and isn't subject to earthquakes, hurricanes, random fires, and has a access to the largest freshwater supply system in the WORLD.
Detroit has houses worse than 95% of the cities in the US. Both inside the the city limits.
Lots of opportunities in Detroit metro but like many have said you have to do due diligence and homework. I also think trusted boots on the ground is needed. We are overseas currently but just closing on our second property in Redford.
I also appreciated the posts by Emilio Basa and Christian Hutchinson to give some authentic advice. Yes biased but it gives some balance to all the haters including Josh and the podcast.
How is it biased that if you can score a property in Downtown or Midtown you will rent to roommates with a household income of 85k to 125k who are accountants or medical residents and the property costs less than 150k for a triplex that a unit rents for $1500, versus renting out a 4 bedroom home in Sterling Heights to a Husband and Wife with two kids that make 90K where the husband works for a roofing company the wife is a bartender, and the property cost 120k rents for 1600/mo.
Those are real numbers out the portfolio. Im not advocating buying a place on State Fair and Dequindre or Joy rd and Evergreen. What people do in Detroit it they buy a house for 5000 or they contact a turnkey operator that sells them a house for 40 to 70k with shotty work and guaranteed returns aka Section 8 then wonder why the house in in a warzone, and tenants destroy their house. Like my dad taught me if it sounds quick and easy its probably not true. I had someone offer me 30 houses for 250k in Flint last year. Are there some good ones in there probably but most likely its someone trying ro unload their trash on someone else.
Hooray! I am so jazzed that people are taking Detroit seriously!
I live and invest in detroit its all about location, location, location. Alot of people talk down on Detroit like its the worst city in the world news flash its not. It has crime just like every city. As an investor do your research find areas with great venue minimum crime and nice neighborhoods. I live, invest in East English village ( Detroit), Harper Woods which is classified as Detroit. If you want to speak on area specifics message me and I have a few prime area, dont believe the woo ha about Detroit being the worst place to invest. Amazon is building a new factory in michigan, Detroit has the new little caesars area and tech is booming downtown.
@Christian Hutchinson has elaborated quite well on all of the development going on in Detroit recently. There is so much opportunity to invest in the city if you know where to look. I am currently under contract to purchase a beautiful 4 bdrm in North End for $47k that needs about $20k in rehab and will rent for $1200-$1300/mo easily.
There is a big cultural shift from Millennials to move to cities and it has spurred businesses to invest heavily into Detroit, again. The last data that I saw was somewhere in the range of $16.5 billion in redevelopment or new construction going on in the "7.2" section of Detroit.
For any local investors, Bedrock and the City of Detroit have partnered to put on an exhibition of recent changes that have and will be happening in the city in the near future. It is going to be open to the public from Sept 14-30, i would highly recommend anyone that is interested to come down and check it out.
I am not for or against Detroit. I hear all the information everyone is giving for, but what is the driver that will make it grow? Is industry moving there, or is it just the old automotive unions still controlling the place? Why would anyone actually want to live in Detroit. The unemployment is high, weather is terrible, shows up in almost every top 50 worst cities to live in, and Flint and nearby Indiana cities are some of the fastest shrinking.
So I am just curious where all the "Go Detroit!" is coming from.
http://247wallst.com/economy/2017/03/04/in-detroit...
I just visited and had a great time. Im from 60 miles north east of Detroit. Detroit has a long ways to go still but the fact is, D troit is back! We used to just stay close to the ball parks but now we venture out and that says a lot about the temp. of the city. Locals can feel it in the air too and the positivity is breeding friendly good experiences. Millenials want in and i'd look hard at properties there if it were my target market. People dont know it yet, but lots will have hit home runs! Cant wait to visit the new Little Cesars arena. Good luck. -Brad
I absolutely love all this talk about Detroit! I've been visiting and doing some reading and talking to everyone! Detroit, like many other cities, has a multifaceted story. I see that there is a conflict between Old Detroit and New Detroit - some people might use the G-word (gentrification). As investors, rehabbers, and developers, I feel its of utmost importance to preserve the culture and history of those who have never turned their back on the city - the old Detroiters, and make the new prosperity and opportunity available to them as well. Do no harm!
I can recommend these fascinating books for those who want to dig deeper (from their armchairs):
I'm glad to hear nice stories ... what do you do if your tenants don't pay the rent in Dedroit, and you have to let them live free for months in your property ... You also have to extra saving for lawyer, court, utilities etc.
@Rebekah Keller I admit, I didn't read all the comments. Just wanted to mention that I have met and talked to successful investors in the Detroit area. So yes, I would with the correct guidance if I lived in that area.
We do a lot of clean outs in Detroit for a number of successful investors. If you find yourself buying something that needs some trash out we can help. Burly Guys Junk Removal.