One of the investment company officials in the article says Detroit is an investors dream. I myself think it will become a nightmare for them and the City of Detroit. Here is my predicition. I believe we will see a fair percentage of these homes coming back up for sale in the next four years once the investors become disenchanted over:
- Detroit's high taxes for investment properties
- The inability to reduce the investment property taxes easily
- Detroit's renter population and the ability to collect rent
- Detroit's theft problem of vacant rental homes. Losses of furnaces, copper plumbing, radiators, and hot water heaters will rack up unexpected costs.
- Management company fees and poor management companies.
- Lack of demand of for the homes because of diminishing prospective renters.
I think after a few years investors will bail out of their Detroit investments creating a problem for the City of Detroit. I think some investors will just walk away from the properties adding to the City of Detroit's problems. If they have no mortgage the City will lose money. They won't be able to collect the back taxes. They won't be able to collect past water bills. Some of them will become uninhabitable, some will have to be demolished.
The ones that have mortgages on them will be foreclosed on. The people that have $45,000 invested in them won't be able to sell them. They are underwater! So what do they do with them. Do they look for another "overseas" or "out of state" investor to overpay for the home. Detroit properties won't rise in value that quick because.
- Banks not wanting to loan small amounts under $25,000.
- Of new appraisal rules and HVCC (These limit how fast home values rise)
- The demand
- The foreclosure process leaning toward cash buyers over mortgages even if they are lower priced.
What I don't know is how many investors will give up or how soon? That is the problem of the future for the City of Detroit.
These are the many reasons why I don't want take "out of Country investors" or "out of state investors" money. My professional ethics won't let me just take somebody for a ride just to make a buck. The media has people around the world hyped that there are easy pickings here in Detroit. I hate to tell you but it's not as rosey as you think. So before you invest research it well.
From a real estate agent at ground level
Metro Detroit real estate investment information
Investing in Detroit real estate isn't for beginners. Part I
Investing in Detroit real estate isn't for beginners. Part II
Investing in Detroit real estate isn't for beginners. Part III
Investing in Detroit real estate isn't for beginners. Part IV
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My Month of December quote:
~ Mark Twain”
Russ Ravary
"helping make your move easier"
your local Metro Detroit Realtor helping clients like you sell and buy homes through out the entire Metro Detroit suburbs. I love showing and selling Oakland County and Livingston County Lake front homes too.
Nice analysis Russ - I could have written almost the same blog about Baltimore, except that Baltimore does have good long-term job growth prospects, so the future looks a little rosier.
But all of the problems you've cited, I've seen or dealt with, including investors fleeing from neighborhoods they couldn't get enough of during the boom....
Russ, this almost sounds like Arizona for investors. Our market is now saturated with rentals. Investors swooped in - again - and grabbed all of the affordable properties with CASH. Guess the rich get richer and the poorer, more so. The middle class seems to be getting squeezed out...
Charita,
It is so hard and sad to see Detroit go down. I just don't see how it will turn. All the big business leaders have poured money into the city trying to help it but it is in a slow death spiral right now. I'm praying for a miracle. Because just like Detroit can't survive without the suburbs, the suburbs can't have a decayed city in the middle without being hurt either.
I moved away from Detroit in 1982 (graduate of Pershing High School) so I know very well about the bustling city it use to be with a vibrant and rich downtown city center. I remember the pride of the motor city, the Ethic Festival down by the river; the Detroit Jazz festival and the draw from the suburbs to a place that was alive and lively. I lived the Detroit Renaissance and I'm hopeful that someday things will turnaround. I'm not giving in to the notion that there's no hope. I believe that there is always hope. Happy Holidays to your Russ.
Sorry to hear about the plight of Detroit Russ, we have revitalized or started on our wonderful city and although it is not to my liking I go with the majority because I think they know best. I will work with them and their cause because un like our federal government I blieve together we can and seperate we fall. Merry Christmas
Russ, This was a wonderful series on Detroit with information many of us like myself didn't know. I'm sorry to hear the city has fallen on such hard times and it seems to be in other parts of the Country as well. I too hope these places can all be revitalized some time in the future.