If homes are so cheap, why are people still renting in Detroit? (Livonia: 2013, apartment)
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Maybe you're right, and they will rebound. I'm just saying, that people have been saying this for 50 years, and property values continue to go down. The city's economic fundamentals continue to deteriorate.
Also in the relatively short history of the Detroit forum (and to a lesser extent the MI forum) this question comes up time and time and time again. People from out of state thinking they're going to make a killing "investing" in Detroit or Flint. They never come back to the forum to update but I doubt few if any have made a penny.
I've only been in MI 13 years, in Genesee county. I've seen homes devalue by 75%. I own one of them, in Flint, it's rented out now. Thirteen years go it was worth mid-twenties. Eight years ago I bought it for $14K. Now it's worth maybe $2-4K and this is a nice little occupied home. But I'm not doing much more than breaking even with rent. I don't think it will appreciate in value in my lifetime, to be honest. Certainly not significantly.
The other house in Mt Morris Twp, I live in. It's nicer but still, it was worth four times what it is now, 20 years ago. And again, I don't see it appreciating. Not with the humungous stock of insanely cheap homes on the market. I know several people who have bought fine houses for well under $5,000 - basically for back taxes, and Flint is much cheaper taxes than Detroit. But they bought them to live in cheaply, not as investments.
You can buy entire city lots in Genesee county for $25.00. I bought two last year, adjacent to my house. Taxes are about $40 a year. I realise this sounds insanely cheap to most people and it is. I bought them as a buffer to my house, but now I am responsible for keeping them reasonably landscaped, maintaining trees, mowing grass, shoveling snow, etc. They really have no intrinsic value to anyone but me.
A client of mine owns about a dozen rental properties in two cities north of Flint (Mt Morris and Clio) and tells me he doesn't do much more than break even. If a tenant leaves, it can be many months, even a year, before he gets a new one. And even though the houses are not located in high-crime neighborhoods, he worries the whole time about them being stripped or burned down.
Flint and Detroit have more similarities than differences, I think. So while I'm talking Flint (because I am more familiar with it) I think much of what I posted applies to both cities.
Thanks for the feedback. I ask because I'm considering purchasing a few cheap properties and renting them out. The cheaper homes I viewed a few months backs were in pretty good shape. Needed only min cosmetics work (heat/ac, paint) I have quite a few relatives that are from Detroit, and they're STILL renting homes/apt. It does makes sense to rent when you're not planning to stay long-term, but for their sake, I would purchase one, little to nothing, and pay the taxes every year.
Detroit seriously needs to lower the property taxes. I would buy plenty if they did. How's the section-8 program with the city?
Section 8 is based by county. In the city, many section 8 properties look abandoned as landlords collect monthly rent but many do no maintenance of the property. The trend seems to be buying CHEAP, making it liveable, collect rent as long as the building stands or until it is deemed unfit for living--BUY new property CHEAP and repeat the cycle.
Can anyone tell me what areas are renters choosing? College kids, relocating families? Govt Ass Housing? I would like to be closer to downtown as possible. I've been researching and I hear the NE quadrant is ok. Is that correct? Any other places?
Also what parts of the city has the govt shut off street lights, police services, etc. I would like to avoid those areas.
Can anyone tell me what areas are renters choosing? College kids, relocating families? Govt Ass Housing? I would like to be closer to downtown as possible. I've been researching and I hear the NE quadrant is ok. Is that correct? Any other places?
Also what parts of the city has the govt shut off street lights, police services, etc. I would like to avoid those areas.
Northeast Detroit has the highest crime in Detroit, and is just terrible. The East Side, generally speaking, is the worse side of the city, and 7 Mile/Gratiot is the epicenter of East Side violent crime.
And why would "college kids, relocating families or govt housing" folks pick rental housing in Northeast Detroit? The entire metro area is filled with cheap homes. Even for people with govt. subsidies, there are plenty of landlords in places like Roseville or Warren or Eastpointe who will be happy to take your Section 8. Roseville may be a bit trashy, but it's 100 times better than living on some East Side Detroit street.
Also in the relatively short history of the Detroit forum (and to a lesser extent the MI forum) this question comes up time and time and time again. People from out of state thinking they're going to make a killing "investing" in Detroit or Flint. They never come back to the forum to update but I doubt few if any have made a penny.
I've only been in MI 13 years, in Genesee county. I've seen homes devalue by 75%. I own one of them, in Flint, it's rented out now. Thirteen years go it was worth mid-twenties. Eight years ago I bought it for $14K. Now it's worth maybe $2-4K and this is a nice little occupied home. But I'm not doing much more than breaking even with rent. I don't think it will appreciate in value in my lifetime, to be honest. Certainly not significantly.
The other house in Mt Morris Twp, I live in. It's nicer but still, it was worth four times what it is now, 20 years ago. And again, I don't see it appreciating. Not with the humungous stock of insanely cheap homes on the market. I know several people who have bought fine houses for well under $5,000 - basically for back taxes, and Flint is much cheaper taxes than Detroit. But they bought them to live in cheaply, not as investments.
You can buy entire city lots in Genesee county for $25.00. I bought two last year, adjacent to my house. Taxes are about $40 a year. I realise this sounds insanely cheap to most people and it is. I bought them as a buffer to my house, but now I am responsible for keeping them reasonably landscaped, maintaining trees, mowing grass, shoveling snow, etc. They really have no intrinsic value to anyone but me.
A client of mine owns about a dozen rental properties in two cities north of Flint (Mt Morris and Clio) and tells me he doesn't do much more than break even. If a tenant leaves, it can be many months, even a year, before he gets a new one. And even though the houses are not located in high-crime neighborhoods, he worries the whole time about them being stripped or burned down.
Flint and Detroit have more similarities than differences, I think. So while I'm talking Flint (because I am more familiar with it) I think much of what I posted applies to both cities.
I'm sure I won't make a killing no time soon. I'm interested in long term investments. I have children. I'm still young, (27). If I can get some cheap homes and rent them, or maybe get them and do absolutely nothing, I'm ok with that. I'd rather rent them out though. I want to avoid the vandalism/fire.
My parents did that. They bought dirt cheap homes, and now I'm capitalizing on their investments. So if I can rent them and break even, that's ok too.
Like I stated, I'm interested in re-investing my profits for my children's future instead of paying thousands in taxes if I can. City of Detroit is as cheap as they come nowadays. Atlanta prices are on the rise. I still have some here, but prices don't compare to Detroit.
Like I stated, I'm interested in re-investing my profits for my children's future instead of paying thousands in taxes if I can. City of Detroit is as cheap as they come nowadays. Atlanta prices are on the rise. I still have some here, but prices don't compare to Detroit.
You're free to invest wherever you see fit, but just because somewhere is cheap doesn't mean it's a good long-term value. It means the market has judged the opposite to be true.
For example, Manhattan is probably the most expensive place in the U.S., but is probably also the safest long term investment. In contrast, Detroit is dirt cheap because people who know SE Michigan know that, outside downtown and midtown, the prospects for Detroit neighborhoods are extremely bleak. The remaining black middle class is all moving to the suburbs, and even the poor are leaving.
No one can predict the future, but I would say the typical Detroit neighborhood is a very poor long-term investment. Sky high taxes and insurance, and rapidly declining population, with no prospect of a turnaround in sight.
Northeast Detroit has the highest crime in Detroit, and is just terrible. The East Side, generally speaking, is the worse side of the city, and 7 Mile/Gratiot is the epicenter of East Side violent crime.
And why would "college kids, relocating families or govt housing" folks pick rental housing in Northeast Detroit? The entire metro area is filled with cheap homes. Even for people with govt. subsidies, there are plenty of landlords in places like Roseville or Warren or Eastpointe who will be happy to take your Section 8. Roseville may be a bit trashy, but it's 100 times better than living on some East Side Detroit street.
Thank you for your info. I'm planning another trip to Detroit soon with a business partner first of the year. He's originally from Detroit, and he claims that it really depends on the street you pick. I'm just trying to do some of my own due diligence before we head up as well. All information is really appreciated.
My main focal point is to buy where there's police presence, street lights, etc. Can you tell me where would be the best location for that?
The people I know (I am in the construction/home improvement business) who are actually MAKING money are those who are buying relatively cheaper homes in upscale suburbs. There is a giant property dump going on right now from people selling cheap homes in cheap cities that they have been losing money on month to month for years. Genesee County Landbank is glutted with them.
If you are losing money for 20 or 30 years then start making money because you "hung in for the long haul" how far ahead are you, really? Cheap property is cheap FOR A REASON.
People around here aren't "investing" because they know the real deal. The losers plunking their money on $1000 homes are almost all out-of-state folks. It's so common here it has become a sort of laughable meme. But do what you see fit, it's your money. Just remember some people cautioned you about this plan!
The people I know (I am in the construction/home improvement business) who are actually MAKING money are those who are buying relatively cheaper homes in upscale suburbs.
This is exactly what I would do if I were investing money in Metro Detroit. Find undervalued "problem" properties in suburbs with excellent school districts and forget Detroit and most of the declining inner ring burbs.
Places like Novi, Northville, South Lyon, Rochester, Troy, etc. are good investments. The truly upscale Birmingham/Bloomfield type places won't have "deals" and are picked-over.
Thank you for your info. I'm planning another trip to Detroit soon with a business partner first of the year. He's originally from Detroit, and he claims that it really depends on the street you pick. I'm just trying to do some of my own due diligence before we head up as well. All information is really appreciated.
My main focal point is to buy where there's police presence, street lights, etc. Can you tell me where would be the best location for that?
Try New Center. Most properties in Midtown and Downtown are all but claimed and if you find one available, it'll be an easy location depending on how much you may need to renovate. The next neighborhood to see any sort of major reinvestment would be New Center and possibly Virginia Park or (though less likely) North End. They should get considerably more favorable in a couple of years when the M1 Rail is up and running which will terminate at Grand Boulevard.
I can't speak on the police presence since it's most concentrated downtown. But generally, the Gratiot and Southfield Freeway corridors have the highest crime rates. The Woodward Corridor tends to be a bit more subdued.
Another option is Corktown, but generally most properties there too are already claimed and most properties that are left are vacant lots or mixed-use/industrial buildings.
You could try Mexicantown and Southwest Detroit, but I'm less familiar with that area and crime is probably unfavorable despite there being some intact neighborhoods.
The last option I would suggest is the Bagley area around 7 Mile and Livernois. Generally, this area has residents who work in nearby suburbs and the homes tend to be of higher quality than those closer to downtown. There's also many two-family flats. Crime isn't so bad here, though the farther west and south you go, the worse it tends to be. Rosedale Park is a bright spot, but I'm not sure if there are too many rental opportunities in that area (the homes are pretty nice and well-kept). Going southeast is running more into older neighborhoods of the city and you'd probably do well to avoid areas south of Purtian and east of Linwood.
Last edited by animatedmartian; 12-29-2013 at 05:21 PM..
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