Would you invest in Detroit?
 

Would you invest in Detroit?

Would you buy this single family home, currently listed for $25,000 [probably room to negotiate]? You scrape up 20% down and your principle + interest is under $100/month -- no need to worry about an HOA either.

link,: https://www.zillow.com/homedetails/6...88670773_zpid/

Aerial view of the neighborhood:
https://www.google.com/maps/place/60...!4d-83.0358125

No.

Not to bring Chicago into this, but as it is relevant to this thread, you can find properties like this in some of the most impoverished, crime-infested areas of Chicago for this kind of price.

And my mindset is, why would I buy something like that in Detroit if I could get it in Chicago, where you have a huge job and wealth engine accessible by mass transit just a few miles away?

Good points.

No, this is a good thread idea

Yes I would invest.

Maybe if I lived there and could make informed decisions and be able to oversee my investment. Otherwise, no.

Ditto.

I wouldn't feel comfortable making real estate investments in a market that I didn't know like the back of my own hand.

But that's just me. I'm aware that many others are less risk averse than I am. Detroit is probably a good place for investment by the savvy prospector who knows the lay of the land in the motor City.

Downtown lots would make sense. Or areas that might be snatched up in the future or have the probability of doing so.

would I invest in Detroit? If I had the funds to do so, the answer is potentially. It all depends on how much information I could get about the surrounding area, vacant home percentages, that kind of thing.

Thankfully, at least the central areas of Detroit have seen a massive investment over the past 5-10 years, and the rate of investment seems to be increasing. Thrilled to see at least parts of Detroit coming back!

Aaron (Glworock)

As to the topic at hand, I can't offer a simple answer.

First off, to a slightly different question ("would I pay $25k for the house in the link above"), the answer is "hell no". There's basically an extra zero in that price in my opinion. A house like that in a neighborhood like that should be pretty much free (paying off a few grand in back taxes is what I'd expect to have to disburse for acquisition).

But let's instead assume we're talking about $25k houses in more attractive Detroit neighborhoods than that... the answer is, I'd be interested _IF_ I could move to the city. And since I'm already spread too thin (I'm actually looking to sell my two duplexes that are both isolated in order to get down to only two portfolios that are very concentrated), I wouldn't start a new portfolio in another city.

I was in a serious relationship with a Yankee for a while and after checking out (and passing on) Burlington real estate (incredibly overpriced), I expanded my radius to Albany, looking at the most blighted neighborhoods and I came within a hair of buying buildings there. So, yeah, if Detroit was within reasonable distance that I could show up regularly and/or live there part-time, I would probably be interested, since I was extremely seriously interested in a very similar market.

Alternatively, if Detroit didn't ever freeze in winter and I could get Detroit properties that are as solidly built as 1950s Florida ones, THEN that's stuff I could consider managing somewhat remotely. Northern-style buildings, though - nope. Not worth it. The cap rates for me to even consider it would have to be so incredibly attractive that locals would inevitably step in before I'd bite.

Personally, I'd prefer Philly to Detroit.

I was looking semi-seriously at real estate in the South End in Philly (very tempting but the main reason I didn't buy anything is that I was already too geographically spread for my taste, and looking at reversing that, let alone opening new fronts!) and I was absolutely sure the prices over there were about to go up significantly sooner or later... that was a few years ago, and I was correct in retrospect (I usually am nowadays when it comes to having this instinct that a certain area is on the verge of improvement).

The problem with investing in cities other than your own playground is that unless you have some special foresight and are willing to "pay more" than others, you'll usually get beat by locals who can afford to tolerate a smaller return than the minimum gross threshold required to make sense for you as a remote owner.

Imagine a certain Chicago property, and it's almost guaranteed there's a price point where someone like LouisVanDerWright would snap it up immediately finding it an amazing deal while someone like me would still find it too expensive considering I have to factor in the hassle and expense (mostly due to poorer control) of managing/overseeing property that far away.

Reverse is true too, in my hometown here (a day's drive away from Louis' hometown), the cap rates would have to be crazy high for it to even be on his radar as a secondary investment portfolio, and since I (and plenty others) are willing to buy and operate the properties at higher prices than that (giving us still good cap rates), he might take a look but it's never going to be worth it for him to try to compete with us here in our own playground.

Oh! That's interesting, and it makes the thread even more relevant.

Why Detroit then (over, say, Blighted Philly or Blighted St. Louis)?

Are you young and mobile and single enough that you could uproot yourself and move to Detroit?

Can you do some work yourself?

If you've answered yes to both these questions, you could probably follow a path similar to the one I followed for myself, and end up with a sizable real estate portfolio reasonably early in your life.

Albany is kinda pricy. And much of it is run down.

As for Detroit. No. Simply because of logistics. Too far to manage from Houston otherwise i would. Detroit is making a serious comeback and opportunities are to be had but $25k is a bit steep for investment properties considering they were just a fraction of that a couple of years ago.

No it wasn't (pricy), at least not when I was looking. Some of the county land bank buildings were essentially free - I looked at a couple of those (both on Clinton Avenue at the edge of Arbor Hill).

Let me look just for fun and I'll see if I can find properties I'd still consider good buys in the NY Capital. Give me a few minutes :)

Many of us pretty much agree that even though we all find Detroit to have good potential, in practice investing in Detroit is almost certainly going to be beat for you by investing in the right up-and-coming Houston neighborhood, for Steely by investing in the right up-and-coming Chicago neighborhood, and for Sun Belt to investing in the right up-and-coming neighborhood where he lives (or close enough to it). (L.A., right?)

Wow, it DID go up significantly! (I was right again :P)

This gorgeous brownstone, I checked it out in person in 2014 (could be had for $15k-$20k in my estimation at the time... and it did sell for $20k the next year). I'm noting that whoever bought it did not do anything with it and that it's back on the market.

https://www.realtor.com/realestatean...-21873?view=qv

... I need to refrain from buying it. I've always wanted a NY Brownstone, and that's (technically NY).

This well-located duplex (in the Pastures area) is not bad for ~$80k cash only.

https://www.realtor.com/realestatean...-73222?view=qv

But dilapidated buildings that were selling for ~$5k-$10k are now selling for ~$25k-$50k. (If the Detroit property featured in the OP actually sells for that ~$25k, it's exactly the same kind of market change - I am 100% sure it was worth a few grand tops, a few years ago).

This duplex isn't too bad and location isn't catastrophic, but I prefer the one in the Pastures I linked to above.
https://www.realtor.com/realestatean...-33843?view=qv

Investing seems scary. We own a rental townhouse and that has exploded in value and is almost worth as much as our primary home. But we were lucky that part of town is hot. I would love to get into real estate.

I almost moved to Albany to rent and places like Guilderland, nicer parts of Albany (Washington Park area), Cohoes, etc. were $$$. Troy, parts of Rensselaer and north of downtown Albany were cheap. Arbor Hill area up through Menands kinda rough.

I've seen some of those brownstones. Tragic. In Manhattan, they'd be worth millions. Further south near Western Ave, they're more solid but still a little rough but livable.

I almost bought a building in that area, but someone else snapped it up before I did because I hesitated.

In fact the listing from back then is still available online! (when I was looking, was in late 2013/early 2014)

https://www.realtor.com/realestatean...3_M40496-72102

Really great location, right at the park entrance. And a brownstone. With 6 units! The potential cap rate on it was insane.