The Pros & Cons Of Detroit’s $1k Homes
Detroit is gearing up to auction off hundreds more homes for as little as $1,000 each. So are these incredibly low priced foreclosure homes an irresistible no brainer, or more bank account and brain damage than they are worth?
Hundreds of these Michigan homes are expected to be auctioned online. Many may go for the $1,000 minimum. Others could certainly fetch a little more than the original asking price. In contrast to other auctions like this, both those looking for a residents and real estate investors seeking to buy cheap rental properties can bid.
Like other distressed and bankrupt U.S. cities, Detroit has bulldozed blocks of properties in the past. This new deal hopes to avoid even more being scrapped and torn down. The big question is whether or not they are worth buying and investing in, or are just a financial nightmare waiting to happen?
This news of a whole new round of $1,000 homes certainly bucks the recent claims that foreclosures were gone or cheap properties no longer existed. With big hedge and private equity funds out of the game, this leaves even more up for grabs for the average investor. For less than one month of rent, most can own a home free and clear for life. Or they can buy a rental and enjoy a lifetime of income and wealth building. Even reselling these for $1k more can mean doubling their money as a wholesaler. Even renting them for as little as $500 a month, the potential wealth building and income is amazing. It is highly unlikely their values will go down much further. It is true, homes in Detroit have sold for as little as $100 on eBay in the past, but this is still a lot less of a potential loss than many spend on lunches.
It’s no secret that Detroit may not have a reputation for being the friendliest or sunniest destination on earth. However, the recent bankruptcy shows it has hit bottom and now can only go up. There is an incredible entrepreneurial spirit and revolution happening in Detroit. Many top chefs, professionals and others are moving back to restore their home town. Major revitalization is under way, it’s a hot spot of innovation and creativity and investment dollars are pouring in. Much new construction is going up with big builders and lenders plowing in. Of course, there is no guarantee that a major turnaround will stick. Detroit has many issues.
Property management for Detroit landlords is going to have its challenges. Investors need to be prepared. This doesn’t mean people shouldn’t invest here, they just need to be mentally and operationally prepared. The same goes for the level of repairs needed. Expect to encounter major structural and cosmetic repair needs, which require cash. New buyers are also under strict timelines, with a time frame as little as six months to have these homes rehabbed.
If these other factors behind the cheap price aren’t that attractive, consider other areas as alternatives. From Connecticut to Southern California, there are plenty of rental properties up for grabs. Prices might be slightly higher, but so is the quality of assets, tenant quality, prospects for appreciation and cash flow, management is easier, and residents may certainly enjoy living there more.