Despite Tough Times, Investors See Opportunity. (Detroit: tax lien, real estate, foreclosure)

[wallstreetbattlecat]

Detroit is an interesting City. Some say that when Detroit gets sick the entire Nation catches a cold. I think we saw this with the most recent epidemic that took the nation by storm- the foreclosure crisis. What is the cure? Some say it's going to take the Federal Government... I seem to think that it starts with grass roots efforts that are made from scratch.

I met someone; an investor through a colleague of mine and I spent the weekend with him. Exposing myself to the inner workings of this persons investment strategy left me in awe. Why? Here's why, I haven't seen anyone with this investment style in about two and half years. Do the math and remember what happened about two and half years ago? Mortgages stopped - Investors picked themselves up off the floor and left town. The city was in chaos and the property values kept falling with no end in sight.

Real estate investors from all over the country have joined forces and are now offering a once in a life time opportunity to the citizens of Detroit. Despite tough economic times there are opportunities for individuals to invest and take advantage of the housing market. Wall Street Loan Center and commercial finance company has partnered with Mich – Alta a Michigan based real estate investment firm to offer beautiful completely remodeled homes to individuals via land contract. Detroit is plagued with blight and these companies are determined to eliminate the blight and revitalize the City back to its days of glory.

From one Detroit City block to the next you will most likely find a home owned by Wall Street Loan Center and or Mich – Alta Private Real Estate Investment Firm. In that home you will hear the sounds of hammers and drills complimented by the sounds of the local radio station DJ announcing the next song of the day as the workers and contractors are busy hanging cabinets, new roofs, carpet and everything else an old battered home needs to restore its original beauty. “It’s not every day that you find investors crazy enough to put their own money into buying and fixing up these old homes. Everyone I talk to in my industry thinks we’re nuts when they find out what we’re doing.” , Says Shawn Reed the CEO of Wall Street Loan Center and Senior Consulting Partner of Mich – Alta a Private Real Estate Investment Firm. The reason many investors in the industry think that Shawn Reed is crazy for investing in a City as desperate as Detroit is because values are still down due to the conservative value approach used by appraisers working for the banks.

A home that would have sold for $93,000 two years ago is only appraising for $35,000 in some areas of Detroit. In addition to this hurdle many banks have tightened their credit and asset requirements making it impossible for borrowers to qualify. So, what’s the solution?

According to Shawn Reed his inside sources at Mich – Alta tell him that they have plans to become the bank by lending their own money. Their program is supposed to mirror the sub prime mortgage market that went extinct about two and half years ago. By giving out secured land contracts to individuals it opens up opportunities for people with substandard credit and a job to qualify for a brand new home. In short, if you want a beautiful home in a good neighborhood that is being revitalized you must move back to Detroit and take advantage of this great program and support the effort being made to improve your community.

So basically here is my question- do you think that this investment strategy is what the city needs to turn itself around? Do you think that Mich Alta Land Contracts and good people are the new blood of a City that is dying? Let me know your thoughts!

[errhuh]

He's treating the symptoms, not the disease. Investing and fixing up homes in an area where it's difficult to attract the people who can afford to maintain them doesnt seem like much of a strategy.

When there are jobs, housing takes care of itself.

[fmax]

Wall,

" Let me know your thoughts!"


I really want to respond sarcastically.

[HarlemNewbie]

Originally Posted by errhuh

He's treating the symptoms, not the disease. Investing and fixing up homes in an area where it's difficult to attract the people who can afford to maintain them doesnt seem like much of a strategy.

When there are jobs, housing takes care of itself.

Exactly. It's really quite simple. No decent jobs = price of housing plummets. You want a stable housing market, you need a stable job market.

[ilovemycomputer90]

This is great and all, but as others have said, the city needs stable jobs. The city/state needs to attract more businesses and corporations to the area with a friendlier business environment, i.e. lower taxes and less red tape. The government needs to make deals with businesses and corporations that would bring them to Detroit. This would bring in more jobs, more taxpayers, and more economic opportunity to the region. Simple common sense. I know it's easier said than done, but there seems to be so much potential.

[fmax]

Transfer payment schemes don't work.

Attracting foreign companies isn't a viable solution. Once the attraction has been used up, they're out of here.

One answer might be to create products/services which money from outside the area desires.

[wallstreetbattlecat]

All of your opinions are valid- there are many contributing factors to the overall cure. A band aide here and there doesn't fix the problem... with that there is no argument. However, what we seem to forget is that there are still a lot of good people that work hard and earn enough to support there needs. The advantage that private investors who offer land contracts is that they don't require the same underwriting. Mortgages have all but ceased to exist for the blue collar class because of property values and asset tests that make it damn near impossible for the lay person in Detroit to qualify. Investors using income tax refunds as part of a deferred down payment program are able to provide quality, AFFORDABLE housing. In regards to underwriting we make it simple, don't care about your credit- all we look for are hard working folks who don't have any tax liens, no back child support and a housing ratio of a maximum 38% - 42% with at least $750 disposable income.

There are other contributing factors that come from experience. Fact is, Detroiter's are survivors and if you can make it here... well, you can make it just about anywhere. We had one client who has three daughters and no husband. She has a small job that pays minimum wage and she wanted to buy a house but didn't have the upfront money she needed. So what did she do?

Her and her daughters asked me for a $200 dollar micro loan- they were going to make dinners and sell them... I asked them what would be included in the dinner? (fried chicken, spaghetti, dinner roll and some string beans she answered). Sounded good to me! In 3 weeks these good folks raised over $3,000 and closed the following Friday. That was about 6 months ago and the borrower has never missed a payment. In addition because of her documented income and family size she qualifies for poverty hardship on the property taxes which eliminate that variable from her monthly payment all together.

I have several stories just like this one that really showcase the spirit of the hard working folks in Detroit that are making it despite the "job market" or lack of "good jobs". These people know how to hustle and are still very much so a part of their community. Don't get me wrong- Detroiter's for generations have been spoiled by the factory jobs... and the lack of those jobs has indeed changed the face of Detroit. But like a phoenix, these people are rising. And by the way, we're at a 90% collection ratio on all payments for the last year. The only problems we have sometimes is people don't get there money in their account on time for automatic debit but issues like this are resolved within days.

And by the way, thank you everyone for your comments- I appreciate your interest our post.