http://www.businessweek.com/articles...reclosed-homes

we seem to have so many threads on real estate investing. and i especially like the "buying really cheap real estate" threads. obviously all very cheap real estate is that way for a reason but i also think it means there's huge opportunity and really not that much risk.

i thought this article was interesting.... bidding $500 per house for 6,000 houses in detroit. i think it makes sense as these areas need to be developed - maybe not that definition everyone thinks of but basically with a private sector plan to a certain degree.

the article is actually negative but i'd be somewhat more positive. no idea what the property taxes amount to or whether the buyer will be responsible for a bunch of accrued costs that are not factored in the purchase price.

terrible the treasurer would speak that way about his own community especially when he's trying to sell these units....... yes, honesty is good but i think that's too much in this case.

thanks in advance for any comments/feedback

You get what you pay for.

Lets say you buy a distressed house for $5000. It probably needs about 10-15k to be habitable. In the mean time, how do you secure it? I don't think you are going to have an alarm company wire it and the police right over when you have problems. So that means you need to hire private security to guard your development. People can still come in and take the copper because your security is probably not going to even do anything besides shine a flashlight and and call the nonexistent police. These are really war zones. I would describe the project as very ambitious with a high degree of risk.

Old property taxes are cleared. Typical tax on a 3 bedroom 1.5 bath home is
2k/year.
The conditions of the contract are specific and the sell is right to point out that the buyer must demolish approximately 3000 (blight) homes at a cost of
up to 10k per home, depending on lead/asbestos content.
The buyer is better off hiring a knowledgeable buyer to bid on individual properties.
If you have particular questions re: Detroit property I can probably answer them.

What is the end game for a bulk buyer of thousands of houses, most of which need to be torn down?

Cue music from Robocop.

Renting it out to the US Army to practice urban combat in a third-world country?

fyp

Seems only viable if an investment firm takes huge blocks to rebuild it into actual livable neighborhoods with normalized citizen coverage (ambulance, police, fire, etc). To an individual, the only value would be the land and/or the potential to get in the middle of an investment firm scooping up blocks at once.

Someone on reddit posted that they bought their house for 70K in Detroit a few years ago, got foreclosed, and then the bank asked them if they want it for 5K, free and clear. It happens. But if you think people are just picking up dirt cheap perfectly livable houses in Detroit, you're very optimistic. It's a very rare occasion.

The official auction price hides the true price. Liens, taxes, unpaid utilities, renovation, cost of securing the property. Detroit is also a high tax area, so you pay a lot each year just to hold the property. And Detroit is a little north of Chicago. It ain't pretty in the winter. For anyone who has lived in an older house in a cold region, they know how ridiculous it is to heat and cool these places.

It is my impression that people interested in Detroit property have no idea what RE costs in Middle America, USA. The North East is littered with towns and areas where prices are similar - without the ghetto problems and without Detroit mismanagement/taxes.

I live in AZ and this kid in my class was telling me how he wanted to buy a house in detroit because it was so cheap. He found a pretty decent house for $7k. Long story short few weeks down the road somebody stole all the copper pipes and some other things.

I think there's more money to be made just going to Detroit and stealing the copper yourself.

Better opportunities in Atlanta with a lot less socioeconomic risk.

I've heard of two separate proposals, one was to create farmland, the second one was actual going to plant a forest and use it for lumber.

You can also make a lot of money purchasing spoiled milk and rotten eggs.

he bought 6360 lots. for 3.18m..
the minimum auction price was $500 per lot.
of the est 6360
2000 are vacant
3000 need to be torn down.
only 1360 have actual value.
the biggest unknown is if the land bank gave the buyer a pass on the required tearing down of the blighted homes. If he gets no pass, there is another estimated 5-10k per home depending on if any lead or asbestos is found in the home. This could add another 3m to the price.

If you say you started with 4000 homes and 1360 could be rented out for 700/ month each. I would say that was easily doable. If you started with only 1360 and told me you could rent out 1360 homes I would say you were nuts.

lets say he can rent out 1000 homes and needs to do work on 360 to get those to rent ready status.
700k per month income seems reasonable. .. Given this forum's usual guideline of 50% gross.. $350k net and $350k for vacancies..
insurance, property management and long term maintenance costs.

You need a hell of a good management team, multiple maintenance/repair crews and demo crews to demolish the other 3000 homes.
I would not be surprised if 1000 of the 1360 homes needed work and with an average bill of $5000 to get it ready. That is another 5m.

Seems like a huge gamble unless he has eyes on the ground and has other resources that he can capitalize on.

Lets say the buyer was a long time Detroit Resident and Vastly wealthy and wanted to help out Detroit. Even if he spent the entire $350k on demolitions, that would be only 35 homes per month. cost to demolish a home in Detroit..
http://realestate.aol.com/blog/2013/...values/http://
After 1 year he would have demolished 420 of the required 3000 homes.

No profit for 7-8 years.
The endgame for the buyer looks pretty ugly and is 10+ years down the road.

The buyers name is Herb Strather
http://www.detroitnews.com/story/new...iens/18117195/

From the article
"If Mr. Strather is expecting the land bank to pay to demolish properties he has purchased, he has misunderstood the law," said spokesman Craig Fahle.

My opinion is this guy is going down in flames.

Also, I don't know where the other 360 or so homes went. It says 6350 homes purchased, 2000 vacant, 3000 need to be torn down and 1000 salvageable homes.

im sure the city is offering him some big bucks to turn these properties around in one way or another.....

Huh? Detroit is in bankruptcy. They're not offering money to anyone for anything. They can even keep the (very strong) unions happy.

Funny, but sadly true. People are stealing copper out of occupied homes and businesses in Detroit.

While I was writing this post I received a phone call from a friend living near Detroit. He said there are lots of house sales for one dollar. He also said: Detroit newspapers are praising the fact that were few hours fires than usual this year on Halloween. Things get stolen off fire trucks while they are fighting fires.

there's plenty of cities in bad shape that offer gap funding to developers to build in these areas...thats sort of the point of it - to incentivize developers to turn these cities around.....Detroit could be getting funds from the state/federal government so its not necessarily coming out of Detroits pocket.....I'm sure this is the case here.

The auto unions of Detroit are no more. They are not even trying to bring manufacturing back to Detroit. The city is rebuilding itself on sports/entertainment and high tech. The downtown core is getting stronger all the time and there is a very slow trickle down effect on the city itself within 8mile.

No funding for developers in Detroit.
The city gets Federal funding to TEAR DOWN blighted properties, Not to put stuff up! You think the government is going to give private investors money to build the city?? The city just traded a great deal of its property to settle bankruptcy negotiations with its two biggest lenders.

Double huh!!

What do the auto unions have to do with anything? The City of Detroit isn't their employer. The lawsuits are from people employed by the City.

The lawsuits from Detroit unions fighting over (nonexistent) money have nothing to do with car-makers. Detroit is controlled by an Emergency Manager and his job isn't to handout money. There's no money to get street lights working.

Lots of Detroit city workers are teamsters.

If you're curious what's going on google: Detroit city workers teamsters
or google: Detroit emergency manager union lawsuits

Auto unions have Not much to do with anything now. When you said powerful unions.. i automatically assumed you meant the previous powerhouse auto unions.
The municipal workers do not have much power at all. You are correct, they are looking just to keep their jobs and not lose too much. The union lawsuits will come to nothing. It is a lot of bravado and flag waving from honest people who voted in corrupt officials. They first want to hold those responsible to account.. well your mayor just got 28 years in jail. Second, they want the money promised to them.. well good luck with that, your city is bankrupt.

City lights are a huge problem and so is blight and fire safety.. police corruption, city wide corruption in the elected officials. They have done a lot of house cleaning recently but there is still much to come.


The municipal workers and pensioners got a haircut in the bankruptcy.
(from another post of mine, the lenders to the city of Detroit got a good kick in the nuts)