Thoughts on Buy and Hold in Detroit

[Rosalina Brenda Berk]

Hello,

Detroit! Good, bad, or ugly for buy and hold rental property? I'd love to hear your story. 

I'm researching markets for my first investment and I obviously want to go where the math makes sense. 

If you are a Detroit investor - How long have you had your property(ies)? How is the job growth? Are you a local or out of state?

Since I'm in California, one option is to find a reputable turnkey company. On that note, anyone have experience with turnkeys? I feel like they're too good to be true, but maybe I'm wrong. 

Thought or suggestions are greatly appreciated. 

Thanks!  

-Brenda

[Tom A.]

Unless someone is on the ground in Detroit it's hard to know the good deals from the bad. The housing stock can still look good even in a bad neighborhood, until vacancy goes up, the houses get scrapped and burnt, and then it's obvious it's a bad area. A lot of investors have lost money in Detroit. It's not for the new investor, the casual investor, the ignorant investor or the idealist investor.

There are some great neighborhoods in Detroit for investment as well as ones I'd live in myself. Certain areas of Detroit are really hot right now. Some people have made a lot of money recently due to appreciation, and the cash flow can be good if you invest correctly.

That said, I really don't care to have many out-of-state or out-of-country investors buying property in Detroit. They do a number of things which hurt the city and the people who live here. 

One, blinded by ROI promises, they buy crappy houses in crappy neighborhoods from shady turnkey companies. The investment doesn't perform, the far away investor cuts their losses and abandons the house, the neighborhood which was struggling to begin with is blighted by another abandoned house.

Two, buying on ROI, even if they have a decent house in a decent neighborhood, either they or their property management company cut corners and don't maintain the house properly and it starts to look "rental-ish" in a neighborhood with lots of owner-occupants.

Three, they or their property management company fails to adequately screen tenants, resulting in a trashed property that the investor may not reinvest in to fix up to neighborhood standards, becoming a blot on the neighborhood.

Four, the property management company may blatantly rip off the investor, pocketing the rent, the repair funds, and renting out the now crappy house to any derelict who can pay a few hundred dollars a month.

Astute local investors don't usually make these mistakes.  They tend to keep a closer eye on their investments and have a stake in the future of the area since they invest there, live nearby and know what's happening in the city.  They aren't going to let things slid into disrepair and react by reallocating their investment capital to a city 1000 miles away.

So rather than dispute the comments like the ones by @Curt Davis or own local Debbie-downer when it comes to Detroit (Scott K, where are you?), I'll partially agree with their take on it and hope the investment activity tilts more toward locals and away from the block of long-distance investors who really aren't a net positive for the city I love.