Detroit Becomes Landlord Nation, Homes for $1
DETROIT – Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more. In extreme cases, homes are on sale for $1 or less (home pictured above is listed for $1 here), which has enticed investors to Detroit from as far away as the United Kingdom and Australia.
"In the past few months, I've picked up 10 new clients from out of state that are buying in bulk," said Mike Shannon, a suburban Detroit real estate agent. His office specializes in foreclosures in a city that's among the national leaders.
"They're coming to us, saying `Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."
Despite a stagnant retail housing market, real estate sales of foreclosed homes are booming. Shannon regularly fields calls from eager prospects, and recently sold 30 homes in one day to one buyer. A trio of U.K. investors has bought a half-dozen and plans many more.
HT: Clover Aguayo
13 Comments:
"They're coming to us, saying `Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."
Hmmm, considering the 2006 statistics where Detroit has four times the national average for violent crime and sixteen times the national average for property crimes do these people know what they are getting into?
"Hmmm, considering the 2006 statistics where Detroit has four times the national average for violent crime and sixteen times the national average for property crimes do these people know what they are getting into?"
Obviously not and they are missing the golden rule of rental property as well. You need a VERY SHARP manager or the ability to drive by the property on a moments notice. I don't think you can get to Detroit from the UK in less than 10 hours.
I wonder if they're being peddled HUD Fair Market Rent on the "potential income" side? HUD says $809 for a 2BR but Craigslist has over 400 2BR (or more) for $500 or less.
I hope they find a sharp property manager.
What is the return on equity if you buy a house for one dollar and rent it out for $500 a month?
And your downside risk is...????
"What is the return on equity if you buy a house for one dollar and rent it out for $500 a month?
And your downside risk is...????"
If structured correctly none, but if you don't structure it correctly there is is a huge liability downside.
Here is the downside:
More realistic rent $600.00 month
($900 for the house pictured is a joke)
Potential yearly revenue = $7,200
--------------------------------
2 months avg. vacancy = -$1,200
Property Management 10% = -$600
Property Insurance = -$800
(very conservative & minimal coverage)
Property taxes = -$1,000
Inspection fees, govt. licenses etc. = -$300
Repairs to the property after broken into 2 times during 2 months of vacancies = -$1,500
(Of course, the insurance will not cover losses of aluminum siding, copper pipes, wiring, water heater, furnace, etc. - if you can even get insurance)
6 weeks unpaid rent = -$900
(good luck collecting this)
Court costs to evict the non-payers = -$250
Maintenance & upkeep 10% = -$600
(Should be much higher, most of the housing stock was built in 20's & 30's)
All of this assumes that you don't run into a tenant that can play the pro-tenant laws in Michigan against you.
Congrats! - you have made $50 for the entire year, but not to worry - you'll make all kinds of money as the property appreciates - the property is only going to rise in value, right?
You don't structure rental houses in cities - they structure you.
Some seem to be betting on gentrification in Detroit.
The Democrats have run Detroit forever. Shoudn't it be paradise?
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"More realistic rent $600.00 month"...
Well Kelly D. Miller on the face of it, I think asking for more than $60/month rent seems tad exorbitant but I don't know the first thing about rental properties and what all that entails...
I mean you run out some interesting odds & ends about the hassles of renting out the property but it seems like something is missing in your otherwise informative list...
The heavy hand of local government and what that might ad to the costs seems to be missing in your list... Am I wrong?
"You don't structure rental houses in cities - they structure you"...
Geez!
So why $600/month and not more all things considered?
Thanks in advance...
#1,
I only touched on the direct, monetary aspect of govt. ($300 fees).
You are not wrong, after you pay them the money, the heavy hand is there to harass you every step of the way.
As to why only $600.00 month rent, that is what the market will bring.
"As to why only $600.00 month rent, that is what the market will bring"...
Well thanks for that...
The reason I was wondering is that E. St. Louis, Il and Detroit have very many of the same if not identical problems caused for the very same reasons...
I kept thinking that there is No Way one could get $600/month in E. St. Louis even if it was a brand new mansion...
Appreciate your insights...
Sure, you can buy it for $1, but how much is owed in back taxes? Do they have the right to sell it for $1? People can try to sell for whatever they want, but the mortgage still has to be covered. My guess is these homes end up "costing" more than $1 to get the title clear. Not to mention that the city is probably just waiting to cite you, the proud new owner, with a public nuisance fine and threaten to condemn the property.
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