All Forum Posts by: John Knappmann

Good reason to inspect the property every so often.  I have not done that in the past, but plan to do so going forward.  Just this week I sent an email to my tenants that I would be starting inspections.

You're in A2, what about student rentals?  Or Ypsilanti?  

I agree with Al's comments, adding that you have to consider cash flow and potential appreciation. More important, I think you have to find a type of area you feel comfortable marketing to.  I'm fine with blue collar areas because that is how I grew up, but a war zone would scare me, so it doesn't matter what the numbers in a war zone say.

I have two in Wayne County, including one in Detroit. Love them.

So the buyers get 1300 decent houses, 3000 that need torn down, and 2000 vacant lots. $24 million to demolish the bad ones should be figured into the bid. The vacant lots are not worth anything, really. $27 mil to 1300 decent houses works out to about 21000/house, unless they figure they can do the demolitions cheaper. Sounds like a win-win to me.

@Ben When you have less money, you cut spending. So do I. But for a local governmental, there are certain things you can't cut. Police, fire, ambulances, lights. Detroit already cut these things below acceptable levels. Whatever else is left to cut is not going to change anything.

 @James De Silva

Although I agree that part of the problem is the blocks with many empty lots, how do you really shrink the city without walling off part of it and kicking people out of their homes in those areas?  

I may be late to the party, but feel a need to weigh in on some key points:

1) A portion of Detroit's deficit can be attributed to changes in the state's municipal funding system, changes which victimized urban and fully developed areas and rewarded small towns and open areas.  When the state ran into their own financial issues, they chose to cut local revenue sharing (meant to replace other money lost in another tax change).  That change alone meant $200 million less for Detroit.

2) The real estate collapse hit Detroit worse than just about anywhere else.  Tax revenues plummeted.  Then, thanks to certain unique aspects of Michigan law, residential taxes did not bounce back when prices bounced back up.  It will be 2028 before taxable valuations are at 2008 levels.

3) After Detroit was having problems, bonding interest went up.  Creditors received a lot more interest due to a higher perceived risk of default.  Then, when a default occurs, they want to be made completely whole.  

4) Pension and retiree health care costs did go up, and I'll bet they did where you live, too.  Detroit can be blamed for not doing more about this. 

5) Detroit's population drop started in the early sixties. It has continued since then.  Part of that was not Detroit's fault.  Freeways were built, so people could move to the suburbs.  See also Cleveland and other big cities which are not as big.

6) Yes, there has been corruption, but the actual economic impact of that is insignificant compared to the items above.

7) When the Emergency Manager came in, he realized the problems could not be fixed with the debt load.  If it was as simple as cutting pensions and not being corrupt, well, he did that.  But it was not near enough.   He still took Detroit into bankruptcy.

8) Pensions will be cut (see 4 above), but many of those people do not still live in Detroit, so the actual impact on residents is not as much as you think.

9) Detroit comes out of bankruptcy shedding a crippling debt load.  You can't pay for police and fire when 40% of reduced finances go to pay debt each year.

I am optimistic that Detroit will do better coming out of bankruptcy.  Long term, there needs to be changes to municipal funding in Michigan or Detroit will be joined by plenty of other cities in fiscal disaster.  

Welcome!

1. Me
2. All my life.
3. 4 (could be tougher).
4. I manage my own properties. I would consider a PM if I had too many to keep track of or they were not in my area. But I like staying directly involved.