Detroit: Should I Buyout Slums?

Now, I'm not a real estate guy, nor do I flip properties so I don't have a solid opinion on the matter. But, I had a thought. Is there any use to the abandoned slums in Detroit? Can anyone take advantage of the financial freefall?

So, I made a pro/con list on buying up the slums, and I'm looking to WSO to help me expand it a bit. Keep in mind though, I have no idea what I'm talking about.

So first, here are three homes for under $100:

3 beds, 2 baths, home size 1,300 sq. ft., lot size 4350

3 beds, 1 bath, home size 930 sq ft , 3900 sq. ft. lot size

2 Bd 1 Ba 672 Sq Ft 5,662 Sq Ft Lot

CONS: Well, you'd own a house presumably under the code required to be a functioning house and that probably needs more money on repairs than the future value of the repaired house.

Bulldozing these houses and disposing of the debris probably costs more than the future sales value of the house you'd build on the lot to replace it.

Just being cheap doesn't make something a bargain.

PROS You can scrap the house and hold the land, thus covering some short term costs with the scrap, and hope the housing situation in the future will turn around.

Perhaps you can buy multiple concentrated properties, raze them, and turn the plot into a farm if you're in the right zoning.

I know our Real Estate Analysts here don't work in the type of Real Estate i'm referring to, I just figured some of you would have a general idea.

 
Beny23:

If they are under $100 K I would buy them just because the land they stand on.

Do you have ANY experience in real estate? I doubt it. (I am not saying that I have any, but from what I have gathered you have to know the industry, area, etc very well if you don't want to end up wasting your money)

OP, if you are really considering buying any of these, I would consult a professional, not some college students (including me) on an internet forum. I don't think there are a lot of people with lots of experience in real estate on here. Maybe you have a friend you can talk with?

 

That is precisely what I'm saying. >$100.00 = This House.

$100USD. One Benjamin. However you want to put it.

"If you have enough assets plus passive income to cover your personal lifestyle expenses for the rest of your life, and that money allows you to work at something you love, without concern for the amount of compensation, then you are wealthy."
 

Often times with these properties that have shockingly low sticker values it is written in to the contract that the owner must make a certain dollar value of improvements within one year of purchase or the owner's rights to the home are forfeited. That is something you should consider and research before devoting a great deal of time to this project.

[quote=patternfinder]Of course, I would just buy in scales. [/quote] See my WSO Blog | my AMA
 
Simple As...:

Often times with these properties that have shockingly low sticker values it is written in to the contract that the owner must make a certain dollar value of improvements within one year of purchase or the owner's rights to the home are forfeited. That is something you should consider and research before devoting a great deal of time to this project.

That's exactly what I expected.

OP, if they are in "slum" area (I am in India right now, so it can't be too bad up in detroit), you should look around and see what other houses are selling for, what investments you'll have to make, etc.

 

I have also heard of some of these homes coming with fairly epic water bills. A pipe has burst, for instance, and nobody fixed it. DPW just let it ride, kept the tab running. So your $100 home came with a $5,000 lien.

As far as investing in the properties, I think any kind of price appreciation is pretty far off in the markets where you can achieve a $100 home. You are talking about some seriously shady neighborhoods with problems that aren't going to be fixed anytime soon and may even still be getting worse (in the worst areas).

 

$300 for three single-family detached homes sounds like a straight-up steal assuming there are no liens. Regardless of how ghettolike the neighborhood is, how can you go wrong with that risk/reward? What's the rental market like? Vicinity to colleges/universities?

 

I'm thinking taxes, back taxes, liens, etc are a factor in a lot of these and I think some chop shop 'real estate investment corps' are fraudulently flipping homes without legal description....meaning that you can get seriusly fucked on things like back taxes. Plus, I just spent some time looking at a list of houses for sale and they're totally fucked, it's not even worth it to try to repair them. I'd like to tap the flip market, it just seems that there's a lot of land mines in Detroit, and no reason as of yet that people would be moving into the area.

Get busy living
 

As an owner of one of these homes, you could commit a tort by not maintaining the property and somebody getting injured or killed while they're squatting on the land (given the high crime rates... very possible)

 

We are not talking "ghettolike", we are talking ghetto. Like in between two burned out houses, with a boat abandoned in the front yard (massive hole in the side), and people getting shot on a bi-weekly basis at the corner sto'.

To the trap house point, I don't think you're understanding the point of traps. You don't rent or buy traps, you just post and slang in vacant ones. No utilities, just space heaters (it's so cold in the D).

 

I do a fair amount of dealing with RE PE firms. Let me just tell you something. If these houses were truly $100, PE firms, funds, REITs, would be buying up entire neighborhoods in Detroit doesn't matter how ghetto it is. These properties would not stay on the market for more than 2 hours. There is something you are missing here. As others have said, there is likely some liens attached to it. Your taxes may be through the roof as well. Keep in mind, Detroit's tax base has vanished, so in order to maintain public services such as fire and police, somebody has to help cover the shortfall.

Array
 

I remember as a kid driving through parts of Ohio that had completely died after industry was moved overseas. Literally mile after mile of neighborhoods with every house boarded up. I was genuinely shocked. Detroit would do better to burn everything to the ground and start over, and free themselves of the burden of treating these areas like there's any civilization left. Literally relocate the last few holdouts, torch it, and return it to nature.

Even some brick houses could be gutted and rebuilt. My family did this with my house growing up, Irish thing...buy the worse house in the nicest part of town, fix it up, and now you're gentry. Thing is, it's literally not worth the effort with most of these because who the hell is going to move there?

Those areas are gone.

Get busy living
 
UFOinsider:

I remember as a kid driving through parts of Ohio that had completely died after industry was moved overseas. Literally mile after mile of neighborhoods with every house boarded up. I was genuinely shocked. Detroit would do better to burn everything to the ground and start over, and free themselves of the burden of treating these areas like there's any civilization left. Literally relocate the last few holdouts, torch it, and return it to nature.

Even some brick houses could be gutted and rebuilt. My family did this with my house growing up, Irish thing...buy the worse house in the nicest part of town, fix it up, and now you're gentry. Thing is, it's literally not worth the effort with most of these because who the hell is going to move there?

Those areas are gone.

The City has estimated it would cost something like $56mm to tear down all the houses that are vacant (70,000+). They don't have the money to get rid of them. It's a pretty ridiculous situation.

This to all my hatin' folks seeing me getting guac right now..
 

Holy shit. Simply. WOW.

I'm not even talking about tearing them down, just light them up and kill off the neighborhood completely. 70K empty homes? Shit, what's to stop me from buying up a section, refurbishing it, opening a factory, and walling off the rest of the ghetto? I could create my own work camps BWHAHAHAHAHAHAHAHA

Get busy living
 
kinghongkong:
Angus Macgyver:

Well, shit. For a minute there I thought you meant that those houses were literally on sale for less than $100.

Hahaha

Me too, and as a real estate professional I shrugged and thought to myself "hmm...makes sense."

Detroit is such a shithole

Commercial Real Estate Developer
 
UFOinsider:

Holy shit. Simply. WOW.

I'm not even talking about tearing them down, just light them up and kill off the neighborhood completely. 70K empty homes? Shit, what's to stop me from buying up a section, refurbishing it, opening a factory, and walling off the rest of the ghetto? I could create my own work camps BWHAHAHAHAHAHAHAHA

there are plenty of vacant factories out there. i see this crap every day. no need for a new one.
 

One does not simply buy a trap house. Imagine the egg on our face when a neighbor reports "suspicious activity", and the cops come by and discover that the house is in your name.

Then again, you have approx. 58 minutes to take out the evidence and arson that shit before they arrive.

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln
 

The problem with alot of these empty dwellings is that they have become homes for the homeless. I am sure a good chunck of these have illegal activities taking place such as drug labs. If the above figure of $56 million is true to tear down these, I believe the overall benefit will be much greater than that. An investor should come in and provide that amount of money and in return they get a signfiicant piece of real estate they could essentially gentrify.

Array
 

If the house doesn't come with a free and clear title, RUN. A lot of these have crazy taxes and liens associated with them that you, as the new owner, get stuck with. As for scrap value, odds are that somebody already did that for you...the metal and the good stuff is almost certainly long gone. I had a phase like this a few years ago when I got my mind set on Detroit real estate, but I mercifully wimped out and opted for buying in a city with an actual economic pulse.

 
Amphipathic:
FrankD'anconia:

This belongs here.

Wow. Scary stuff.

Reporter: People would find it odd that you're living with a squatter.

Woman: That's, I guess, something that happens in Detroit

I don't even...

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln
 
OkComputer:
Amphipathic:
FrankD'anconia:

This belongs here.

Wow. Scary stuff.

Reporter: People would find it odd that you're living with a squatter.

Woman: That's, I guess, something that happens in Detroit

I don't even...

LOL like there's no other house the squatter can live in? LOL cyanide. This can't be real though?????
Get busy living
 
Best Response

I was watching CNBC at work and they were doing a segment on this company that is just bulldozing a few blocks of land of all the houses on it and everything. They said that with in the first couple of days of work they found a dead body. I could only imagine how many more would be found if everything was bulldozed properly.

Also, as someone has mentioned, these houses will cost you way more than the purchase price before you can actually call the house yours. Just about every single one of them will have a tax lein on them of some sort. Now that Detroit is going through bankruptcy, and they don't technically need the money to pay off their debts, you could probably buy the property and go to a court and have it waived. I know after the housing market crashed you could buy houses in Detroit, in better condition, for 1,000 dollars and they still had the leins on them, but I heard that some people were getting them waived.

Also, the property taxes are among the highest in the country. The amount that you'd be paying broken up monthly would be half the rent of an apartment in NYC! Not only that, but you wouldn't get any services from all that money you're paying.

The good thing about these houses, is they come pre gutted!! You don't have to worry about having to do all that hard work! You can just show up and start putting everything back together!

make it hard to spot the general by working like a soldier
 

Do you own a D9 cat? If so then buy the whole block and start demolishing the houses. The ag value of the land is bound to be higher than 100/lot however the area is likely to be heavily polluted. I don't buy houses in Detroit. That should be all of the advice you need. Can you make money there? Yes. Can you waste time and resources chasing gains that will never come yes. You have to look at it from an opportunity cost standpoint. Do you have the time and money required to take on a project that because the government is stupid they in their infinite wisdom have decided that a city with 800k people needs a million homes.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

I was actually thinking the same thing when I heard of the bankruptcy and I took a quick look to see what houses were going for. There are a lot of options for under US$1,000 (one thousand).

This one doesn't look too bad for US$541 http://www.coldwellbanker.com/property?propertyId=4443653&mode=detail&b…

Or, if you really want to step up to a life of luxury, you can go for this one for US$812 http://www.coldwellbanker.com/property?propertyId=4573400&mode=detail&b…

Maybe one of you interns can buy a summer home in Detroit :-)

Go East, Young Man
 

I don't know anything - why are these debts/backtaxes/liens owed by whoever buys the property? Shouldn't they be owed by whoever used to own to property when they took out the debt?

 
txjustin:

THis is what happens in liberal strongholds. These thieves need to be shot on site.

Umm or just in bad neighborhoods in bankrupt cities... Not sure what the political affiliation of the area has to do with it

 

Consider: high property tax rates, delinquent back taxes, owning the title free and clear, brick rustlers, copper thieves. Also, I'm guessing that everything that makes a house livable (HVAC system, plumbing, electrical and phone wiring) has been stripped from these houses. So anyone deciding to buy these houses will have to put up significant amount of money to fix them up. Buyers also have to deal with squatters inhabiting and taking liens on your house as demonstrated in the previous youtube videos, classic case of tragedy of the anti-commons.

"Detroit ranked first among the 50 largest cities in taxes and last among property values in a 2011 study by the Lincoln Institute of Land Policy in Cambridge, Mass. Detroit taxes on a $150,000 house were $4,885, twice the national average of $1,983. The city's average house price, $16,800, was nearly 10 times lower than the next lowest, Mesa, Ariz."

From The Detroit News: http://www.detroitnews.com/article/20130221/METRO01/302210398#ixzz2ZtVT…

"The News reviewed more than 200,000 pages of tax documents and found that 47 percent of the city's taxable parcels are delinquent on their 2011 bills. Some $246.5 million in taxes and fees went uncollected, about half of which was due Detroit and the rest to other entities, including Wayne County, Detroit Public Schools and the library."

From The Detroit News: http://www.detroitnews.com/article/20130221/METRO01/302210375#ixzz2ZtVi…

 
JDimon:
txjustin:

THis is what happens in liberal strongholds. These thieves need to be shot on site.

Umm or just in bad neighborhoods in bankrupt cities... Not sure what the political affiliation of the area has to do with it

He's obviously a troll, but the political affiliation of Detroit, as a union stronghold, is definitely one of the main causes of its current bankruptcy

Commercial Real Estate Developer
 
heister:

Do you own a D9 cat? If so then buy the whole block and start demolishing the houses.

Haha, a D9? Fresh out of those. That would be a little overkill (but a whole lot of fun). Don't need to own one though. Herts will rent you smaller dozers, I've personally operated D5's and D6's from them. A D7 would most certainly get the job done. I operated in the military so if any of you do this, I'll get the job done for you.

When a plumber from Hoboken tells you he has a good feeling about a reverse iron condor spread on the Japanese Yen, you really have no choice. If you don’t do it to him, somebody else surely will. -Eddie B.
 
SureThing:
heister:

Do you own a D9 cat? If so then buy the whole block and start demolishing the houses.

Haha, a D9? Fresh out of those. That would be a little overkill (but a whole lot of fun). Don't need to own one though. Herts will rent you smaller dozers, I've personally operated D5's and D6's from them. A D7 would most certainly get the job done. I operated in the military so if any of you do this, I'll get the job done for you.

No you need a D9. The houses are not the reason. The gangsters with guns are the problem. The bigger the better in that case.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

Supposedly, many of these houses are ancient which means they're full of abestos. Normally abestos is found in the piping so it would take a special service to remove the stuff in accordance to regulation. That automatically takes "straight bull dozing the properties" out of the equation. Put this together with the other problems brought up in this thread and you have the ideal recipe for a major headache.

 
UFOinsider:

I remember as a kid driving through parts of Ohio that had completely died after industry was moved overseas. Literally mile after mile of neighborhoods with every house boarded up. I was genuinely shocked. Detroit would do better to burn everything to the ground and start over, and free themselves of the burden of treating these areas like there's any civilization left. Literally relocate the last few holdouts, torch it, and return it to nature.

Even some brick houses could be gutted and rebuilt. My family did this with my house growing up, Irish thing...buy the worse house in the nicest part of town, fix it up, and now you're gentry. Thing is, it's literally not worth the effort with most of these because who the hell is going to move there?

Those areas are gone.

This. They have actually talked of doing this. Literally abandoning the places entirely and letting nature take over.

The OP had a decent suggestion, assuming you could get zoning to go along. If you could buy up a large number of contiguous properties you could possibly create some farms.

 

Now there are a lot of different types of wallpapers, from nature to geometry, wild and funny wallpaper ideas - a great way to revitalize a room without adding unnecessary decor and mess. Modern wallpapers are not determined by the colors and stripes that we remember from the houses of our grandfathers. Today's possibilities are endless and easily accessible. Therefore, I advise you to make your home original and see the wallpaper here https://www.wallmur.com/wallpaper/tropical-wallpaper .

 

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