I spent a week in Detroit to scope out deals. Here's what I found

[Fabiola F.]

Like all other investors, I heard all of the talk about Detroit, and since I needed to scale up my business and acquire large multifamily 20+ units, and because Atlanta deals were becoming tougher to negotiate, I knew that I needed to move into more emerging markets. I combed through a few opportunities in Macon and Birmingham, but didn't find the numbers that I was looking for. 

So I made a 1 day stop in Detroit and was blown away that I returned the following week last week for another 4 days of discovery. Yes, it's all true - good and bad. Cheap deals, lots of vacancies, a lot of investor speculation, wide open market, buyer beware, etc. However, as an investor out of Miami with a base in other top markets like Atlanta, all I saw in Detroit was opportunity. 

I did have a lot of help during my canvassing spending my days with 2 Detroit-based ground up multifamily developers and a realtor that helped me identify pockets of opportunity. However, I'm not blind to the Detroit horror stories and overly optimistic investors that have lost more than they gained. 

Since there's plenty on the BP posts warning investors about Detroit, I thought it would be right to share a few tips for investors still curious or optimistic about the Detroit market.

1) First, it's overwhelming how every block is completely different from the next, and just because you spot a good deal on one block doesn't mean that the next block or parallel streets carry the same energy.

2) Secondly, you have to think placemaking instead of spot investing due to the excessive vacancies and blight. The more energy you can create in a target zone, the stronger it makes your deal.

3) Development costs will be at a premium due to a loss of trades and labor shortage. What I'm accustomed to paying for renovations in South Florida is at least 2.5x the cost in Detroit.

4) There's also a huge labor shortage due to all of the investor demand. I've had headaches with this in Jacksonville and had to bring in a labor team from 2 hrs outside of Jacksonville just to complete the project. Plan ahead for the labor shortages in Detroit. 

5) Don't get too fixed on price. There's a lot of dirt cheap deals (under $10k for a SFH) that can be enticing, but those may be your toughest streets, but there's also huge inventory of higher priced commercial and multifamily deals that's been vacant for a while that you really can drive a hard bargain on.

Detroit isn't for the novice, but don't let it scare you away, and obviously, the more ground network you have, the easier it'll be to navigate. I had a phenomenal time learning the city, and as disheartening as it is to see what the recession did to this thriving historical city, I'm also very optimistic about the social impact that developers will be able to create in the city.

If you've had Detroit experience, been curious, or have been warned against Detroit, I'd love to hear your feedback.

[Keyonte Summers]

@Fabiola F. For you not to be a Detroit native you have explained it quite well. I'm a local investor from Detroit that invest in and around the surrounding cities.  You hit the nail on the head. It's block by block but there are good pockets for investors you just have to know where or have people that know.  I get contacted by several novice investors that want to get started in Detroit but I always try to get them to see the bigger picture that you have to come and experience it yourself to best know how to invest your money. Most of them never follow-up and try and get a deal. The contractors, workers and labor workers are great but you have to go with a reputable company and don't try and get it down for cheap because that's when you run into scam artist.

For my personal experience it has been great with my properties since I know where to go and what to stay away from. I've run into a few headache realtors, sellers, and investors that try and falsify rental rolls, leases and other documents during transactions but when you have a seasoned realtor an do your due diligence its easy to spot. I had a 6 deal package fall apart over these type of investor. I make sure I don't over rehab for certain areas where I won't get a good return on my investment. I make sure all my properties mechanical are inspected before renting to make sure my capex/repair reserves are properly budgeted for. Many people don't understand that in order to have things move smoothly as an investor you have to lay the groundwork first.