Detroit
Detroit, USA
Property prices haven’t just declined in certain places in America, they’ve collapsed. And right now they are at rock bottom. In fact, like all boom and busts, they’ve overshot and are at frankly silly levels. So low, that we just can’t get our head around how cheap the price is.
Simply speaking, it’s now the best value property in the World. And all the more amazing when you consider this isn’t in some third world country, but America, still the world’s number one economy. The land of Hollywood, Cadillacs and all-you-can-eat diners!
Even though it’s a great market for bargains in USA at present, selecting the right property is still very important. That’s where our work and expertise pays off. We look at hundreds of properties and only offer about 1 in 20.
Prices are rising now…
Prices are springing up from the absurdly low levels. Local investors are buying up such property and there are bidding wars on many repos. Prices are now, in our estimation, sharply on the up. However, bargains can still be found.
Detroit an ethical investment
You have the option to work with a local non-profit organisation to invest, refurbish, rent or sell. Whichever option you choose for your property you can be sure local people have benefited from your ethical investment. We have managed to secure properties in Detroit which allow for refurbishment and rented to the local community providing you a steady income stream. The refurbishment will be carried out by an admired and well respected group whose sole aim is to give back to Detroit quality housing aimed at renting to local responsible tenants.
For each individual property we bring to the market we provide:
- Pictures of the property and surrounding area
- Pictures/ description of the interior and structural integrity
- Historic purchase prices and rental comparables in same street or surrounding area
Ownership
Getting work done and property managed isn’t a problem. There are plenty of tradesmen and companies looking for work. We can provide details of property repairers or management companies if required.
Buying process
One of the great things about buying in America, is the simple buying process from anywhere in the world. A preliminary contract will be sent to you to sign and then once the balance is paid you will receive title by means of a Warrant Deed transfer and the property will be registered in your name locally. Total buying cost is only $500. No hidden extras. Ideal low cost if you wish to quickly re-sell. Process…
- Reserve with a total of $2,000 plus £2,000 ($1500 USD, Notary $500 and £2,000 finders and administration fee).
- Preliminary Contract sent to you to sign and return.
- Pay balance to USD Client Protected Account in the UK within 2-3 weeks.
- Title Deeds will be signed and transferred into your name and registered in the US.
- Registered Deeds and keys will be sent to you once registered (within 3-6 weeks).
Once you have rented the property out, why not mortgage it? Credit is available in America, as long as you have good security in your property. And that’s certainly the case here. In fact, as you are buying well below market rate, it’s likely you will recoup your money. Even take cash out! So owning a good property at no cost to yourself!
FAQ for Detroit Properties
1. Are these cheap Detroit properties free from debts and liens?
Yes, all properties we offer have had any liens and debts cleared before being marketed. We do not offer properties that have any outstanding taxes, which many repossessed American properties may have.
2. Why are these American houses so cheap?
The answer is public money. The banks can afford to write off mortgages of $70,000 and more which were typically held on these houses because billions of government money is being poured in to their businesses. In short, the American government is subsidising your investment!
3. It seems many of the properties will need work to get them into a rentable condition, can you assist with this?
We do assist clients with obtaining quotes for building works and can oversee a project for a management fee of 12%. Contact us for further details of building management.
4. Do you offer rental management for these properties?
We don’t offer rental management ourselves as this is a specialist area but do recommend the services of a local rental management company. They will find tenants, vet them and deal with managing the tenants for a percentage of the rental income, like any letting agent in the UK.
5. I know unemployment is increasing in the US and that may affect my tenant’s ability to pay rent. Is there anyway to avoid this?
Many landlords are taking advantage of the ‘Section 8’ scheme whereby the government covers the majority of the rent.
6. That sounds good but do I risk getting bad tenants as sometimes happens with the UK’s ‘DSS’ scheme?
The American system is more closely monitored than the UK’s DSS housing scheme and Section 8 applicants and tenants are required to abide by the rules. Failure to do this does result in eviction and permanent removal from the Section 8 scheme. This helps ensure that tenants respect the home they live in and the Section 8 scheme in general has very few evictions.
Section 8 covers up to 100% of the rental amount and in the cases where, 60% or 70% of rent is covered, the landlord (or rental management company) collects the difference from the tenant. If the tenant does not pay, then after 30 days Section 8 officers are brought in to rectify the situation. Those paying a portion of the rent are generally employed but earn less than the designated median wage for an area.
7. I want to visit Detroit, is it easy to get there?
Yes, there are regular flights (direct) with Northwest Airlines daily from Heathrow to Detroit Metro airport. As well as Northwest, there are a number of indirect routes which stop at either Washington or Chicago. Total flight time on a direct flight is approximately 8 hours.
8. Why invest in Detroit and Cleveland?
Property prices in Detroit and Cleveland are some of the lowest in the country and purchasers can pick up houses than dropped on average between 6 and 7 times in value.
9. What is a multi unit property?
A multi unit house is a property that has been divided into two or more apartments.
10. What kind of prices were these properties selling for in the peak sale period a few years ago?
We provide a breakdown of the previous sales history on each property so you know exactly what your home was worth previously.
11. Can I get a mortgage to purchase this property?
No, these properties are cash only purchases so please ensure you do have the funds to complete within the set deadlines. Failure to do this will result in the loss of your deposit and/or penalties. Mortgages can be obtained post completion and 60% LTV is achievable in the current market place.
12. I have heard of grants being offered to renovate properties, can I take advantage of these?
Grants are available for renovating properties and also tax credits of up to $8000 can be used to offset against the purchase of a property. However these are only available to American citizens. So whilst you may not be able to benefit directly, home values on your street will improve if your American neighbours take advantage of these schemes.
13. I have heard that a lot of people have lost their jobs in Detroit, so how can people afford to rent these properties?
Job losses throughout America are an increasing problem and for those that earn under the median income or who are struggling financially, the government has put in place the Section 8 scheme (detailed above).
14. Do these properties come with a building survey or structural inspection?
These properties are sold ‘as is’ and we do not offer surveys or guarantees as to the condition of a property. However, before we place a property on the market each house is personally inspected by us and we do not take on houses that have structural problems. Generally, we choose only one in every twenty houses that we see ensuring we provide only better quality houses.
We always provide up to date photos on a property so you can get a clear idea of what condition it is in and also, what the street and neighbours look like.
15. Do any properties come with tenants already?
Some houses we offer do come already tenanted and in these cases, we will state that in the advert. The majority of houses that we offer however do not come with tenants.
16. What kind of income tax will I be charges when renting out my property?
Rental income tax is approximately 29% after deductions, capital depreciation etc have been taken into account.
17. What is Capital Gains Tax (CGT) in the US if I decide to sell my property?
15%
18. I’ve heard I need a Certificate of Occupancy to rent out a property in the US, is this true?
Yes, a certificate of occupancy is a document that an owner obtains from the council to be allowed to rent/live in the property. It currently costs 295 USD for the certificate.
19. What are property taxes in the US?
Taxes vary depending on area, house, location and price/value. It is difficult to give figures as these houses are currently being sold under value at a low price. Typically annual property taxes for middle class homes can be anything between 1500 – 4000 USD.
20. According to local media the average house price in Detroit is $8,000
The average house price in Detroit is $19-23,000. Contact us for sources.
21. I had a conversation with XXX Realty who advised that we stay well clear as the place is becoming a ghost town, they said that there are entire neighborhoods that are completely deserted which would result in absolutely no rentals, no one looking after neighborhoods and resulting in new age ghettos.
Statistics available for the average home price in Detroit (Please see some of the real-time websites I have sourced) because the city is so large and diverse we prefer to concentrate more on the area where the properties we offer are located to get a more accurate idea. We’ve yet to see an entire neighborhood boarded up but there are definitely streets in the inner city areas that are nearly all boarded up. Oddly enough, the neighboring streets can be fine (which is why we always check before we offer). But we would never offer property in such places. No doubt you’ve seen photos (in particular the street photos) of the houses we offer and know they are not in such areas. Before we offer any of our houses, our contacts inspect them personally to make sure there is no/very little other repossession on the street and that the area is good. We cannot comment on the conversation with Fortune Reality as we were not involved, I would suspect that if they have regional conflicts of interest, then perhaps there input may be biased?
22. More than 50% of the population has now left the city.
It is very difficult to find official figures on how many people have left the city but 50% is certainly completely inaccurate. The general consensus seems to be approx. 8% of the population leaving between 2001 and 2006. However, with the foreclosure problems happening in the expensive metro areas, there is a new trend of homeowners moving back to the city to more affordable housing and to where the jobs are. It has been noted that residents of Detroit have strong roots there and are not transient like in places such as Las Vegas.
23. The entire city is on the brink of bankruptcy.
Approximately 1 in 8 Americans are having problems with their mortgages and I would expect that to be the case in Detroit, probably a bit higher since it is in the top 5 for foreclosure rates. But to say the whole the whole city is on the brink of bankruptcy sounds like unsubstantiated tabloid page filler. Whilst the city does have problems hence the huge price drops and opportunities. There are obvious signs that politically there are no shortages of candidates for the Mayors position, and radical changes are what the city needs. Homes can be purchased in Detroit for around $10, 000 but typically these are not in areas that I would want to own a property in. For decent areas, you need to be looking at $20K and above on average. The rental figures we quote are based on what is available on the same street/immediate area and a very accurate reflection; not made up figures. Rents are quite high in Detroit because of the Section 8 scheme http://www.hud.gov/progdesc/voucher.cfm and the number of homes that have been lost to foreclosure.