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Old 06-19-2012, 02:43 PM
 
Location: Lyon Township
85 posts, read 63,047 times
Reputation: 42
Default Foreign Investor Detroit Real Estate Scams

Lets talk about the real estate marketing scam that is using Detroit to bilk millions from foreign investors.

People are lured in by sites promising turn key investment opportunities in Detroit with a guaranteed renter and huge profit potential. What could be better?

Here is how it works.

Property values in Detroit have collapsed to an extent that most people outside the region cannot fathom. Detroit has lost a quarter of its population in the past decade and is expected to lose another 25% in the upcoming decade. Maxing at 2.2 million, the population is now 700,000. Much of the middle class, black and white, have fled to the suburbs leaving Detroit very poor with high taxes, no services, and terrible schools. The mortgage crisis has hit the urbanites extremely hard. With the vast majority of property "up side down" and very little demand, prices have collapsed and with declining population and tens of thousands of vacant properties there is little hope of a big rebound. The median price of a home in Detroit is $9000. Foriegn "property management companies are buying homes for $20,000 that were selling 2-3 years ago for $200,000. They then market them to gullible investors for $60,000-$70,000. They promise them a renter in place at say $1000 per month for a year. So they make $50,000 gross profit on the house, pay $12,000 in rent less 10 percent , $10,800. They net $39,200 on a $20,000 investment. The sucker , oops investor, Sees $1000 a month coming in. They buy more properties, convience their friends. By the time reality hits and the checks stop, they think "its temporary" a down in the rental market. Eventually the house is rented at a fraction of the price, or the vacant house is trashed or they are forced to sell at a fraction of their investment. They often never even realize they were scammed. If you see a foreign investor on this site asking about investing in an area of Detroit, don't just say "its a nice neighborhood". Save them bankrupty and grief.
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Old 06-19-2012, 03:16 PM
Status: "Campaigning 4 State House" (set 3 days ago)
 
Location: Mid-Town
7,336 posts, read 9,256,553 times
Reputation: 4969
I would think it is all about due diligence and smart investment. ANYONE who seriously believes a house will rent for $1000 a month and not look at what they are selling for, should reconsider being a venture capitalist...
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Old 06-22-2012, 09:27 AM
 
Location: Lyon Township
85 posts, read 63,047 times
Reputation: 42
Default Get rich quick schemes

Yes, the problem is that some people think any outside money is a good thing. Nothing wrong with bringing in new capital. In the longer run, the houses in these scams are more likely to fall into decay, bringing the neighborhoods value even farther down.
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Old 06-22-2012, 08:17 PM
 
Location: Your computer screen.
5,544 posts, read 3,962,382 times
Reputation: 5157
That's really a shame. People need to be careful with their investments. "Invest in what you know" is good advice. No one familiar with Detroit would fall for this. I sure as hell would not invest in property in another city I had never been to and thoroughly researched in person.
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Old 09-01-2012, 05:05 PM
 
1 posts, read 4,033 times
Reputation: 10
Default Land for $1000 are you kidding?

So what's the catch with the land? Why wouldn't someone unemployed buy a piece of land for $1000 if they could call it their own? Is it dangerous? High Taxes? Liability? Maybe no shopping anywhere nearby or water/electicity/sewage?
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Old 09-02-2012, 04:47 AM
Status: "Campaigning 4 State House" (set 3 days ago)
 
Location: Mid-Town
7,336 posts, read 9,256,553 times
Reputation: 4969
Quote:
Originally Posted by muilenta View Post
So what's the catch with the land? Why wouldn't someone unemployed buy a piece of land for $1000 if they could call it their own? Is it dangerous? High Taxes? Liability? Maybe no shopping anywhere nearby or water/electicity/sewage?
If we are talking about vacant land with no buildings on it, there is probably no catch--except the possibility of back taxes.
If the land has a building on it, the owner will eventually be financially responsible to remove the building themselves or one day the city will do it and levy a lien against the property.
Most land in the city is set up for electric and water / sewer.
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Old 09-03-2012, 06:21 AM
 
Location: Baltimore
1,588 posts, read 2,082,136 times
Reputation: 949
Quote:
Originally Posted by zthatzmanz28 View Post
I would think it is all about due diligence and smart investment. ANYONE who seriously believes a house will rent for $1000 a month and not look at what they are selling for, should reconsider being a venture capitalist...
Couldn't be further from the truth. This happens in Baltimore all the time. Investors purchase a home for around 20k, spend about 10k making it section 8 ready then lease it for 5-10 years for $800-$1500 depending on the beds and sell for maybe 32k after harvesting the rental returns. There are huge tax benefits to holding property this way as opposed to short term investing/flipping.
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Old 09-03-2012, 11:01 AM
Status: "Campaigning 4 State House" (set 3 days ago)
 
Location: Mid-Town
7,336 posts, read 9,256,553 times
Reputation: 4969
Quote:
Originally Posted by davecj View Post
Couldn't be further from the truth. This happens in Baltimore all the time. Investors purchase a home for around 20k, spend about 10k making it section 8 ready then lease it for 5-10 years for $800-$1500 depending on the beds and sell for maybe 32k after harvesting the rental returns. There are huge tax benefits to holding property this way as opposed to short term investing/flipping.
And Detroit is identical to Baltimore? Do we really believe there is a house in Detroit for $20K (no liens) that can be rehabbed and made livable for a mere $10K investment and then rent it for nearly $1500 a month? Plumbing and electrical wiring will cost $10K. Now the investor has to drywall, paint, do the flooring and any exterior repairs.
Do not forget the nearly $5000 annual tax, repair and maintenance of the $30K investment property.

EVEN IF a house could get $1500, even $1000 a month, by the time the investor pays taxes (property will not be homesteaded so tax rate is almost 1.5 times normal) water bill, maintenance and claims income, there is no guarantee the house will sell for $32K and the investor is fortunate to break even after 5 years of frustration.

This belief is what causes people to come to Detroit and loose their investment.
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Old 09-04-2012, 04:18 AM
 
2,240 posts, read 1,280,160 times
Reputation: 2677
Quote:
Originally Posted by zthatzmanz28 View Post
And Detroit is identical to Baltimore? Do we really believe there is a house in Detroit for $20K (no liens) that can be rehabbed and made livable for a mere $10K investment and then rent it for nearly $1500 a month? Plumbing and electrical wiring will cost $10K. Now the investor has to drywall, paint, do the flooring and any exterior repairs.
Do not forget the nearly $5000 annual tax, repair and maintenance of the $30K investment property.

EVEN IF a house could get $1500, even $1000 a month, by the time the investor pays taxes (property will not be homesteaded so tax rate is almost 1.5 times normal) water bill, maintenance and claims income, there is no guarantee the house will sell for $32K and the investor is fortunate to break even after 5 years of frustration.

This belief is what causes people to come to Detroit and loose their investment.
Of course, the Detroit market isn't exactly like Baltimore, but plenty of people make money by renting out properties in Detroit. You can easily buy a house in Detroit for $10K - $20K that is up to code and ready to rent out for $700 to $1,000 month. You can buy ones needing repair for a lot less. Taxes are high, but the biggest deterrent is simply dealing with tenants and the City. For those who can stomach that work, they can make money under the right circumstances--especially in Detroit where house prices are cheap compared to the rental income. Remember, the median house price in Detroit is under $10,000.
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Old 09-06-2012, 10:34 PM
 
557 posts, read 479,828 times
Reputation: 509
Quote:
Originally Posted by zthatzmanz28 View Post
And Detroit is identical to Baltimore? Do we really believe there is a house in Detroit for $20K (no liens) that can be rehabbed and made livable for a mere $10K investment and then rent it for nearly $1500 a month? Plumbing and electrical wiring will cost $10K. Now the investor has to drywall, paint, do the flooring and any exterior repairs.
Do not forget the nearly $5000 annual tax, repair and maintenance of the $30K investment property.

EVEN IF a house could get $1500, even $1000 a month, by the time the investor pays taxes (property will not be homesteaded so tax rate is almost 1.5 times normal) water bill, maintenance and claims income, there is no guarantee the house will sell for $32K and the investor is fortunate to break even after 5 years of frustration.

This belief is what causes people to come to Detroit and loose their investment.
Plumbing and electric do not cost $10k. plumbing is $1,000-$1,500, and electric isn't too much more unless every piece of wire was ripped from the walls.

Not all homes have $5,000 a year in taxes. Some are much lower and some are higher (including non homestead)

You are just looking at the negative of everything. There are plenty of people who make good money from rentals in Detroit. It's not easy but it is far from impossible.
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