Post: #1

I saw this article on facebook how this kid bought a house for $500 in Detroit and started fixing it up. The guy also mentions how artists/other people are snapping up cheap real estate and a lot of them are having a more positive impact on the surrounding areas. They have whole foods in one neighborhoods and the people new to the place are a bunch of young hipsters.

http://www.buzzfeed.com/drewphilp/why-i-...it-for-500

I also watched this series of videos recently which has a similar theme. The first part is how artists are reviving neighborhoods, second part is about how community promotes growth and the third the more reality side of things and how it looks like a warzone.





My question is: would it be a good move to 'invest' in Detroit real estate (around areas which might be starting to get better). If people are snapping up places for dirt cheap would it be smart to drop a few grand, own some property?

Do you guys think the city, or specific neighborhoods, will ever bounce back yielding a large return on your initial investment?

Say you did buy property in an area which might improve in the next few decades would it be smart to let people live there in return for taking care of the place/fixing it up?

Post: #2

I don't see the upside in that sort of absentee investment in Detroit. You would basically be tying up a bunch of capital over an unknown timeframe at an unknown rate of return.

What I could see is someone with a location independent lifestyle moving to Detroit, taking advantage of the low cost of living, and looking for on the ground opportunities to invest in. The return on cash investments in Detroit is probably going to be low for some time. Sweat equity, however, might pay off.

Post: #3

(01-23-2014 04:02 PM)WesternCancer Wrote:  My question is: would it be a good move to 'invest' in Detroit real estate (around areas which might be starting to get better). If people are snapping up places for dirt cheap would it be smart to drop a few grand, own some property?

Do you guys think the city, or specific neighborhoods, will ever bounce back yielding a large return on your initial investment?

Say you did buy property in an area which might improve in the next few decades would it be smart to let people live there in return for taking care of the place/fixing it up?

It could take a long time for "flippers" to see any return on real estate properties in Detroit.

I wouldn't rule the city out for making a comeback someday though. The suburbs of Detroit are some of the most affluent in the country and that's where the vast majority of companies that do business in the area are located. The people that live there are the same ones that drive into the city for baseball and (soon) hockey games. You also have Univ of Mich just an hour away in Ann Arbor. Google and a bunch of other tech companies and startups have a presence there. Won't be surprised to see some of these folks creeping into Detroit in the coming years. Everyone loves a good comeback story.

Within Detroit, there's a hipster area within like an 8-block radius of Midtown. Whole Foods opened up there and the store is doing exceedingly well, surprising many. The CEO considers it a long-term investment and sees hope in the city's resurgence. Something to think about.

Post: #4

Good idea, let the hipsters move there!

About Detroit though umm..NO! Pick another shithole where you can at least find decent renters.. Look in Ohio

Post: #5

Not really a good idea for a few reasons:

1. Houses are cheap because the crime in those areas is absolutely awful. The thing about Detroit is that you can have a block that looks relatively safe but across the street have an entire block of houses that are burnt out, boarded up, or abandoned. Its EXTREMELY common for one block to be safe and the next block over to be a complete warzone. I am not exaggerating, as I routinely visit friends and drive through the city myself.
2. In addition to crime driving the prices down, most of these houses have been completely vandalized and stripped to their cores. You would have to put extensive money into bringining the house up to a liveable condition.
3. Taxes are extremely high and access to emergency services is increasingly scant. Cops really don't have the manpower at this point to put any attention to crimes other than murders and even then people can wait 2 or 3 hours for an ambulance to show up.
4. Don't discount your house getting stripped again after you fix it up. I have seen this happen to quote a few people. Buy a house for 5,000 dollars and spend 35,000 dollars on it only to have it ransacked later.
5. Buying and sitting on houses is a big problem here, because everyone is waiting for the value to rise. That will not happen if everyone does it though, so many people people ending up hurting themselves investment wise, since no progress is being made in those neighborhoods.
   

Most of the rebirth you are reading of is occurring in the Downtown and Midtown areas since they are getting heavily gentrified. You know the yuppies are moving in full force when a Whole Foods is getting built in the neighborhood. I have also met quite a few yuppies coming in from places like DC and LA, but they all live Downtown or are in Midtown where there's also a large state school. The bottom line is you really have to do your research on the neighborhood you want to buy in. I'm not sure where you live exactly but that's an exhaustive exercise within itself. There are also some historic neighborhoods like Palmer Woods or Boston Edison that feature large mansions for a heavy discount but they are still pretty expensive for a young person to try to buy and hold.

Post: #6

http://www.detroitnews.com/article/20110.../102030395

http://michiganradio.org/post/gilbert-ow...whole-city

Some heavy rollers already had the idea and unfortunately no one can get paid until they do. I don't think it would be a wise investment unless your willing to wait a very long time.

Post: #7

I saw the second part of those nice lofts on 11 mile are resuming construction (maybe a block west from McDonalds next to the railroad tracks). I bet they will be pretty popular as soon as they are finished.

Post: #8

Thanks for the replies guys. I didn't really think of the recurring costs.

For the record I wouldn't really expect anything out of it, but it would be cool to throw $1000 down and just watch how things go. Land is land even if there's a dilapidated building sitting on it. Who knows in 20 years Detroit might have gotten back on its feet and then you own land in a "new" city.

I do like the idea of what the hipsters are doing, it would also be cool to go there with a mission to mold a neighborhood into what you wanted it to be, but like others have said there is a lot of crime. I could make my own poosy paradise, ha.

I just read articles like this http://www.nydailynews.com/life-style/re...-1.1415014 and get excited by the possibilities.


Does anyone know the cost/logistics of holding land there? Say I go and spend $1000 on however much I can get, what other expenses will there be?

Post: #9

Mega rich guys like Cleveland Cavs owners Dan Gilbert, and the Chinese have already swooped in and bought up large tracts of the properties that will have the most upside the quickest. The game of land is rigged since land is always the best asset to buy long term (best performing asset in the history of mandkind, no other asset has as much collusion to protect its value). Its all rigged. They are building a new Red Wings Arena and word of that plot of land was leaked out way before to insiders whom swooped up the surrounding lots before the Arena developers swooped in and strong armed the tract of land to build it. They are building new stuff on Woodward for transit and again that was leaked out too with the same outcome. Gilbert literally bought whole tracts of land along Woodward because he knew before hand the value would shoot up XX% after the projects are done. If you have money or connections land is a easy hustle, people play casino with the stock market when land is just sitting there waiting to be pillaged if you know what your doing and know how to get the right insider information. The time to buy in Detroit was 3-4 years ago. Hipsters from Boston and shit have already driven up rents in the few bougie parts of town, if you bought some shack apartment building 4 years ago for nothing you would be a rich man now charging these hipsters $900 bucks a unit to live beside beside a noisy interstate, Whole Foods, and a homeless shelter. Not all is lost as there are still other ways to exploit what is going on there.

I agree that Detroit is the ideal place for location independent living. The crime stuff is overrated, for simple money you can live in a good area. Nobody lives in the city, you might have only 4 people on your whole block if even that. The shitty areas are far out from the good areas and you have no reason to live there anyways. All the stuff in Midtown, New Center, and Downtown is legit, you can live a urban lifestyle cheap in those areas for the most part.

Detroit is ideal though to start up a venture. If you have a idea you can get it going in Detroit way cheaper then anywhere else. Detroit is the last urban place where you can actually hustle in the classic American way and not be hand tied by bureaucracy and bullshit like in other places. Smart people from Toronto are ditching this godless city and starting business down in Michigan for way cheaper. I met these two latin broads whom ditched Toronto to go start a clothing company down there, I know a dude whom is doing a lot good things in the gallery scene there also, would never be able to do his hustle on that scale here in Toronto.

Its a place I have my eye on. I've been down a few times now and from what I've seen its a legit spot. I need to explore the surburbs more but overall I got the vibe that the city was on the rebound. Rock bottom was a few years ago but now the only place the city can go is up so its easy to be in a position to capitalize on that and ride that wave.

Post: #10

(01-24-2014 02:29 AM)kosko Wrote:  I agree that Detroit is the ideal place for location independent living. The crime stuff is overrated, for simple money you can live in a good area. Nobody lives in the city, you might have only 4 people on your whole block if even that. The shitty areas are far out from the good areas and you have no reason to live there anyways. All the stuff in Midtown, New Center, and Downtown is legit, you can live a urban lifestyle cheap in those areas for the most part.

Detroit is ideal though to start up a venture. If you have a idea you can get it going in Detroit way cheaper then anywhere else. Detroit is the last urban place where you can actually hustle in the classic American way and not be hand tied by bureaucracy and bullshit like in other places. Smart people from Toronto are ditching this godless city and starting business down in Michigan for way cheaper. I met these two latin broads whom ditched Toronto to go start a clothing company down there, I know a dude whom is doing a lot good things in the gallery scene there also, would never be able to do his hustle on that scale here in Toronto.

Outside of the areas I mentioned earlier the crime aspect cannot be overstated, as anyone who actually lives in the city can attest. In fact this week, one of my friends refused to let me come pick him up after dark, while a another was telling me how he's always seeing crack busts in his neighborhood. Mind you both of these guys live on opposite ends of the city, and live in houses that you would think would be in a solidly middle class area like Southfield or Troy. The growth(for now) is contained to the Downtown and Midtown areas, which many in the thread have already acknowledged, but of course you won't find a $500 house to fix up in these areas since that's prime real estate. Midtown still has a fair bit of crime as I was looking to move there last summer, but if you stay aware you should be OK, since the last two bad hoods are being phased out as we speak. New Center One is literally right next to the hood, with only Downtown really not being by any bad areas at the moment.

Moving onto a block with 3 houses is simply not a smart idea when you consider things like stagnant water in the pipes, no street lights, and arson being a very common occurrence. Hipsters are not moving into these hoods I can assure you, but mostly gentrified hoods in Midtown by the university and Southwest D.

I thought the OP was asking strictly about snatching up a house for something like $500 in what undoubtedly would be a shitty hood, but if he is also considering Midtown or Downtown then I would say go for it, since you definitely score a sick loft for much cheaper month to month than alot of other big cities I've seen. I was actually going to do this myself, but moved somewhere a bit farther away.

I do agree that this is a great place for a startup however. Dan Gilbert has started up a venture called Detroit Venture Partners, that a few people I know work for, that infuses cash into alot of Ann Arbor and Detroit based startups among other things. This has helped lead Michigan to be one of the fastest growing states in terms of venture capital investment in the country. In addition, to that there''s a ton of artists moving Downtown and Midtown, so good things are happening and the city is going to change alot more now that Mike Duggan is in office. I also ran across this article yesterday, which say good things about the startup scene.

http://techonomy.com/2013/07/why-i-love-...a-startup/

(01-23-2014 10:23 PM)one-two Wrote:  I saw the second part of those nice lofts on 11 mile are resuming construction (maybe a block west from McDonalds next to the railroad tracks). I bet they will be pretty popular as soon as they are finished.

Those will probably go for $1500 easily.

Post: #11

It's a kind of an automatic stabilizer of the housing market. The area becomes unlivable and people move out (or vice versa), but then people are motivated by the cheap property to move back in and make the area livable again. I love seeing it in action.

Post: #12

I agree with Kosko that the smart money is already in there. Unless you live in Detroit or have roots there, I don't see it working. You'd need to invest yourself in the area to make it work, not just your money.

There's a kind of run down area near my house where you can get real estate cheap. I keep thinking about trying to get into investing in that area, but it's not easy money. Dealing with renters can be a serious pain in the ass.

Post: #13

I checked out that Palmer Woods area and that is tits. Big ass houses on the cheap and it doesn't have the crime problem as you have private security. ($495 a year)

Only downside is most of the homes are older and I know from experience with the parents place maintenance and upgrades are expensive as hell.

10,000 square feet for $700K? Wow...

Check out some of the places on this list.
http://detroit.curbed.com/archives/categ..._woods.php

Post: #14

http://money.cnn.com/2014/04/14/real_est...?hpt=hp_t2

A few houses are being auctioned off starting at 1k.

Once you buy you have six months to find someone to live in it or else you loose the home and the money you spent on it.

Post: #15

He was right! Back in the early 2000s I saw an interview with a professor of economics and he was talking about the real estate cycles of greenwich village and Brooklyn in NYC. He said the cycle goes like this:

Blue Collar housing area start to decline ---> crime goes up people leave like crazy ---> artists and other people in professions that are low income/risk takers move in because of low housing prices ---> artists set the trends people follow, now people want to move to that place because its the new 'scene' -----> the cool factor starts to attract the rich ----> prices go up to an almost exclusive real estate level -----> Once everyone is there the trend fades, people who shop at target move in last into the affordable fringe areas ----> start cycle again.

He said its about 25 years, looks like Detroit is at about stage 3, so if it really started to take a shit in 2007 by 2027 Detroit will be the coolest, most expensive place to live. I think it will be the next Austin texas by 2020 and be some sort of american sister city to annoying Toronto.

Edit: I am doubling down on this prediction based on what Kosko wrote.

Post: #16

(04-15-2014 10:05 AM)Dr. Howard Wrote:  He said its about 25 years, looks like Detroit is at about stage 3, so if it really started to take a shit in 2007 by 2027 Detroit will be the coolest, most expensive place to live. I think it will be the next Austin texas by 2020 and be some sort of american sister city to annoying Toronto.

While I see Detroit having opportunity and upside. I can't see it being the coolest, most expensive place to live. Respectfully, that sounds like bitcoin talk from a few months ago. Detroit will have its issues. I have been there a long time ago. There were some cool things but fuck they called that people mover thing the people mugger and this was when Detroit was in good shape. Or should I say better shape. But don't get me wrong, I think it would be a cool change of place, try to do your own thing city. I spent a couple hours a few months ago reading/imagining what it would be like.

Post: #17

(01-23-2014 06:11 PM)iWin Wrote:  Not really a good idea for a few reasons:

1. Houses are cheap because the crime in those areas is absolutely awful. The thing about Detroit is that you can have a block that looks relatively safe but across the street have an entire block of houses that are burnt out, boarded up, or abandoned. Its EXTREMELY common for one block to be safe and the next block over to be a complete warzone. I am not exaggerating, as I routinely visit friends and drive through the city myself.
2. In addition to crime driving the prices down, most of these houses have been completely vandalized and stripped to their cores. You would have to put extensive money into bringining the house up to a liveable condition.
3. Taxes are extremely high and access to emergency services is increasingly scant. Cops really don't have the manpower at this point to put any attention to crimes other than murders and even then people can wait 2 or 3 hours for an ambulance to show up.
4. Don't discount your house getting stripped again after you fix it up. I have seen this happen to quote a few people. Buy a house for 5,000 dollars and spend 35,000 dollars on it only to have it ransacked later.
5. Buying and sitting on houses is a big problem here, because everyone is waiting for the value to rise. That will not happen if everyone does it though, so many people people ending up hurting themselves investment wise, since no progress is being made in those neighborhoods.
   

Most of the rebirth you are reading of is occurring in the Downtown and Midtown areas since they are getting heavily gentrified. You know the yuppies are moving in full force when a Whole Foods is getting built in the neighborhood. I have also met quite a few yuppies coming in from places like DC and LA, but they all live Downtown or are in Midtown where there's also a large state school. The bottom line is you really have to do your research on the neighborhood you want to buy in. I'm not sure where you live exactly but that's an exhaustive exercise within itself. There are also some historic neighborhoods like Palmer Woods or Boston Edison that feature large mansions for a heavy discount but they are still pretty expensive for a young person to try to buy and hold.

Anyone entertaining this idea should reread this. If you buy a Detroit house for three or even four figures, expect to get the keys to a shell with no copper wiring left, boards over the windows, and char marks from the arson fires surrounding it.

Post: #18

Vice had an episode on scrapping a couple of weeks ago. Detroit is being pillaged to feed China raw materials.

Back in the day Detroit had some beautiful buildings. I mean marble and shit for schools.

Post: #19

Quote:Anyone entertaining this idea should reread this. If you buy a Detroit house for three or even four figures, expect to get the keys to a shell with no copper wiring left, boards over the windows, and char marks from the arson fires surrounding it.

Right. I'm from north of Detroit...you're basically be buying a piece of land you have to re-build on. And yes, I can personally attest on the crime aspect.

Quote:Blue Collar housing area start to decline ---> crime goes up people leave like crazy ---> artists and other people in professions that are low income/risk takers move in because of low housing prices --->
...Detroit is at about stage 3

Detroit isn't in in stage 3. Very small -too small- parts of Detroit are in stage 3. Look to the city leadership. Grand Rapids (smaller city) was in rough shape but had business and city leaders step up and improve it. Detroit isn't doing this. It's a city of blood-sucking, tax-sucking people sucking off the tit of the rest of the state. West Michigan considers it a separate state.

Funny story...I met a doctor from Sao Paulo this past Sunday Funday at my local bar asking him how dangerous Brazil is...he said "would you feel safe walking the streets of Detroit?" totally serious, trying to get me to realize how rough parts of Brazil are.

Good luck though if you decide to invest and prove me wrong. If it fails, just camp out there for some, as Kid Rock says, "Corn fed midwestern hoes"

Post: #20

I think seller financing is the way to go if you are going to invest in Detroit.

Buy a house for 10k and sell it for 40k at 12 percent with no money down. Let the borrower do all the repairs because it's their house.

You now get a check in the mail for once a month and you don't have to worry about fixing toilets.

Do this with a self directed IRA and all your profit is tax deferred.

Post: #21

What about outside of Detroit. I'm talking Dearborn, Royal Oak, Grosse Pointe, and Saint Clair Shores?

While RE is more expensive, how is the rental market in communities immediately outside Detroit?

Post: #22

(04-15-2014 11:14 AM)heavy Wrote:  

Quote:Anyone entertaining this idea should reread this. If you buy a Detroit house for three or even four figures, expect to get the keys to a shell with no copper wiring left, boards over the windows, and char marks from the arson fires surrounding it.

Right. I'm from north of Detroit...you're basically be buying a piece of land you have to re-build on. And yes, I can personally attest on the crime aspect.

Quote:Blue Collar housing area start to decline ---> crime goes up people leave like crazy ---> artists and other people in professions that are low income/risk takers move in because of low housing prices --->
...Detroit is at about stage 3

Detroit isn't in in stage 3. Very small -too small- parts of Detroit are in stage 3. Look to the city leadership. Grand Rapids (smaller city) was in rough shape but had business and city leaders step up and improve it. Detroit isn't doing this. It's a city of blood-sucking, tax-sucking people sucking off the tit of the rest of the state. West Michigan considers it a separate state.

Funny story...I met a doctor from Sao Paulo this past Sunday Funday at my local bar asking him how dangerous Brazil is...he said "would you feel safe walking the streets of Detroit?" totally serious, trying to get me to realize how rough parts of Brazil are.

Good luck though if you decide to invest and prove me wrong. If it fails, just camp out there for some, as Kid Rock says, "Corn fed midwestern hoes"

The one thing Detroit has going for it is that Kevyn Orr has been granted powers to take over wide aspects of the city for its Chapter 9 bankruptcy, which may allow him to eliminate some of the bloated pension obligations and municipal debt. Even if he can, though, it will probably take a decade.

Post: #23

(04-15-2014 02:22 PM)renotime Wrote:  I think seller financing is the way to go if you are going to invest in Detroit.

Buy a house for 10k and sell it for 40k at 12 percent with no money down. Let the borrower do all the repairs because it's their house.

You now get a check in the mail for once a month and you don't have to worry about fixing toilets.

Do this with a self directed IRA and all your profit is tax deferred.

Just some thoughts...

You have to be careful how you set this up because there are usury laws in place.

If you sell the house and take back a mortgage, you have to follow foreclosure laws if they don't pay. It typically takes takes 7 months to foreclose on a house.

One month to post in a newspaper within the county and a 6 month redemption period. After that you need to evict if they are still in the house which is another 30 days. Bankruptcy will stop the foreclosure. You will need to get the trustee to allow you to start the foreclosure again which takes time.

That is why banks will try to give them some cash for keys.

You can do a land contract which tends to have a 30 day like eviction process. You still have to watch out for usury laws.

I would also check out some loan servicing companies that will take care of receiving payments and end of the year financials.

Post: #24

Post: #25

If houses can be had for a few thousand what is the real risk? If you plan to hold it for the long-term you should see some return. I really can't see homes getting any cheaper than that in a major American city.

The thing is, if everyone thinks it's a good idea to buy in Detroit, it's already too late to buy. When everyone thinks the idea is crazy is when you buy. There was a time when downtown Los Angeles was as scary as Detroit. This wasn't even too long ago, I'm talking late 90s, maybe even early 2000s. It was a place you got the hell out of after sundown. Only people down there after dark were crackheads and a small community of artists in lofts.

Now few could even afford to live there. Yuppies and hipsters moved in, rents are in the stratosphere, trendy bars and restaurants opening up all the time and it's the place to be. Buying a loft down there would start at half a mil, maybe more. If someone had said to buy downtown L.A. property in the 90s everyone would've thought you were crazy. But for those that did, they are sitting on a sweet equity cushion. Real Estate is one of those sectors where you always want to do the opposite of what everyone else is doing.