Investing in Detroit

The city of Detroit is ripe with opportunity. A current and momentary lack of liquidity in the mortgage market has created unprecedented market conditions. Investors are dictating acquisition prices while rent levels stay constant. The result of these factors is above average rental yields with the potential for long term capital appreciation. One can acquire a fully renovated property in this market for 25% of what it once traded for. A well informed investor will understand the phenomenal opportunity in this market because of a unified and strategic effort of revitalization of key neighborhoods by the city, state, and federal governments.




In Detroit's heyday it was second only to New York in terms of population growth, wealth, etc. Its infrastructure was built for a population at that time of 2MM people. There are only 800,000 people living in Detroit at this time. The population has slowly gravitated towards more stable neighborhood "pockets" however there are still many people who are living in areas where homes are boarded up, burnt out, or falling down. These are homes that were thrown up because of the city's significant growth in a short period of time due to an economy fueled by the automotive and manufacturing sectors creating a boom period in the areas like Detroit. Many of these "shotgun" homes were stick built; frame styled and only built to last 50 years or so. They are not viable anymore. These are the homes that you can find on an internet auction for $1k. Not worth buying though.


Many banks and institutional organizations who have been forced to become property owners do not see the differences in stable areas and not so stable areas. They see an address on a balance sheet and “write-off” great homes because of negative perceptions based on zip codes. By taking advantage of what you could say is a glitch in the banking world's accounting and strategically acquiring in the best neighborhoods, you are in essence insuring future capital appreciation because as the city's infrastructure shrinks around certain core neighborhoods, the values in the areas will only appreciate.


One company that is taking the lead in this area of investing in Detroit is Precise - Properties of Detroit. Visit their web site for more information about their investment programs for Detroit real estate.

Memories of The Little Rascals

When I was growing up there was a show on TV (yes we had TV back then) called Our Gang or sometimes The Little Rascals. It was a cute show about a bunch of kids and all of the trouble they got into. Every now and then the gang would need or want to raise some money, normally to help out some poor widow who was about to be evicted from her home or for other good causes. Invariably, someone would suggest - "Let's put on a show!" Then one of the other characters would chime in - "I'll get us a stage." Another would shout "We'll get together a band." And so would begin an episode in which the whole gang participated, some as the stage hands and some as performers (either in the band or on stage). Of course in this little show everything came out alright and the day was saved for the poor widow.

I think of that old show whenever I work with young, naive buyer who are out to invest in real estate, with the thought of "flipping houses." It's like - "We'll buy a fixer-upper" and "You do the painting. I'll do the repairs. We'll make our fortune" Most of these young innocents have no idea what they might be getting themselves into and most do not have the capital or the skills to really take on the challenges ahead. Unfortunately, many learn that the hard way, with the end result adding yet another foreclosed property into the current mess. Of course they have also damaged their credit along the way, many maxing out credit cards to buy the paint and materials to fix up the place. The lucky ones break even and a few might even turn a small profit.

So, what am I to do when facing one of these young entrepreneurs? I try to provide some counsel on the risks and size of the task ahead. I have lots of information on my Web sites http://www.themilfordteam.com/ and http://www.mihomebuyer.com/ about investing in real estate and about buying fixer-uppers. There are pages that show what the paybacks are from various updates and upgrades to a house and lots of artilces on the pitfalls of real estate investing. I try to provide educational information, without being so negative that it would turn them off to working with me. The truth is that real estate investing for the little guy is a very tough, very risky business. Yes, it can also be very rewarding; but you have to have the wherewithal to ride out a longer than expected sales cycle when you go to sell and the skills (or contacts) to get the necessary work done for reasonable prices that will still allow you to make a profit. It's not like Our Gang; it's real and it's your money and credit rating at stake.