Detroit Bankrupt
Los Angeles, CA · Member since 2013 · 44 posts · 15 votes
My dad just sent me this link.
http://theextinctionprotocol.wordpress.com/2013/07/18/motor-city-goes-bust-largest-ever-municipal-bankruptcy-in-u-s-history/
What do you all think about the REI market in Detroit after hearing about this?
For starters, the $500. Then being on the hook for taxes and other liens.
Here's the elephant that's stomping on Detroit: The city once has 1.8 million residents. It now has 700,000. That means it has enough housing units to hold 1,800,000 but need only enough for 700,000. That means that many of the housing units in Detroit are completely unnecessary. The right answer is for these to be razed. Not just individual houses or buildings (there are MANY totally abandoned and totally useless auto factory buildings right in Detroit) but entire neighborhoods. People need to be concentrated toward the core of Detroit so large swaths of land can be abandoned. Not just houses, but streets, electric lines, water and sewers - everything. Otherwise, the city is stuck providing services to an area three times larger than is needed. That's a burden that must somehow be shed.
Donald Hendricks I can appreciate your sentiment. And yes Detroit has sold vacant lots to owner occupied houses next door, why not? It gets the property paying taxes and maintained by the most likely buyer.
I would disagree with you that the people who live in Detroit are trash. Maybe you will want to rephrase in the future?
I don't see myself as a do-gooder, however I do want to see Detroit succeed. It has been my experience that opportunities lie in market unrest. My challenge is what and where is the best, risk adverse play in the city. I have yet to pull the trigger.
I would disagree with you that the people who live in Detroit are trash. Maybe you will want to rephrase in the future?
I don't see myself as a do-gooder, however I do want to see Detroit succeed. It has been my experience that opportunities lie in market unrest. My challenge is what and where is the best, risk adverse play in the city. I have yet to pull the trigger.
Perhaps you could re-read what I wrote, and see that nowhere did I write that everyone in Detroit is trash.
The people that are the root of the crime problem in Detroit, that is another issue. They are trash indeed. Flushing them out into other areas only screws up someone else's neighborhood.
Donald Hendricks thank you for readdressing, and I did miss your point. The criminal element needs to be dealt with, perhaps more in Detroit than in other cities.
I am extremely sensitive to your point of flushing criminals from one city to neighboring cities. I own property in neighboring cities of Detroit and I do not want the criminal element spreading anymore than the next investor.
Part of the Detroit criminal element thrives because they can commit crime faster than the police react. Reducing response times for police should address that issue, which the new chief and the EM have made a priority.
I continue to believe that Detroit will emerge from this process as a better, self-sustaining place.
I continue to believe that Detroit will emerge from this process as a better, self-sustaining place.
That's absolutely true. As police response times improve and the city continues to knock over abandoned buildings, crime will be limited. With jobs, crime will reduce.
Business coming back like Meijer / petco development @ 8mile/woodward, quicken obviously and all the companies with gilbert, arenas being built, whole foods, on and on are bringing jobs back. I just saw some huge development proposed for the old plant and on the river front.
http://www.deadlinedetroit.com/articles/5756/meijer_superstore_finally_opens_its_doors_in_detroit
http://www.deadlinedetroit.com/articles/5747/hockey_arena_progress_state_oks_bonds_for_illitch_plan
Big money coupled with grant money is pouring into the city, as a result, "bullseye effect" is taking place. Young professionals are leading the charge. I just went to buddys pizza on conant on friday with a group of 25 young professionals, 3 years ago this would of never happened.
I'll bet w/in a year gilbert, almost single handily, will have connected greektown to downtown w/o any shady blocks in between.
Things are changing, regardless of detroit's mismanagement by its elected leaders.
Yet, only in detroit will you find something like this:
http://www.deadlinedetroit.com/articles/5768/quotations_from_mayoral_write-in_candidate_mike_dugeon_s_facebook_page
Joe Delia, Do you currently invest in the Detroit market?
Only thing I have going on in metro detroit right now is a rehab in mount clemens. I don't know detroit as far as an investment standpoint yet, simply as a place I now go socially, that i never would have previously.
Joe Delia, for the out of towners/staters, Mt Clemens is about 30 minutes north of the North Detroit border and about 45 to an hour north of Downtown Detroit.
Just to clarify to people who are not familiar with Detroit or Michigan. Mt. Clemens as well as bordering cities are not experiencing what people are seeing on the news about Detroit.
So when you see all the news about Detroit, it is solely about the City limits of Detroit, not Metro Detroit's surrounding citites.
I am trying out a test. I work with a guy who know the city neighborhoods. He is going to check addresses for me and give me reports on whether it's good areas or bad areas.
This is what I needed to make a decision to move forward into Detroit neighborhoods.
I just watched John Stossel on Detroit, it's incredible the mess Detroit is in, and the politicians there completely refuse to do what they need to in order to generate revenue.
The fire departments are so broke they are selling the brass fire poles to generate cash! Firemen, police and ambulances don't go out to 911 calls. Trash is piling up all over the City in huge mountains, so much so that a body was found in it.
Detroit has art work worth hundreds of millions if not billions of dollars, land they've been offered billions on, and the politicians won't sell! Crazy. The people have to pay taxes and fees, but don't get any services. A huge portion of the population are illiterate, because the educational system is so horrendous. So, who would want to invest there?
Reading this thread and the online news coverage, I have concluded that, as with most economic stories, we have only a partial picture.
Nonetheless, that partial picture creates what investors fear the most ... uncertainty. As Karen noted, usual municipal services have been cut to (or past) the bone. Would the robbery at or vandalism of an abandoned home under rehab efforts take much precedence with the police department? Or the bigger issue ... would the city see a new business (albeit a SFR rental) as fertile ground for hiking assessed taxes? Conclusion: uncertainty.
On some level this is not much different than a seller neglecting to tell an investor/buyer that the property needs some repair work or that there is an HOA assessment that can change with a simple vote.
My $0.02
Nick K. I totally agree. I don't know enough about Detroit to make a statement about the whole entire area. I heard it's something like 169 square miles, which is MASSIVE. No wonder they can't provide the services needed to maintain it. Like all metros, there are areas with higher standard of living, and lower. Crime riddled and not. Not all people in lower standard of living areas are bad people, in fact most are good people, subjected to the antics of a group of thugs. Also, higher income areas still have thugs, they just have jobs! We can't paint anyplace with such a broad brush, and I'm sorry if I did that.
At the same time, until the politicians in areas such as Detroit, and some of the states (California for one) quit squandering money and bring salaries, benefits, etc. under control in the public sector, it will always suck up the first tax dollars, and leave little left to serve the people. But.. I digress. Unfortunately though the solution is a political one. However; Joshua doesn't want political posts, so I'll leave it there.
For those that are familiar with the many areas, I'm sure Detroit could use all the support they can get in the way of revitalization, from homes on up.
In 1960 Detroit had the highest per-capita income in the country; and it was the 4th largest city in the country.
Today the population has sharply declined from 1.8 million to 700,000 a loss of more than 60%. (But Oakland County on the other side of 8 Mile has tripled in population over the same period to 1.2 million.)
When you lose over a million population, there is no job growth and the economy is not conducive to real estate growth.
Detroit is no a unique situation, there could be many more municipalities, school districts, and states that end up declaring bankruptcy. Some are saying there could be 100 municipal bankruptcies all over the country. I would like to think that won't happen, it will not be pretty.
Real estate investing is never easy, municipal bankruptcies doesn't make it any easier.
When you lose over a million population, there is no job growth and the economy is not conducive to real estate growth.
Detroit is no a unique situation, there could be many more municipalities, school districts, and states that end up declaring bankruptcy. Some are saying there could be 100 municipal bankruptcies all over the country. I would like to think that won't happen, it will not be pretty.
Real estate investing is never easy, municipal bankruptcies doesn't make it any easier.
States declaring bankrupcy? which states do you anticipate filing?
I read recently that San Bernardino, CA declared bankruptcy last year. Many other cities also in line to do the same. Maybe I'll post a forum about that.
@Joe
any state where state expenditures exceed state revenue, perhaps several municipalities and school districts declare bankruptcies and there is state bail out, and the economy is down in that state.
Since I'm new to Michigan, I spent half a day driving around metro Detroit several days ago and my biggest impression was the city really needed to exercise Eminent Domain in a big way and I was curious why that didn't happen. I'm glad you shared the state's policy on that.
It's fascinating to drive through a city with such rich history and beautiful architecture and see whole neighborhoods whose current highest and best use would be agriculture. But that won't happen because the state won't permit ED. It's frustrating to hear that the local politicians have tied their own hands. Because the city's voters are overwhelmingly under-educated entitlement-addicts, it's hard to imagine that situation changing.
And in talking to some friends who have moved into the city, the common thread is, "It's great here - like living in a 3rd world country - you can do pretty much whatever you want - no need for permits, licenses - it's like the wild west." They're hippy artists, mostly (my friends).
And the hippy artists and the young professionals are exactly the ideal folks to rejuvenate a city around. It's happened in many other places. It will be a long, slow going. The city has no resources to offer incentives. It can't even keep the libraries open.
Seeing all the able-bodied young men with hoodies walking around with poor posture during the middle of the day - that's perhaps the biggest problem. These are lives that have no educational or moral foundation, and nothing to do but get in trouble. These are the people no neighboring city wants, and they stay in Detroit for likely the same reasons as my hippy artist friends.
The last neighborhood I drove through was Indian Village, where you can buy a 9600 sf apparently well-kept mansion for $450K. Any other city in the country it would be $3M+. And 1/4 mile north or south and you're in absolute blight. What's living in a mansion worth if you can't sleep at night for fear of a break-in?
It's clear there are opportunities in the city. Perhaps significant opportunities. But they're certainly not available for less than $1K. I suspect commercial is better than residential as a generalization. But either way it would require a good deal of courage.
The last neighborhood I drove through was Indian Village, where you can buy a 9600 sf apparently well-kept mansion for $450K. Any other city in the country it would be $3M+. And 1/4 mile north or south and you're in absolute blight. What's living in a mansion worth if you can't sleep at night for fear of a break-in?
Did you talk to people living in indian village or just guess that they "Must" be fearing for their lives?
I'm going to guess you didn't talk to anyone living in that community, if i'm wrong i'm sorry in advance. Indian village has their own private security, I don't care to search it, but their crime rate is probably lower than most of the suburban cities.
I think most of the confusion is about Detroit is like anywhere else, knowing your area. @Annette Hibbler I think including Ann Arbor and "nearby" Lansing is not really describing the Detroit area accurately (if I understood you correctly) as neither are close (in a metro area sense) and that metro area is already quite larger. Many of those free places in Detroit probably arent worth picking up, but in addition to all of the northern places people mentioned, there plenty of relatively cheap places to the south (most of the downriver area) that I would think would be ideal rentals (cost vs rent).
Whenever you decide to invest into a city like Detroit it's a must that you do your home work. Certain areas require certain investment strategies. For example, in the inner city you can't put a for rent sign up and expect to find quality tenants. Section 8 or senior citizens who live on a fixed income are the best tenants for the inner city because they provide guaranteed cash flow.
As a new investor with a signifcant other from the Detroit area (Grosse Pointe) the question seemingly crosses my mind every few months as well.
At those widespread, extreme low prices, it seems as though the city is a few iterations away from being viable for a guy with limited capital like myself. The temptation to get in at a market at its bottom is there, but I am waiting on better investors than me to do the years of real dirty work to get the market going, if it ever happens.