Investing in Detroit ?

24 Replies

Hello everyone,

I hope this question finds you well.

After visiting a few U.S. real estate investing websites for French nationals, I am receiving offers for full packages investments in Detroit.  

I would like the opinions of this fine crowd on BP about distant investment in Detroit... still a bit risky for a distant investment ? good opportunity ? 

I am sharing a link I received today

https://www.dropbox.com/sh/v17s8ca1xx07x0i/AADfA4a...

Thanks in advance for your replies,

Best

Christophe

Christopher, 

RUN! 

These packages are created to take advantage of foreign buyers who have no clue if it's a good deal or not. 

No way the Newport house is worth $49k and that's the lowest crime area on the list you provided. Most of the homes on this street can be purchased in the $10k range and look decent with another 10k work. It's a nice rehab home, but severely overpriced.

The others... well... just avoid the area. Good chance they'll be looted once they sit vacant for a while. 

If Detroit is a target area for your investments, I would suggest you wait for better deals or partner with honest investors.  

@Account Closed , thanks for the honest reply, I thought so for those packages ... when looking at Zillow the houses seem a lot lower ... But Detroit was not on my radar, at least not with such an ROI ... similar to FL but with a lot more risks.... I was just curious on how legit this one was...

No problem. Glad to help. There are plenty of reputable companies and investments in Detroit, but if you search the forums, you'll probably only hear about the negative ones and tons of negative stories. I invest there, but I have local people who have lived there for 30+ years who know the market well.

[email protected] Castle Yes there are some reputable companies here but you always have to do your due dilligence. What areas do you invest in here in Detroit? 

@Christophe Noualhat I would suggest visiting the area yourself that way you can gauge what neighborhoods you're comfortable with. There are good affordable suburban neighborhoods right outside of Detroit as well. Next you need to build a team to be your eyes and ears in the area. 

If you think buying rougher area assets is hard being out of state just wait until you are out of the country.

What happens when problems come up and you are not getting a response?? Spend thousands for flight and hotels to travel there. Guess what your expected cash flow just went down the toilet for a few years.

I think out of the country investors should not be buying these low quality properties and areas. It's cheap but it's for a reason. The reality is the great properties in good areas get bought up by the local investors because they can act often in a day. The foreign investors have to perform a ton of due diligence from afar and go through multiple hurdles to buy. Landing financing is really tough as well if they are not paying all cash. If it's a foreign investor they would have to put down considerable non-refundable EM to tie it up. I have heard many instances where they get here and do not like something about an area etc. or find out a tax consequence they didn't know of and the deal falls apart.

Most investors like the warm belt states for investment and growth. Tens of millions of retirees are flocking to warmer climates. The cold belt states are dying off. Some growth there in spots but they can't touch the upside to the warm climate states long term.

Just my opinion and everyone has one.......... : ) Detroit would not be on my radar as a top spot.     

Thanks all, thanks especially @Joel Owens for the very good analysis of the issues related to investing from afar ... 

Joel and all, which areas/states would you advise and do you have any recommendation for companies that could help me invest in the US as a foreign national ? 

Best

C

Christophe,

You need to first start with how much money you have to invest in the United States.

If you have large quantities of money 500k, 1million etc. then more doors open up for you. 

The type of assets you buy will be related to how much money you have.

If you are looking to place 50k etc. then it is more challenging. You are more heavily dependent on a local relationship for the asset to work. You need to define your annual cash on cash expectations off of your money and your time horizon of how long you want to hold the property before exiting. Deciding if you want to keep the money here and 1031 down the road or pull It out and move the currency back to your country makes a difference.

Hi Joel,

I wish I had that amount, unfortunately it's not the case :) (yet...) , so let's go with the second option (my budget is a bit higher but not that much), I expect a net cash flow around 10% (after the 50% rule) and I am more of a buy-and-hold person which I believe makes more sense when investing from abroad... unless the market picks up and I'll maybe sell it in 5-10 years to re-invest....

1031 I have heard the term but I am not familiar with it... I am not considering pulling out and bringing back the money to my country, I do not know what life is made of and which country I will retire in... maybe in Florida to follow a trend ;)

This has been a great discussion.  We are in the Atlanta market and we have sold over 400 properties to foreign buyers, domestic investors and US based hedge funds.  We have seen it all!  We've had a great deal of success helping our clients but we've  had some issues as well.  The good times and successful deals are easy to talk discuss.  I want discuss the challenges we encountered to help the group.

Contractors....were do I start?   We used to provide our own scopes of work to the contractors.  This was a HUGE mistake on some many fronts. This process didn't provide the appearance of objective accountability.  After a few challenging situations with clients, we quickly changed our process.  We went to independent licensed inspectors for complete home inspections reports.  This report became our scope of work and a critical part of our investor program.  It provided a level of comfort for all parties.  

Property management was another area of focus for our investors.  This selection is extremely important because they management your asset!  We are local operators and we've gone through a few property management companies.  Many people "jump" into the property management space seek an opportunity after the Great Financial Crisis of 2008.  Thank goodness this space has matured and there are good companies left standing.

I could go on and on about our lessons learned in this space.  Bottomline:  If you select the right team, owning US real estate can be a profitable venture.  

Originally posted by @Christophe Noualhat :

Hello everyone,

I hope this question finds you well.

After visiting a few U.S. real estate investing websites for French nationals, I am receiving offers for full packages investments in Detroit.  

I would like the opinions of this fine crowd on BP about distant investment in Detroit... still a bit risky for a distant investment ? good opportunity ? 

I am sharing a link I received today

https://www.dropbox.com/sh/v17s8ca1xx07x0i/AADfA4a...

Thanks in advance for your replies,

Best

Christophe

Hi Christophe,

I have always been an optimist and see great potential in Michigan and the outskirts of Detroit.

At the end of the day it comes down to the people you are looking at dealing with. Make sure they have your best interest at heart and are genuinely interested in a long term business relationship and not just selling you a few properties for a quick profit.

Thanks and have a great day.

@Engelo Rumora

Would be great to see you make the move into Michigan with all the rif raf running around in that area it would be good to have someone reliable. 

Originally posted by @Charles Worth :

@Engelo Rumora

Would be great to see you make the move into Michigan with all the rif raf running around in that area it would be good to have someone reliable. 

 I am reliable.  I just gave a great tour to 2 New York guys.  They will be back and are ready to get started investing in the Metro Detroit area.

Come on in and I'll give you a tour also.  The good the bad and the worse is what I will show you.  The burbs to the north is a great place to invest. 

Come on in.  Let me know.  I can refer you to the investors I just met.  I enjoy showing people the great area's around and in Detroit 

Investing in Detroit.... 

IS A BAD IDEA!

@Scott K.

 that was not a dig at you. As I have seen you talk about more than a few times here there are a ton of people selling pure garbage to the uninformed. so my comment had more to do with balancing the scales than that there were no other good ones. 

There is a very active real estate market in Detroit and the Detroit Suburbs. The markets in different Cities and neighborhoods are quite different here. There are distressed neighborhoods and wealthy ones. Oakland County, which borders Detroit directly to the North has the highest median income in the State but the Cities in that County are vastly different. Some are great areas for operating rental property. Some have an active new construction market. Some should be avoided unless you have special skills and a good local team. Please do some research on the area and on your tour guide before you come for a visit or invest. A free tour can be a poor use of time just as a free house can be a poor investment.

Originally posted by @Charles Worth :

@Engelo Rumora

Would be great to see you make the move into Michigan with all the rif raf running around in that area it would be good to have someone reliable. 

Thanks Charlie,

We love that state but need to get situated in Ohio first haha.

Lots to do here and we haven't even scratched the surface.

I can always just see through all of the rubble and dream about the potential that city has.

Maybe I am just spending too many hours in the office or something and getting disillusional haha

Thanks mate and have a great weekend :)

Originally posted by @Christophe Noualhat :

Michigan CashFlow ? :)

One day Christophe :)

The branding is in place, the trademarks are in place.

I am working on the systems and just need to compose a franchise agreement.

Also, need a bit more of a proven track record with Ohio Cashflow

1-2 more years I would say hehe

Thanks

Originally posted by @Scott K. :
Originally posted by @Charles Worth:

@Engelo Rumora

Would be great to see you make the move into Michigan with all the rif raf running around in that area it would be good to have someone reliable. 

 I am reliable.  I just gave a great tour to 2 New York guys.  They will be back and are ready to get started investing in the Metro Detroit area.

Come on in and I'll give you a tour also.  The good the bad and the worse is what I will show you.  The burbs to the north is a great place to invest. 

Come on in.  Let me know.  I can refer you to the investors I just met.  I enjoy showing people the great area's around and in Detroit 

Hey Scott,

I am 100% in.

Busy days over the next 4-6 weeks but please shoot me an email at [email protected] and we can book it in advance.

I'll bring my glock with me just in case along with my awesome 3 buddies called Chico, Chico and Chico hahahaha

Charlie,

Get your self here and you can also come and check out Toledo.

Thanks guys

@Engelo Rumora

Sadly the next two months are the busiest  for me. I keep your type of hours. 

Detroit proper is a tough spot.  For the amount of $$ you're about to spend you really should plan a trip out there and look at that entire package.  Or better yet, pick another town, split the package in half and diversify.

Having personally done a number of properties in Detroit and other surrounding suburbs in Wayne County, I would say be super careful before you spend your money on a package without doing a bunch of research.  Spend the money to make the trip out there and look at the properties.  Hook up with a local (somebody other than the seller or the seller's agent) and get the real skinny on those streets.  Also, go watch Denis Leary's documentary "Burn".  Don't get scared off, but just know what you're getting into.

I've owned some pretty good properties on pretty good streets in wayne county and have made money. On the other hand, I've owned some "really great" properties on "really great" streets and I lost my ***.

There are enough great MI locals on BP - just find one and have them give you the real story.

As someone already mentioned, you need to have a special skill for Detroit. The ROI is HUGE if you know where and what to buy, who to put in and how to collect. It's a different ballgame. My mindset is that it is low risk when the majority thinks otherwise but I have many years of experience in Detroit. I would NOT look at any investment packages. Be careful...

Originally posted by @Charles Worth :

@Engelo Rumora

Sadly the next two months are the busiest  for me. I keep your type of hours. 

Sounds good mate,

We need to bloody slow down soon.

I think I have another 2-3 years of this pace in me haha

Need to do more for less ayyy haha

Thanks mate

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