Cheap Investments: Reasons To Buy A Detroit Investment Property

Before we get to the good stuff and start your on your journey to your first Detroit Investment Property, there is a little something I need to clarify and clear up...You may have noticed that I used the term 313 Detroit, in the sub-heading of this post and you might be wondering why I would add this rather strange prefix...Well, this is the way I will make the distinction between the City of Detroit and the Detroit Metropolitan Area. 313 refers to the Telephone Prefix for the City of Detroit and if you see 313 Detroit anywhere throughout this lens...that means I am referring to the City itself. If I make reference to Detroit, that means general Detroit Area including the suburbs. Got it? 313 Detroit is the City, Detroit is the entire Metropolis! Glad we got that cleared up...now we can move right along to the good stuff!

SAVINGS IN THE BANK: What is the return?


So, you've worked hard, you've built up your nest egg and like most people, you entrusted it to your bank. You popped it in a savings account and waited for those safe little interest payments to come in. Only, things haven't quite gone to plan because the very institutions you entrusted your money to didn't invest it wisely and now, those interest payments are practically zip, ziltch, nada...

Lets have a look at how the banks are supposed to work and how they've actually been working for a minute...

Back in the good old days, banks operated on a really simple idea that went something like this...Joe Saver, deposits (invests) his hard earned savings into the Bank of Good Fortune. Bank of Good Fortune take that money and invest it, often in the form of mortgages and loans to Joe Borrower. Joe Borrower pays back the loan to the Bank of Good Fortune with interest, who as a thank you for the investment, give Joe Saver some of that interest. The rest is kept by the Bank in payment for the hard and rigorous work they do, ensuring that Joe Borrower is a good investment and can actually pay the loan. It was good system and everyone was happy! All was well until the banks got lazy, greedy and finally, lost their damn minds!

You see, this little predicament the world is in right now called the global credit crisis is due in part to the very people many of us are entrusting with a savings. The banking Institutions. What happened was banks started making ridiculous loans to people they knew couldn't realistically afford the payments in the form of 100% mortgages and the like. Then, when the money they had on hand to lend (the investments from the Joe Savers of the world) wasn't enough to loan out, they started electronically loaning money from other sources and institutions and gambling in high risk investments to pay those loans off. Before we knew it, banks were running out of ways to recover their money and banks started collapsing. Joe Saver lost his interest payments, Joe Borrower lost his home and the fat cats at the banks took huge great bonuses and bought a holiday home in the Bahamas!

The Banking Institutions are not taking responsibility for their laziness, greed and incompetence and biggest travesty of all this is that Governments are now using the taxer payers money to bail them out! So not only is Joe Saver seeing no return on his savings, his taxes are going to the fund the bank bail out!!

So here are a couple of questions to ponder....

1. Is it really wise to entrust your savings to a banking sector who have mismanaged and lost you money?

2. With these all time low interest rates, how much is the return on your money making you each month or year?

STOCKS, SHARES and HEDGE FUNDS: How much can you afford to lose?

The other popular option for investors has been stocks, shares and hedge funds but we're going to lump them together as one entity because essentially they amount to the same thing - RISKY!

Investing in stocks is risky and quite frankly, it doesn't matter if you're a complete novice in the stock market or you've been a seasoned stock broker for 20 years, what you're doing is gambling. The returns can be spectacular, there is no question about that, but with those huge returns comes huge risk. My old grandmother used to say to me, 'never gamble more than you can afford to lose' but unfortunately for some, they didn't have a wise old grandma to turn to for advice and they put their eggs in the stock market basket and the market crashed!

If you invested 10k in stocks, your investment is probably worth 2 or 3k now and it wasn't only private investors...oh no...it was banks, pension funds and the like who gambled their money in stocks and lost. Almost every pension fund in the world is now underfunded and is praying that the stock market will boom just to meet it's obligations.

Essentially, before investors, private or corporate can begin to make a profit, there is a huge loss to recover and this could take YEARS to happen. One investor that I am currently working with on some Detroit Investment Properties invested £350k in 2007, the current value of her investment is less than £60k. She would probaby have seen a better return if she'd put her money on the lottery!!!

Some questions to ponder...

1. Are you a gambler? Even the professionals are losing on the stock market, what chance do you have? You could win big but you could also lose big and most people experience the latter.

2. Can you afford to lose your investment without hardship?

If you answered no, then what you are looking for is a safer investment with both short and long term growth potential.

The good news is you're in the right place!!!

THE MICHIGAN REAL ESTATES MARKET: Short and Long Term Returns Potential

Whether it is short term or long term investments you are looking for, the Michigan real EstatesMarket can offer you excellent returns. While Detroit Investment Property will certainly perform better in the longer term, it is possible to see good returns almost immediately. Why? Quite simply because the rental market is strong, people have lost their homes, they need somewhere to live and with their history of foreclosure, they have no choice but to rent. Therefore, if you buy a Detroit Investment Property, whether it is in 313 Detroit or the 'burbs, you can rent that property out and start recovering your investment as soon as you refurbished it.

Lets look at an example, the links below will help!

Joe Investor buys 3 Bedroom Home In Roseville, Michigan for $18,900
The house has no plumbing probably due to frozen pipes and requires refurbishment the estimated costs for developing the project $7000
Total Cost $25,900
Joe Investor completes the refurbishment and puts the house up for rent at $1000 a month, in 2 years, he has recovered his outlay, the Michigan real estates market improves by just 5% which is rather a conservative estimate but Joe can sell the home for more than he paid for it which is all profit.

It doesn't take Einstein does it!! Visit the links below and see for yourself! Buying a Detroit Investment Property is a low risk, solid return opportunity!

In reason 1, we discussed the fact that the Michigan Real Estate market is saturated with bank owned properties, so what happens when thousands of people lose their homes to the big bad banks?

Good Credit, Bad Credit

Well the first thing that happens when someone is unfortunate enough to lose their home to bank or tax foreclosure is their credit suffers. As we all know, good credit is king and without it, your options are REALLY limited. You pretty much have 2 hopes of getting another mortgage, Bob Hope and NO HOPE!

Maintaining good credit is your life blood and pretty much everything you need for life in the US relies on it. The credit score range is 300 - 900, with 900 being the best and for a stab at a mortgage most lenders require a score of 720 or above. After foreclosure, that magic number is a thing of the past!!

What Do You Do People When You Have Bad Credit and They Needs a Home?

In essence, there are 3 options.

1. Land Contract - This is when the buyer finances the house directly with the owner. Instead of paying a mortgage each month, they pay the owner of the house. The biggest problem with this is that home owners do their homework to. They will usually (if they are smart!) check your credit and although their criteria may be lower than the big lenders, not everyone will qualify.

2. Lease-To-Own - This is where a property is rented for a set period, usually 12 - 24 months, with an agreement that after that set period, the tenant will purchase the house. A portion of the rent is kept toward the down payment and during the rental period, the tenant hopefully builds his or her credit back to good enough level to get a mortgage. The down side of this for the tenant is that if they can not secure a mortgage at the end of the lease period, they may find themselves back at square one and the money they paid into the down payment fund is lost.

3. Rent: This is by far the most common option. Landlords are more inclined to rent to people with bad credit and, lets face it, with so many people with bad credit, there really isn't too much other option. However, Landlords do check tenants credit and do refuse tenants on this basis. Landlords can afford to take a more lenient approach when it comes to people with not so good credit because they can, if the need arises, evict the tenant and find another one.

So with thousands of people in the Detroit area in the bad credit trap, there are tenants aplenty for your Detroit Investment Property and there is no reason why you couldn't enter into a lease-to-own or land contract agreement if you wished.
Many Detroit Investment Property owners are marketing their property for all 3, offering tenants a choice. This can be an excellent way of securing your returns and enables you to make future plans for your property empire.

So Reason 2, is that you are not going to be stuck with a vacant property. It is reasonable to expect rent of between $600 and $2000 depending on the size of the Detroit Investment Property you purchase and it's location.

In this day and age, we all need to be more concerned about the environment. Most households recycle to some degree, whether is it paper, glass, tin cans or textiles. Buying a Detroit investment property allows you do something HUGE for the environment. Recycle a house!

Many of the houses, particularly those in 313 Detroit, are in a terrible state of disrepair. Once enormous, spectacular structures, these houses have been abandoned or neglected, leaving them open to vandalism. Restoring these homes to their former glory and offering them to low income homeless families is a fantastic way of giving something back. Not only to the people of Detroit, but also to the environment. Whats more, you can secure a regular rental income for yourself! How many other environmental projects can you find where you make money!??

Another option for ecological benefit is HUD homes. Many of these houses would make great family homes but most sit deteriorating because no one wants to get their hands dirty! For the handymen among you, most of the work you could do yourself, and in return for your investment and your work, you can provide a great home for a family and again make a great return.

If every environmental charity or organization were to buy a couple of these houses and refurbish them, not only would they help the environment, they would make a rental income for their charity. There are even options for help with the refurbishments. Organisations like Blight Busters offer low cost labor for homes in 313 Detroit.

Wanna make a difference while helping the environment...buy a Detroit Investment Property!

The stagnant Michigan Real Estates market has led to the financial institutions coming up with other inventive ways to off load the bank owned properties and get rid of their tax liability. The most recent is an explosion in property auctions. I recently posted an auction on this lens for those interested in buying a Detroit Investment Property and today got news of another one with some very interesting properties.

The really interesting thing about these auctions is that they are starting the auctions for as little as $1000. Most of these houses are not in 313 Detroit, in fact, some of them are not even in the Metro area! There were a number of investment properties in Grand Rapids, which for those of you who don't know, have a HUGE housing shortage.

For more information or to register to bid Click Here!

The Good Times of The Past
In the 1950's, Detroit was booming. It was home to over 1.8 million people and was the highest per capita income city in the US. Famously nicknamed 'Motown', Detroit was home to both the Auto Industry and Motown Records. Ford, Chrysler and General Motors, or the 'big 3' as they are collectively known, had created wealth and opportunity in the area and the affluence in the City of Detroit could be seen on every street in the form incredible houses, imposing in size and stylish in design. While the bigger, more impressive houses were found in 313 Detroit, the wealth in the area spread throughout the Detroit area and at that time, Detroit was an impressive place to be.

The Steady Decline of 313 Detroit
By the time Motown Records moved to Los Angeles in the early 70's, the decline of 313 Detroit had already begun. Investment and pride in the city lowered and there was the inevitable urban flight, where people started to move out of the city and into the suburbs. Crime rate increases, racial issues, a poor public school system and issues with allegedly corrupt city officials saw 313 Detroit start on a rapid downward spiral.

Detroit 2005 - 2009
The economic crisis, the fall of the auto industry, bad Government and a loss of pride in their community have driven people out of Detroit. Many residents were employed by 'the big 3', Ford, Chrysler and General Motors and when the auto industry began to collapse, thousands lost their jobs and with it their homes. Detroit is now ranked the 67th per capita income city and migration out of 313 Detroit and the surrounding suburbs is 3 times the outward migration rate of any other US City. In 2008, the number of people living in Detroit fell to 900,000, making Detroit the first US city whose population fell below 1,000,000.

It is an absolute fact that some areas of 313 Detroit that were once affluent and thriving communities have become so impoverished and run down that they are no longer desirable or even safe. It is also true that increased crime rates in some areas of the city have had a significant role in moving people out of Detroit. Also adding to the many difficulties Detroit has been facing was the arrest and subsequent trial of former, Detroit Mayor, Kwame Kilpatrick, which cost the tax payers over $9 million.

Sadly, this once thriving Metropolis, full of opportunity and wealth is now a shadow of its former self. Many of the once impressive houses in 313 Detroit have been left vacant and deteriorating. Bank foreclosures (or repossessions, if you're not from the US!) are at an all time high across the Detroit area, unemployment is among the highest in the US and things are tough!

The Boom Waiting To Happen...What the future holds
You are probably thinking why the hell would this idiot be suggesting we buy a Detroit Investment Property when things there are so bad? Doesn't seem to make much sense if people are leaving the area, right? WRONG!!! Now let me explain why...

Things in Detroit are only going to get better, in fact, many experts believe the upturn has already begun. Huge amounts of private investment, from people like YOU has seen many of the old abandoned or bank owned houses redeveloped and rented out to the families left homeless by foreclosure. In 313 Detroit, houses are selling from as little as $1, simply because the banks want rid of them! For as long as a bank owns a property, they are liable for the annual property taxes which in 313 Detroit can run into thousands. Even outside the city, banks are keen to rid themselves of the properties they have taken back because the tax bill is simply too high. To relieve themselves of the tax burden, banks are selling homes off as cheap as chips, often making huge losses.

With Detroit high on the political agenda, the Government are putting grants and incentives in place to get things moving again. Many of President Obama's plans for the country will have a direct impact on the situation in Detroit, for example, in terms of education and health care. It might take a little while but things are going to be rosy again.

Lets use some common sense here..while car production has ground to a halt at this moment in time, we have not seen the last of people buying new cars. It doesn't take Einstein to work out that things are not going to stay stagnant in the auto industry forever, if it did, there would be no cars left on the road! People will have to replace their cars sooner or later and the skilled workers at the plants will return to their jobs. It stands to reason that when the people of Detroit are back in work the first thing they will be looking for is a house of their own. Most likely the house they've been happily renting!

Finally, while high crime rates may be part of the problem in 313 Detroit, outside the city enjoys some of the lowest crime rates in the US. Even in 313 Detroit, the crime rates are dropping with the increase in policing etc, but in areas such as Sterling Heights, which is about 15 miles outside of 313 Detroit, the crime rate is exceptionally low. Hence the urban flight I discussed earlier.

All in all, Detroit is on the up and even though it won't happen overnight, there is a glowing light at the end of the tunnel. If you take the time to give it a little thought, you'll have the insight to see that there is a golden opportunity in Michigan real estates with cheap investments and healthy profits just around the corner, investors just need to take it before it is too late!

The people of Detroit LOVE their sport...Football, Baseball, Basketball and Ice Hockey...you won't get far on the streets of Detroit without seeing a symbol of loyalty to one or more of the Detroit teams.

BASEBALL
The Detroit Tigers, play at Comerica Park.
Click Here To Visit The Official Tigers Website

FOOTBALL
The Detroit Lions play at Ford Field.
Click Here To Visit the Official Lions Website

ICE HOCKEY
The Detroit Red Wings play at Joe Louis Arena.
Click Here To Visit the Official Red Wings Website

BASKETBALL
The Detroit Pistons (men) and Detroit Shock (women) play at the Palace of Auburn Hills.
Click Here To Visit the Official Pistons Website
Click Here To Visit the Official Shock Website