Advantages and disadvantages to investing in the Motor City
It hasn’t been that long ago when headlines were shouting that it was possible to buy homes in Detroit for $1. One dollar, for a home. Granted there were problems with the houses, city services were anaemic, squatters were living in many of these abandoned houses, but, nonetheless, it was shocking to find in the United States, let alone a major city like Detroit.
Let that sink in for a second. Homes, for $1, in a major urban center.
Sure, there were caveats. Unless you bought the property during the latter half of the tax sale in Detroit, you were responsible for back taxes. Houses had to be improved. Absentee owners were not allowed. But, the overriding theme was that Detroit was in such bad of shape that homes were worthless.
The housing market in Detroit reflected other problems the city had and still has, but there is some light at the end of the tunnel and, even though prices are rising, Detroit is becoming more appealing to real estate investors.
The reasons for the upsurge are varied. There are more empty-nesters looking for affordable one- and two-bedroom homes. Gentrification plans are working in many of the neighborhoods that were considered lost a few years ago. And, of course, investors brought money and new owners into many of these neighborhoods.
Although there are still parts of Detroit where home prices are still at the rock-bottom, much of the city is becoming stable. For home buyers and investors, much of the hard work has been accomplished and, now, many Detroit neighborhoods are both affordable and growing.
Investing in Detroit
The truth about buying a home in Detroit is that the house itself is one of the least important issues. Parts of Detroit have seen home values double in the last year while other parts remain at rock bottom. Knowing where you want to live is vital for getting a good deal.
Everything about investing in Detroit comes down to doing your homework. Understanding the market and the city and doing the legwork to ensure that you are not being taken for a ride.
- Rent-to-value rates are high. Buying rental property is cheap allowing your investment to quickly pay for itself and generate a steady profit stream.
- Cheap prices. Investment property can be had – even in good neighborhoods – for less than the national average. It is possible to find property that is worth more than the asking price without the problems of foreclosure and abandonment.
- Growth. Finding the neighborhoods that are getting ready to start growing is the key to successful real estate investment in Detroit.
- High risk. Many of the homes that can be purchased for much less than the market value have debts attached that drive the prices up quickly. Due diligence is necessary to prevent turning a cheap property into a nightmare of fees and taxes.
- Cheap prices. Sometimes the diamond in the rough turns out to be all rough and no diamond. Future costs of your investment property can be difficult to ascertain prior to buying, but is necessary.
Investing in Detroit is like investing anywhere, but as the risks are much bigger, the payoff can be significantly higher. The problems, however, are undeniably challenging. As experts in Detroit property management, www.srginvest.com, has the following advice for investors, “Get a good property management company that has deep roots in Detroit. Whether you are a local or from somewhere else, Detroit’s market has a unique set of challenges that are difficult to qualify. Expert help is essential.”