Detroit?

Question

Everytime I read something it seems like Detroit and most of Michigan for that factor has gotten worse and worse.. cheaper and cheaper.. Do you think this town will eventually rebound!? I know no one can say for sure, who knows, but what are your thoughts? Recently read this article http://www.dailyfinance.com/2009/11/17/detroit-stadium-or-new-york-studio-the-silverdome-sells-for-58/

That stadium sold for just over 1% of the orignal cost to build? Amazing. Sad. Seems like its almost too far gone to come back to me.
-Scott

Douglas Christian · Answer

Well I will share my strategy about the taxes. Before I buy the home I go and speak with the city about reducing the taxes and so far 100% they have agreed and reduced the taxes TREMENDOUSLY. You just have to show them the reasoning behind your request. Vacant and no taxes or occupied and helping out the community and some taxes. It is all about your NEGOTIATING level. That strategy can be used in EVERY CITY across the country. I usually charge for this information, but because of the GREAT INPUT I will let you have it for free. Remember if you don't ask you will never RECIEVE. SUCCESS BREEDS SUCCESS

Mark Yuschak · Answer

I agree with pretty much everything in this post. I live this market everyday. Unfortunately the media paints a worst-case-scenario picture about Detriot and the state in general. Eddie did a great job of pointing out the highlights, and downfalls. All of the metro area surrounding Detroit is labeled as Detroit, even though it's hardly Detroit. The suburbs are really nice and offer affordable housing. The inner city has been very corrupt for a long time, but things seem to be changing now that the ring leader is gone, Kwame. The rest of the state will slowly follow suit once our Democrat governer is elected out of office. The work force is highly skilled and manufacturing centric, but the union mentality has tarnished things since there's an entitlement sentiment among the blue collar workers. As more jobs leave the state they're beginning to realize that they ARE replaceable and the mindset is changing, albeit, slowly. Until more jobs are brought to the state not much will change. But, for jobs to be brought in, the menality and tax structure need to improve. Massive shifts like that take time. But, in the mean time, the state is not 100% desolate and those folks still desire decent housing at an afforable price. There's a happy medium to maintain.

Terrence Wright · Answer

Thanks for the specifics Eddie. You are correct though. Typically, in Detroit, for about 12k you can get a nice 3bed/1 bath house with a full basement on a large lot. Easily rent for $700/month with taxes under $1,800 annually. For brick homes, taxes are higher (avg $2,500 - $3,500) but they will generally command higher rents. With the proper cash flow it will be hard to go wrong. It also depends on your comfort level with certain regions. If you prefer the south, you can definitely make a strong argument for AL, MS, LA. :cool:

Douglas Christian · Answer

I agree with what has been said, but I still invest in Motown. In and around the area. I grew up there and still have family there. I have been successful with my investing there because I know what I am doing. With that said, there are many areas that will feel a DEEP depression like Detroit in 2010. Foreclosures keep rising and states loosing tons of revenue. What is the solution? Well if you are an investor and a true one. You look at the opportunities and not the NEGATIVITY. I have been investing for over 8 yrs and all I have heard was not to, but if you do not invest in real estate what do you invest in the stock market, or your 401k so that they can take that from under you. To me real estate will always be the number investment tool for creating wealth and CASH FLOW. But, it has to be done right. You can pick wherever you feel comfortable, but at the end of the day as long as you are happy and making money then you are on your way. Detroit for me was a no brainer because prices and quality of the properties that I purchase. When I am in for 10-15k and getting $550-$650 no matter what the nay sayers say I SAY YES, YES AND YES. SUCCESS BREEDS SUCCESS

Terrence Wright · Answer

The Detroit metropolitan area has a population of over 5 million people. The population in the city of Detroit is under 1 million. There are some excellent areas within metro Detroit but every neighboring community is labeled "Detroit" by the national media. The local government has been completely overhauled, so it will be intersting to see if there's a shift in their practices. If you are skeptical about the actual city of Detroit, I understand, but the suburbs provide a wealth of resources and opportunity. I prefer investing in Detroit real estate. Peopl still need a place to live and there is a huge demand for nice affordable housing. Where else can you purchase and rehab for 20% ARV? If you have good property management and cash on hand you can make a killing in Detroit.

Shaun Steckler · Answer

Being from the South, I cannot predict what will happen in Detroit. But I can make the following statements, 1. As a result of the auto-industry declining, jobs have left the area. And when jobs leave, real estate values take a big hit. Jobs and real estate go hand in hand. They both have to be happy in order for the marriage to work. 2. I don't know if the economic shift there is permanent. But I do know that if new jobs are not created, the investment risk for real estate in Detroit will probably be too high.

Account Closed · Answer

Detroit has an excellent location for manufacturing businesses. But it's my understanding that there are problems with the local government not being friendly to business. If they would go on an all-out program to attract and nurture business, the city could recover. Transportaion is a biggy for manufacturing, and Detroit can offer it. But between the uncooperative government, the enormous welfare population, and the spoiled demanding workforce, I sure wouldn't locate a manufacturing plant there. My opinion: they are going to learn to change, or they are going to die.

Scott R. · Answer

Any thoughts on the stadium that sold and was referenced above, I guess that like most commercial properties the stadium is only worth the income in brings in, and not bringing any income in kills the value, but seems to be the biggest depreciation I've ever seen, 34 years, then sells for just 1% of orignal cost to build, and that was to build it in the 70's!

Eddie Ziv · Answer

Mark, I think that it is really depend on the law in which the assessment goes by. In California, a property can go for years without being assessed because of proposition 13, which disallow arbitrary tax increase, therefore the taxes are determined if and when the property is sold. I l own in my house for 22 years, so my taxes are estimated based on a very old assessment. Consequently, they are much lower than the house down the block that was bought three years ago. If the low allows the county to raise taxes based on the sale price, I'm sure the same law can and should apply when the sale show reduction of value in relation to the previous sale.

Mark Yuschak · Answer

My experiences are quite the opposite of Douglas'. I attempt to get my property taxes lowered on EVERY property I own. I start out amicably...they turn me down, so I start a case with the State Tax Tribunal. I've been successful with the State Tax Tribunal. But it's a very LOOOONG drawn out process. Afterall, the city/townships have no vested interest in reducing the property taxes. It's the their sole source of revenue stream. They can be reduced with a lot of perseverance and documentation (recent comps, etc.), but it's no where near as easy as Douglas claims (at least in my experience).