Reprinted from http://blog.mylandlordinsurance.com.
There are a lot of investors looking at Detroit as a great place to buy cheap real estate. The thinking is if you can purchase a home with renovations included for $35,000, you can quickly turn a profit. Most homes in Detroit are brick, beautiful, 2 stories, and usually over 2,000 sqft. As a section 8 property the going rental rate is between $1000-$1400 a month. That is roughly $12,000 a year. In three short years the property would be paid and any future rental income would be 100% profit with the property having a resale value of about 50,000 if rented with a good tenant. Sounds great.
There's few problems with this plan:
(Summarized)
Insurance and Taxes
27% of homes are vacant
Lack of employment opportunities
Solution:
Rebuild City from Center. Consolidate public resources and reduce supply by demolishing vacant homes.
To get a more detailed description please read our blog. http://blog.mylandlordinsurance.com
I know many people have a problem with bulldozing homes. The truth of the matter is doing so probably would help Detroit.
Interesting facts, you are absolutely right about the number of vacanices in Detroit. Another major problem that needs to be addressed is to address the growing problem of voilence in the city.
Many people have left the city due to the violence and the response time of the police when there is a problem. Often the problem is there are not enough officers to patrol the city, and I am sure the officers on duty are doing their best, but there needs to be a serious look at this problem and address it accordingly.
The problem with Detroit is systemic and there really isn't a short term solution without aid or assistance from the state or federal level. The most obvious problem is that Vacant homes don't pay taxes. They burn down, provide shelter for criminal activities, and use public resources like fire, police, and even utilities. The people who live in Detroit can not afford to subsidize the lack of tax payments from these vacant homes. The city has to run the communities services on a budget that can't provide the necessary resource. The city tries to compensate the lack of tax revenue by charging income taxes to its residents, businesses, and commuters that work in Detroit which discourages business growth in the city because of the high cost of doing business not to mention the increased risk of fire and crime.
Successful free market economies are driven by supply and demand. Reduce supply(demolish homes)=increase demand for homes. Reduce supply (demolished homes)=reduced need for resources. Freeing up resources (fire, police, education)=safer and better communities.
Just my humble opinion.
Don Stevens
http://blog.mylandlordinsurance.com
You hit the nail on the head Don! I live in Chicago and I'm closing on a single family property tomorrow. Its an investment property and I plan to buy more. I believe as the big three go so goes the local economy. Should the electric car market gain traction, which from all indications it looks to be the future of the car industry, the big three should do well. Even if only two of the three survive i think it would do wounders for employment there.