Move to Detroit – investing in Detroit homes
What to avoid when buying homes in Detroit
I honestly think it is a bad move for out of state investors to buy in Detroit. I believe they would be better off giving the money to charity. Or sticking the money out the window when driving 70 mph because at least in the end it would be gone and you would not have heartaches along the way.
Here is what is wrong with investing in Detroit. So many people in Detroit are below the poverty line or on government assistance. Even though there is so many abandoned and crumbling homes there is an abundance of rental homes. I believe the majority of homes in the city are rentals. So renters can just jump from one to the other if they do not pay the rent. So entering into the rental market is tough.
Property taxes are higher than the value of the property. To fight to get a reduction is no easy chore. If I haven’t had 50 out of state investors call me over the years to fight their taxes for them, I would be lying. I won’t tackle that either because the system is stacked against the home owners. So basically you are over paying on taxes on many properties. Because of the high crime rate in Detroit your property taxes and car insurance is much higher than in the suburbs.
The whole goal of buying a property is appreciation. Will Detroit homes appreciate? Yes probably, slowly over time. But usually appreciation is happening through what I call scams. Investors buy homes, then re-sell them to out of state and out of country investors that think they are getting a bargain.
I recently had another AR member’s investor want to sell some they bought. They had bought them on the high side of property values. Then fixed them up nice, putting more money into them. No they were basically upside down without even including selling costs. Another investor sucked in. He had tried renting them, but that was not working out so well.
Many landlords are stuck with water bills after the renters move out. Or a bunch of garbage from the tenant. If the house goes vacant you have a 50-50 chance of the home being stripped of the hot water heater, the furnace, and anything metal or good. Metal scrapping by thieves is a big time business.
So will Detroit homes appreciate? Would you move to a city that the schools are at the bottom of the state testing scores. A school system that had a 25% graduation rate? Would you move to a city that cannot afford to fix the city lights or maintain the parks. Would you move to a city that the police, fire, and EMS has slow response times due to lack of running equipment, lack of personnel, or delays because of the crime. I myself do not want a client to die because EMS took too long. So basically city services and schools are sub par. So why would you want to move there or live there unless you could not afford to live somewhere else.
Yes there are good places to live in Detroit, there are many good people that call the city home, but the crime, the schools, the city services are not the best. Add in the court system that favors the renters, the high fines you could get for the abandoned cars and junk left behind. Not a great place to be a out of state landlord.
The crime is bad. They have to have security guards at some gas stations in the city so the people pumping gas do not get robbed or carjacked while pumping gas. Our local news has at least one shooting a night on TV from Detroit. Carjackings, drug deals gone bad, gangs, and shootings. I don’t like to go do there because I am a target. Why go to the city to eat?
As for fixing and flipping. I have heard stories of new doors being stolen the night they have been put on. Some fixers and flippers have their workers live in the place while fixing and selling. I have heard stories of scrappers backing up to a house with a chain and ripping off the aluminum awning. So will all of the house be there when you go to sell or go to close. It is a big gamble for out of state investors. The odds are that they are going to lose.
So my ethics do not allow me to sell to out of state investors who have a 90% chance of losing money. I will only sell Detroit properties to people who want to live there, or experienced in state investors. Investing in Detroit is not for novices.