Hi
I wanted to post current news with regards to the Detroit property market. This was clipped from the Detroit Free Press
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December home sales prices rise 26% in metro Detroit
By JC Reindl
Detroit Free Press Staff Writer
The Metro Detroit home sales market experienced a considerable rebound at the end of 2012, with December sales prices increasing 26% from a year earlier, according to new data released Monday.
The median sales price of condos and houses in the region comprised of Wayne, Oakland, Livingston and Macomb counties was $85,750 last month, up from $68,000 in December 2011.
The metro Detroit county with the highest sales price is Livingston County ($160,000); the lowest is Wayne County (45,000), according to the figures released by Realcomp, a Farmington Hills-based multiple listing service.
Price increases were largely the result of fewer for-sale homes. The number of market listings in the region experienced a 21% year-to-year drop, falling to 14,903 available homes.
Total home sales in the metro area were down about 2% in December from the year before, but that reflected a steep 18% drop in the number of foreclosure sales. Non-foreclosure sales increased by nearly 10%.
The average home in the area was on the market for 77 days.
But metro Detroit still has a long way to go for a full housing market recovery. Prices are about 20% below 2000 levels and more than 35% off their late 2005 peak.
The Detroit property market has stabilized. The number of foreclosures is decreasing and non-foreclosure sales are up by 10%. I know from personal experience that there is still a lot of opportunity to purchase homes below market value. The median price for a home in Wayne county ( that is where Detroit is located) is 45000$USD this means that there are many homes that are far below this price.
That's my little commentary, please feel free to respond.
Thanks
Detroit is a third rate market. If it has gone up its due to investors being silly enough to invest there. I believe that the major car manufactures will slowly pull out of Detroit. For example in the last few years Toyota pulled its truck manufacturing business our of Detroit and Californian and relocated them to San Antonio Texas.
Much of the down town area of Detroit has been abandoned for around 30 years. Do a search on abandoned housing and buildings like a hotel still with decaying furniture. or the central railway station now long abandoned. This is a dying city do not be convinced to invest there it will be a decision that you will regret.
Now even if I am wrong, why take the risk when there are far safer markets to invest in, such as Texas or Florida. There are maybe another 40 states ahead of Detroit. The real numbers are the market is 30% less than it was in 2000. The big mistake is investors believing that this market will improve.
Nigel Kibel | Property Know How
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Hi Nigel
I know Detroit is definitely not a sexy place. But the fact remains that people need a place to live even in Detroit. The US government is willing to subsidize apartments for the poor. The houses are dirt cheap, but the income is guaranteed by Uncle Sam. As long as, you have good tenants, things will go very well. This applies to IP in general, you need to have good tenants. With my company, we personally handpick our tenants so it is very stable. Our investors buy homes that pay for themselves within 3 to 5 years. After that all those profits are going directly into their pockets. How can this be a bad thing? If you are looking to buy and flip Detroit is not going to be for you, but if you want an extremely inexpensive price point to enter into the IP world with an incredible ROI, Detroit should be considered.
Josua
Again there are much better opportunities around than Detroit so why take the risk. In America as in anywhere else it is a matter of buying in the best location to give you a good cash flow and also some capital growth. I see no benefit in buying in Detroit it is a third rate market with little chance of real growth that will cause you problems.
So why take the risk. So where are you based you seem to be selling properties in many markets do you have offices in each?
I tend to deal in markets I understand. I have a partner in Florida and I used to run a real estate firm in Texas. In my view both are good markets experiencing strong population growth and job growth, Detroit continues to go backwards
Nigel Kibel | Property Know How
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I will agree with you in so far as to never invest in something that you do not understand, that by the way is Warren Buffett's motto. Texas and Florida are definitely good markets, I'd throw in Atlanta. What makes these appealing is that there is a migration of people moving from the North to the South. As the population ages and there are many baby boomers hiting retirement age, many are migrating South for retirement. When you combine this with the large numbers of young people moving south to places like Texas where there has been an employment boom, the South looks very appealing.
But, Detroit is nice due to low cost of entry price points. When you throw section8 ( government financed rent), it makes it even more appealing. While you may not see a great rise in valuations, you can still find excellent cash flow and very low cap rates.
Hi Joshua
I hear what you are saying however I do not agree with you. Why take a risk in a bad market when you do not have to.
Now I am not claiming to know everything, however where are you based and do you have offices on the ground in Detroit.
Nigel Kibel | Property Know How
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Nigel,
I have to agree. I deal with Florida and Atlanta and would never touch Detroit. It is important to focus on places that have strong potential to recover – that is why I like these areas. I have my teams on the ground in both states and they are reporting prices are going up. Check the recent CNN report on best foreclosure places on my blog at http://www.usadreamhouse.com.au for more info.
Regards,
Steve Park-Smith
USA Dream House
Steve
I could not agree with you more I also have a business on the ground in Florida. I also have extensive knowledge on the Texas market. However since there is choice about where you buy why would you spend your money in a second rate market like Detroit.
Also the question I have made to Joshua since he says Detroit is a good place to buy does he have an office on the ground or is he a wholesaler. Unless you are dealing with someone who works in the local market stay away
Nigel Kibel | Property Know How
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Hi
Yes we have an office on the ground in Detroit. There is both higher risk and reward in Detroit. Many of our clients have paid of their investments in 5 years doubling their equity.We manage our properties and hand pick stable responsible tenants. You have to be hands on, especially in Detroit. We buy properties, rehab them, and then get tenants for them before we sell them to the public.
Again answering the question, why would you buy in a 'second rate market' its about returns. We average about 22% net returns. Our clients are putting more cash in the pockets from day one. Dont' get me wrong, we are in Atlanta, Florida, Dallas, and Houston too. But the winner as far as highest returns on investment if Detroit. I know its not the sexy choice but the numbers don't lie.
Thanks'
Josh
Joshua
Numbers always lie they can mean anything you like
The fact is that there are far safer markets to invest in than Detroit, so why bother. Personally we prefer larger blocks of apartments because you can leverage them. Now you are not going to get 22% however 14-17% net cash on cash is doable plus you may even look at solid capital growth on these type of Properties.
Nigel Kibel | Property Know How
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We do get those types of return because we are a small boutique firm. WE handle every aspect our selves. We are Americans,we live here in the states. We are the ones picking the tenants, cherry picking properties at foreclosure sales, etc. We have a lot more control over the entire process since we are here. We get properties at far far below market value and then even with the extra equity put in both in cash and sweat, our prices still are at or below market value. I think we have an edge because we are here. If I was shopping for a home in Australia, I would at a disadvantage or someone who is located there. Just my 2 cents. Personally,I am getting tired of this particular thread, Florida , Atlanta, And Texas are great places too. I was just disagreeing with you a little on Detroit. Anyways, have a nice day…
I have a full time business partner in Florida as well
If you really liked Florida and Texas why are you pushing Detroit
Nigel Kibel | Property Know How
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We just do a lot of business in Detroit thats all. Our clients are happy with their returns. I, like you, am using this forum to educate people here about differnt RE markets thats all. I will be posting articles soon about Atlanta, Houston, Orlando, Dallas, and some others soon. I am busy with my business so I only pop in here every once in a while.
Drop the section 8 subsidy .. clear out the gangs .. bulldoze the wasted houses .. install a functional police force .. and you'll have a place worth living and investing in.
A byline on a well watched area. Kmart made inroads into southwest detroit about eight years ago and had to pack up because of a problem of inhouse theft from the store .. from the staff. There was a 65% loss to inhouse theft. They closed up and its now another store.
Things need to change there. And there will be a point. But its not yet.
I have invested in there recently. But where I have invested was previously a five star area, not that its any overall protection. However it still attracts better clientele .. and you pay a premium for it. But for a gross 44% return .. all i need to do is mow the lawn .. pay the bills .. provide a couple of years of catchup maintainence .. and i'm sitting pretty. I have onsite management crew and tenancies who i trust to report back on issues. My property will go on without me having to look over it every month.
I view it that the whole Detroit scenario one way or the other has about another six or seven years to run out. I have the energy and the time to wait that long. And with over 200+ units at less than 8.5k each .. i'm sitting pretty for gains.
Dont forget the slab of taxes on property and the enforcement for upkeep. Its not cheap owning in Detroit with the additional levies they pull. But if you have a reasonable deal to start with you have a reasonable solution long term anyway. Same basic rules still apply.
When I was lending in Detroit.. the number one problem was the reno crew coming back and stealing what they just put in that day. The company I did bizz with had retired police at each job.. they checked ID's and took names before you stepped on the property, One can always make money in Trashflow in the US is you have mass and scale like what Xdrew is talking about the one off investor gets killed in these markets has been my experince.
Nigel I am back under a new name and I promise to be good. this new site gives my computer problems like right now I can't hit enter and make a page break jay hinrichs alive and well been absent a while but been lurking seems like the site has been pretty quiet of late… markets have changed.. we got priced out of Atlanta but got 40 under our belt at the great prices so good with that
Jay,
Welcome back buddy. We have been missing you !! Your right. The markets have changed. Dallas is much like others where the hedge funds have moved into town making it hard for the individual investor to get a look in. Prices have risen and it's hard to compete against the billions of dollars that hedge funds have. Pretty well all our inventory these days is sold direct to the hedge funds.
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