Detroit was on my mind last week as I spent a good part of it analyzing some of its residential properties. I found a handful of promise in only a few. And my small success had me wondering what's the best strategy to use there.
I've lived long enough as an urban denizen to know cities have their share of ups and downs - the bigger cities experience them within their many neighborhoods all the time; and Detroit's plight is well known. The pressing question to be asked is "when will their comeback take effect?". In one year? 10? 20? Or longer?
Buying and holding might be the best bet. The Information Age is taking hold and replacing the manufacturing relics. The
Detroit 2.0 Movement and
Dan Gilbert of
Quicken Loans are working hard and fast to bring the city back to glory.
Magic Johnson has partnered with
Detroit Venture Partners to help inject new blood. My most pressing hope is for the crime rate to go down, as that will encourage more people to return. Getting one or more fiscally sensible properties, while watching Detroit's Renaissance take place right before your eyes might be a great experience in and of itself. I think it's time to get my business plan ready.
Those areas are often hard to obtain financing from a lender or bank. We saw this in the 90's in certain areas of NYC (Brooklyn, Bronx, etc...) when banks would not loan money to buyers so they needed cash. Lending may be possible but maybe not, which means cash is necessary. In either case, I would make sure obtaining rent is possible based on the demand in the area versus the supply before doing anything. Then, I would make sure the rent offers you enough of a profit based on the money you might be able to borrow. Then, I would be prepared to sit on that property for many years with possibly a small profit, depending on rental income over mortgage payments, insurance, and repairs for any worthwhile profit.
ReplyDeleteThanks, J.R. Great assessment of the area. Hopefully, many investors have access to other forms of financing. While purchasing might be easier since the prices are so low, getting renters in the near future may be the harder task. Buying and holding for a long time might be the way to go.
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