Detroit? A quick review of my hometown's challenges and opportunities

[Paul J.]

Such a popular topic on this site... I have been following a lot of the threads, I have a keyword alert for "Detroit" and my email box fills up every day :-). I thought I would share my two cents and history in the city.

Me - I am 34 and grew up in Oakland County (northern suburban Detroit). As a young man, I hired on with SBC (now AT&T) as a high speed internet and telephone technician. I started in Oakland County, then went on to Downtown Detroit, and then after that areas in Southwest Detroit, Cass Corridor, Woodbridge, Corktown, and Dearborn. I was sometimes loaned to other neighborhoods on both the west & east side, so I think I am fairly qualified to explain some things about the city and its real estate stock, at least how it was until a few years ago. I spent my days driving around the city, much of that in the alleys looking for telephone terminals, and going in 2, 3, 4 homes a day to repair telephone service for almost a decade.

People here are saying 'Detroit, terrible investment" and others are saying "Detroit, what an opportunity". They're both right, depending on where you are standing.

Since leaving my beloved Motor City, I have lived in Portland Oregon, Sonoma County California, Los Angeles, and San Luis Obispo. I have travelled to many cities across the East Coast as well. While I am new to landlording, I think I can say from a fairly-educated perspective that Detroit is a very, very unique place. I hear people here saying "You've got to know your market", and I think this rule holds 10x the weight when it comes to the city of Detroit. You really need to know your areas well in Detroit.

I can vouch for many of the stories told here, both good and bad. In Detroit, the urban core has been neglected so severely and damaged so badly by things like insurance redlining, racism, mismanagement, collapse of the manufacturing economy... The list goes on & on. This has left quite a patchwork of neighborhoods in the city, where quite literally one block can have solid owner-occupied homes that are well kept and have a tight neighborhood association, and quite literally two blocks further on the same street there are the burnt shells of homes that are occupied by drug users, feral dogs, or worse. Detroit has had the highest rate of urban arson in any city in the country. There are many areas of the city where you will not get a police response for a property crime without going down to the station yourself to wait in line and make a report. I once witnessed an attempted shooting in broad daylight on a busy street, reported a license plate number and description, and was asked "Was anyone hurt? if not just come down to the station".

That said - Detroit also has a lot of great things going for it. If you like music, art, or history it is an amazing place full of all of it. There are many neighborhoods in the city that have been on the move for a decade or more, an all indications seem to be that there may be a light at the end of the tunnel on both the city government and the mass transit issues that have been lurking for 30+ years. Many of those that have grown up around this town and have stuck around it have a fierce loyalty and care deeply for their town. I lived Downtown for a few years and certainly walked around at all hours of the day and night, and never had any trouble. The areas surrounding Wayne State University are most definitely vibrant, even when they don't always seem that way from an outside perspective.

So - real estate investment there - I am currently living in California and recently purchased my first rental property in Oakland County. While there are many, many properties available in city neighborhoods like Sherwood Forest, Boston Edison, and others - I don't feel qualified to purchase there from afar, especially as a newbie. Even with my years of driving the streets, things happen there on such a mico-neighborhood level that I feel it would be very difficult to get a feel of a particular property without driving around the neighborhood at night, talking to neighbors, etcetera.

If you think you want to invest in Detroit, I think it would be a very good idea for you to plan to relocate there, at least for a time. I spent the first 30 years of my life there and have a network of friends and family I can lean on to provide references for vendors and help out, and I still wouldn't feel comfortable playing long-distance landlord there unless you are prepared to deal with issues like scrapping in broad daylight and a culture of mistrust and contempt of authority that is, perhaps rightfully so, held by many residents. I'm not saying you might not get lucky, and certainly whatever you buy there will cash flow with incredible numbers if you get it rented - my worry comes from the times when it is not rented. I worked at homes where folks had bricks pried from the front of the house and dug out of walkways. Understand that this level of desperation runs deep in areas of the city and you will be exposed to things you may have never realized happen in american cities.

Some excellent reading on the history of the cities troubles is "Origins of the Urban Crisis" by Thomas Sugrue - it's really a must-read primer on the relationship between the city and suburbs if you have any passing interest in Detroit.

Anyway, that's probably more than 2 cents worth. On my next trip back home, I certainly will be taking a look at properties for sale - when I can be there to evaluate them in person.