Detroit Subdivisions

[Hutchym]

Hello All,



I went back home last weekend and met up with an friend. He was telling me about a new investment he has in the works with a few other southwestern ontario/ michigan investors. What they're doing is buying up full streets of abandoned and empty lots for under $5000 a peice. Then they build smaller more affordable 2/3 bedroom and practical homes. I guess there are others doing this too?? Then they go and rejuvinate the whole block. I guess the idea is to they start out near the outskirts of detroit near more pricey suberbs and move inward. In some cases you can actually create home associations that are gated and secured. Just wondering if anyone has any experience at all with this. Just looking behind the curtain here.



Mike

 

[Thomas Beyer]

[quote user=Hutchym]Just looking behind the curtain here. We bought a 45 suiter in Detroit in 2007 for $650,000 because it was "cheap". We couldn't cash flow it with no mortgage due to tenant profile, vacancies, rent collection issues, falling rents, very high taxes, deferred maintenance and very high utility costs ! One of (only) 2 of 30+ multi-family properties where we ever lost money on.



Sure, if you know the area well and have a local partner that knows what he is doing it may be worth it. All cash, please .. with money you can afford to lose.



The trick is to get out. Who is buying what you own in 2, 5 or 10 years ?



What is driving Detroit's economy ?



Many new car jobs are not going to high tax jurisdictions like Michigan. They go to SC or GA or AL .. areas with lower labour costs, more sunshine and lower taxes !



In addition, as a Canadian, investing in the US in general must have a far higher gross ROI compared to Canada due to

a) high capital gains taxes, and

b) currency exchange rate risks



Perhaps you make 100% on your money .. before tax ! Then take 40% to 50% of that for taxes .. and 30% of the remaining 50-60% for a depreciated US dollar .. so a net gain of 30-35% perhaps in Can $s !!



Consider gain and risk !!



Consider Windsor, ON perhaps, across the river: similar low prices, lower taxes, no exchange rate risk and possible similar upside !

 

[Oleksandr11382]

[quote user=Hutchym]Just looking behind the curtain here. We bought a 45 suiter in Detroit in 2007 for $650,000 because it was "cheap". We couldn't cash flow it with no mortgage due to tenant profile, vacancies, rent collection issues, falling rents, very high taxes, deferred maintenance and very high utility costs ! One of (only) 2 of 30+ multi-family properties where we ever lost money on.



Sure, if you know the area well and have a local partner that knows what he is doing it may be worth it. All cash, please .. with money you can afford to lose.



The trick is to get out. Who is buying what you own in 2, 5 or 10 years ?



What is driving Detroit's economy ?



Many new car jobs are not going to high tax jurisdictions like Michigan. They go to SC or GA or AL .. areas with lower labour costs, more sunshine and lower taxes !



In addition, as a Canadian, investing in the US in general must have a far higher gross ROI compared to Canada due to

a) high capital gains taxes, and

b) currency exchange rate risks



Perhaps you make 100% on your money .. before tax ! Then take 40% to 50% of that for taxes .. and 30% of the remaining 50-60% for a depreciated US dollar .. so a net gain of 30-35% perhaps in Can $s !!



Consider gain and risk !!



Consider Windsor, ON perhaps, across the river: similar low prices, lower taxes, no exchange rate risk and possible similar upside !

I'm thinking about investing in single families or duplexes in Detroit.

Do you have good realtors, property mangers in Detroit you could recommend to talk about market situation.

Maybe you have some opinion as well regarding Detroit in 2018.

[quote user=Hutchym]Just looking behind the curtain here. We bought a 45 suiter in Detroit in 2007 for $650,000 because it was "cheap". We couldn't cash flow it with no mortgage due to tenant profile, vacancies, rent collection issues, falling rents, very high taxes, deferred maintenance and very high utility costs ! One of (only) 2 of 30+ multi-family properties where we ever lost money on.



Sure, if you know the area well and have a local partner that knows what he is doing it may be worth it. All cash, please .. with money you can afford to lose.



The trick is to get out. Who is buying what you own in 2, 5 or 10 years ?



What is driving Detroit's economy ?



Many new car jobs are not going to high tax jurisdictions like Michigan. They go to SC or GA or AL .. areas with lower labour costs, more sunshine and lower taxes !



In addition, as a Canadian, investing in the US in general must have a far higher gross ROI compared to Canada due to

a) high capital gains taxes, and

b) currency exchange rate risks



Perhaps you make 100% on your money .. before tax ! Then take 40% to 50% of that for taxes .. and 30% of the remaining 50-60% for a depreciated US dollar .. so a net gain of 30-35% perhaps in Can $s !!



Consider gain and risk !!



Consider Windsor, ON perhaps, across the river: similar low prices, lower taxes, no exchange rate risk and possible similar upside !

 

[Thomas Beyer]

You need deep local knowledge. Spend several weekends or a few days each MULTIPLE TIMES on the ground to separate light from shadow. War zones and class B or A areas often only a few blocks apart.

When we bought in the US we added one question at the top of our Canadian due diligence questionnaire:

Do you feel safe leaving the car?


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