What You Must Know Before Investing in Detroit Foreclosures

InvestorDirector.com

Contributed by: Jeremy Burgess, Urban Detroit Wholesalers

Detroit has great price points, excellent cash flow, and a tremendous return on your investment if you know what you’re doing. Too many times I see investors rushing into Detroit real estate because of prices without any knowledge of what they’re doing. They don’t work with anyone that has knowledge of the area and they don’t have any good contacts. They just figure that the prices are so cheap, it has to work. Well, I’m here to tell you that this just isn’t true.

The $1,000 Detroit House
This is the single most frequent request I hear from investors. “I want to buy the $1,000 house that I heard on the news”. No you don’t and here’s why. Detroit has great prices but it has it’s limits. The $1,000 house is that price and still for sale for a reason. Here’s what I’ve seen with the $1,000 or for that matter the houses that are more than $1,000 but still cheaper than you usually see in Detroit:

• They are in bad neighborhoods that are hard to rent, have very low rents, and have a high probability of vandalism and theft to the house.
• They require so much rehab work you will end up spending as much as the other houses after fixing it up.
• They usually have high taxes, back taxes or both.

I have seen people that invest in areas with some amount of success but for the most part I have seen them doing most of the work themselves, not fixing up the house to code, renting to anyone that walks by, knocking on the doors to collect rent, going to court often for evictions, and living close to the area. They may end up getting a good cash on cash return but they are spending a lot of time to get it.

The Great Looking House in a Bad Neighborhood
I see houses come across my desk every day that don’t need much work, have reasonable taxes, and have reasonable prices. That is until you look at the location. Location is key in Detroit! You can have the best house but if it’s not in a good neighborhood, you will not be successful. Bad neighborhoods will leave you with a house that isn’t rented and will quite possibly be broken into and vandalized. This happens very rarely in the good neighborhoods. See our report on  for more on good neighborhoods.

The Great Neighborhood and Great House with No Contacts
You must have great on the group contacts or be working with a company that has great contacts in order to be successful in Detroit real estate. Contacts like contractors, property managers, property security companies, mortgage brokers, insurance agents, and other critical contacts are a must. Make sure that anyone you’re working with has long standing relationships, documented processes, and a lot of experience working with everyone.

The Great House with High Taxes
Taxes vary greatly from house to house, in the same neighborhood or even on the same street in Detroit. If you’re not checking taxes or taking them into account, you’re gambling with your investment. Taxes are our biggest qualifying factor after location. Taxes and location make or break a deal.

At Urban Detroit Wholesalers we take into account these factors and more in providing great deals to you. Don’t just take our word for it as we post all of the due diligence that you need to know on each of our houses. View our Detroit Foreclosures to see contractor estimates, a rehab checklist, public records, appraisals, pictures, video walk throughs and everything else you need to know to make a buying decision.

If you’re new to investing in Detroit, I suggest reading our Detroit FAQ (Frequently Asked Questions). If you’re investing from out of the country, we have created many successful investors from a wide variety of countries. Our processes and contacts insure that you will be successful investing from abroad. Read our International Detroit Investing FAQ.

Written by: Jared Pomranky