Investing in Detroit real estate may be tricky

Investing in Detroit real estate may be tricky

Investing in Detroit real estate is tricky. I get a quite a few calls and emails from people who have bought Detroit investment properties on how to resolve problems with their investments.  One of the major issues these investors have is how to reduce Detroit property taxes after they have bought the property.  They don’t realize when they buy a $4000 Detroit home they could have a $4000 a year in property taxes.  Here is one of my latest emails from an investor:

I saw your site and thought it would be worth contacting you.  I live in FLA and am a full time real estate investor. Last year I bought 2 Detroit foreclosures.  It has taken me almost a full year, after calls and letters, before the City/County would tell me what my Detroit property taxes were/are.  I guess they could not read the typing on the HUD settlement statement because they have been sending them to the wrong location; and the addresses, according to their website don’t exist.  Anyways the taxes seem VERY high.

Needless to say, as an Investor, I don’t care about the City’s economic issues, I’m more concerned about my cash flow.  In fact, if they were not raping me on taxes, I’d probably buy more Detroit foreclosures.  Or if the Detroit city officials replied to letters or could read the typing on the HUD settlement statements and sent to bills to the correct location.

I spoke with them today, and despite paying cash, they say one has a mortgage and they can’t discuss my property with me – yet making me spend more time to correct there mistakes.  ugh!

Anyways, in February, I asked my Metro Detroit real estate agent to send me comps which I sent to the City to dispute the property tax assessment (SEV) and never received an answer or reply.

I’ve asked my metro Detroit real estate agent to save me a flight and represent me this February, but he say he does not feel comfortable doing that.

Have you had any success fighting ‘city hall’ to lower tax rates?

fyi, here are my 2 property addresses and SEV’s yeah I know kind of crappy areas, but hey they cash flow some:
1.) Detroit, MI 48228 – SEV 29,868 annual taxes about $1400/yr – property rents for $650/mo
2.) Detroit, MI 48227 – SEV 35,338 annual taxes about 3200/yr property rents for 800/mo

I myself think investing in Detroit real estate for an out of state investor is a bad investment.  But many out of state investors don’t believe me so I thought I would share one of the many stories I get from them.  This guy above hasn’t been stuck with a water bill yet, been fined by the City yet, or had to evict anybody yet for lack of rent.  He has yet to learn fully about investing in the City of Detroit and he is already frustrated.  So I replied back:

Unfortunately you have encountered a one of the many problems out of state investors have with investing in Detroit real estate.  Unfortunately I don’t provide that service of going before the board.  It just isn’t worth the money for the time I would have to spend to do it.  The City of Detroit is very tough to deal with when fighting Detroit property tax assessments.  They have a multi appearance tax review board to fight Detroit taxes

They even send out the dates and times to the review board very close to the review board dates.  By doing that it reduces the amount of people able to fight them.   You may not even get the notice of where or when to show up.

 Taxes are very high compared to the cost of the property.  Even if you provide them good documentation they don’t have to reduce the property taxes.   Then you have to take it to the next level of the Michigan State tax tribunal.  Which is a year to a year and a half to be heard and costs more money.

That’s is one of the reason why I turn away out of state and out of country investors that want to buy in Detroit.  I believe you have to be hands on and live locally to be a successful Metro Detroit real estate investor.  Too many issues like you are encountering occur with the City of Detroit.  The City of Detroit doesn’t have the resources or the necessary amount of personnel to handle all of the cities issues.  They need to keep every property tax dollar they can and they are not going to make it easy for you to lower your taxes.

As much as you don’t care about the City of Detroit’s economic issues they directly affect you.  They need every tax dollar they can get to run the city.  With the population diminishing because of people moving out of the city and less homes to rent because of fires and vandalism.

One piece of advice is too keep the property full or you will have a good chance of the property getting vandalized.  Many times they will steal the furnace, hot water heaters, and strip the house of any copper plumbing.  My advice is too get out if you can.  Ride it out so long as you are making money or sell it quick because I don’t think it will turn around any time soon.

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Good luck with your investment

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Russ Ravary your metro Detroit real estate agent


My quote of the day is:

“Finish each day and be done with it. You have done what you could; some blunders and absurdities have crept in; forget them as soon as you can. Tomorrow is a new day; you shall begin it serenely and with too high a spirit to be encumbered with your old nonsense.” Ralph Waldo Emerson

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16 years of experience and full time Russ Ravary

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