Are These Houses Cheap or A Money Pit?

By now, I suspect everyone has heard the news that you can buy a decent single family home in Detroit for, in some cases, less than the price of a used car. I recently read an article in the Nov 2009 "Money" magazine titled "Is this a $6,900 Bargain?" It is amost imaginable that a single family home in the city of Detroit has a median price of $7,500. As you might guess, there is an avalanche of investors jumping in to buy these houses, many sight unseen (NOT recommended) unaware of the pitfalls of owning these homes. Some getting in and are underwater and unable to get out. Others are flourishing. Oh, and totally forget flipping....there are just too many of these homes available to even consider and buy, rehab, and flip. Rentals seem to be o.k. though if you get the right property in the right LOCATION (near a college or a hospital, but probably not an auto factory) so that you have an ample supply of rentors ready to pay you rent.

I have pondered doing a deal in Detroit but I do not know the market. I suspect it is much more risky than where I am (Northern Virginia) where good deals for investors are few and far between and usually met with a dozen or more offers (many cash). Unemployment is relatively low here and the rental market is stable if not actually good. My current property rented in 2 days for $1700 per month. You can buy a home here cheaper IF you can qualify for a loan.

The other issue I see with the frenzy in Detroit real estate is finding good available and competent contractors. You might have to shop around and or wait to get the contractor you want. Then there is the issue of finding the right tenant and being an absentee landlord. Here is a real kicker for you, 20% of addresses in Detroit are unoccupied. My opinion: At some point the real estate investors are likely to reach saturation with qualified and available tenants and may be left holding the bag with a property or renting to tenants that are either unable to unwilling to pay rent.

If I were tossed a legitimate opportunity with true potential (the numbers all worked and provided instant cash flow) I might seriously consider a Detroit opportunity....or I might not.