Before investing in Detroit you need to know what the city is really like.

Detroit, Mi hate it or love it. Is heavily segregated, a vast majority of the residents have poor credit, the city is plagued with crime, the local government is too corrupt, the school system needs improvement, blight has invaded neighborhoods, and etc. I could go on and on, but the city is still highly profitable for some real estate investors.

By my estimates 70% of the cities residents prefer to rent oppose to owning. I have met landlords who have told me tenants have paid off their mortgages from living in their properties so long. Detroit does have several nicer areas to live. Sherwood Forest, Rosedale Park, & Palmer Woods to name a few.

The city has the potential to recover, but with all the racism in the Metro Detroit area many large companies do not want to do business here. Detroit is a very large city but it lacks the necessary industries to make it thrive.

Its sad to say but Detroit only has 2 major restaurant chain sit down restaurants, and there both on the edge of the city near the water front of the Detroit River.

There are no Fridays, Ruby Tuesdays, Chilis, Paneras, Max & Ermas, Red Robbins, Outback Steak Houses, & etc in the city, you have to drive into the suburbs to visit them. Detroit also lacks major shopping mails, major food chain grocery stores, fitness centers, 7-11, Tim Horton’s etc. The Detroit Pistons don’t even play in the city, and so on and so forth. Until these issues are addressed the cities growth will stand still. Despite the fact we have 3 hotels with casinos, new stadiums, and development occurring downtown, the traffic comes from the suburbs, and promptly leaves as soon as the show is over. Detroit has become a transient city.

Even though the city has more than 3 strikes against it. For some reason people like living in Detroit. Many have moved, but several hundred thousand have stayed behind. The most damming part of investing in Detroit, Mi is too many real estate investors are in Detroit. All investors want a good quality section 8 tenant, but there are only so many vouchers out there. The city now has a ton of nice rehabbed homes, but a smaller pool of high quality tenants to choose from. You really have to know marketing in Detroit if you want to survive. Because if you run out of cash, you will run out of luck!

I have came across too many articles, and press releases ill advising investors about Detroit. They give you the impression that every rental property you buy will yield up to $1000.00 in rent. That is not a realistic estimate. If many Detroit residents could afford that, they would have moved long ago with the others. Check out the demographics of the city there you can see what kind of income residents have.

By far the biggest drawback to owning rental property in Detroit are the taxes. Detroit has one of the highest millage rates in the nation. So once you factor in P.I.T.I. (principal,interest,taxes,and insurance) you may end up showing negative cash flow. And after you buy the property the taxes will go up again. Do the math before you make the offer on any property. The deal may not be as sweet as you thought.

Another major hurdle you have to overcome in investing in Detroit real estate is shrinkage. So many investors spend a lot of money rehabbing a house, and soon as the contractor leaves for the day the house is broken into. The burglars work very fast. They will steal every new window installed, kitchen cabinets, sinks, toilets, copper pipes, furnace, hot water tank, bathroom sink, vanity, security doors, and anything else bolted down. And they can accomplish ALL of this in a few hours.

Your material ends up on the black market, in someone else’s garage sale, or in a hole in the wall mom and pop hardware store. The stolen material is then resold to a contractor, and for the most part they know its stolen goods. You may even end up buying back some of your own material if you don’t pay close attention.

The neighborhood where your investment property is located is watching everything. Most of the time a neighbor has a hook up with someone, and lets them know about the vacant house full of treasures. Some of these thieves are crack addicts and will break in, and even try to steal the bathtub. This problem occurs all over the city. Even in some of the better neighborhoods.

Unfortunately this problem is so overwhelming the police does not have the budget or man power to keep up. They have more important violent crimes to deal with. Detroit has a huge deficit, and they are desperate for money.

Flipping real estate has become an extreme challenge in Detroit. To be successful you want to focus on lease options, private mortgages, and avoid land contracts or installment sales agreements.

Land contracts in Detroit are almost like renting a home. If the buyer defaults you have to evict them by going through the whole legal process. Detroit is known to have professional rent evaders. They will move into a rental property pay the first months rent, and try to live there for free as long as legally possible. Then move on to the next free home. Because Detroit’s residents have the worst FICO scores in the State, its hard for the average landlord to screen tenants.

Mortgage lenders have completely red-lined or blackballed the city, although they contributed to all the mortgage fraud, appraisal fraud, & home inspection fraud. You have to wonder whether it is mainly racially motivated because Detroit has an 86% black population.

What rebound? Foreclosures rise as jobs and income drop

WASHINGTON — Delinquency and foreclosure rates for U.S. mortgages continued to rise in the second quarter, with loans to the most qualified borrowers going bust at an unnerving clip, especially in hard-hit states such as Florida and California.

The numbers reported Thursday by the Mortgage Bankers Association show clearly that rising job losses are worsening the nation’s housing troubles and threaten the Obama administration’s efforts to keep owners from losing their homes.

The quarterly National Delinquency Survey showed that almost one in 10 homeowners with a mortgage was at least one payment late, and thus delinquent, while another 4 percent had entered the foreclosure process on their loan.

Nowhere is there less sunshine in this picture than Florida. The survey found that from April to June, 12 percent of all Florida mortgages were in the foreclosure process and about 23 percent of all Florida mortgages_ almost one in four_ were late on payments or under threat of foreclosure.

In California, 10.8 percent of all mortgages were 90 days or more past due or in foreclosure. While the Golden State accounts for 13.3 percent of U.S. mortgages, it’s also the site of almost 20 percent of foreclosure starts from April to June.

More worrisome is a trend emerging deeper in the numbers: Subprime loans given to the weakest borrowers are now a declining portion of delinquency and foreclosure rates, while prime loans, given to the most highly qualified borrowers, are a rising share.

“The rise in prime delinquencies . . . is a clear indication that employment is the driver of mortgage performance, with the worst performance coming in those areas that are combining jobs losses with large drops in home values like California and Florida,” Jay Brinkmann, the group’s chief economist, told McClatchy. “We won’t see a turnaround in delinquencies until we see improvements in employment, most likely the middle of next year.”

Forty-one states notched a rise in their foreclosure rate for prime fixed-rate mortgages in the second quarter, and prime fixed-rate loans accounted for one in three foreclosure starts. A year ago they were one in five starts.

Prime fixed-rate loans are 65 percent of all U.S. mortgages outstanding, but more than 32 percent of foreclosure starts from April to June. They also constitute 27 percent of all U.S. loans now in foreclosure, up from 17 percent in the comparable 2008 period.

The rising delinquency and foreclosure rate for prime loans creates new problems for the Obama administration, which inherited a complicated housing situation.

The administration has unveiled a number of incentives for lenders and mortgage servicers, who collect mortgage payments on behalf of investors, to modify distressed mortgages by refinancing into lower rates or lowering monthly payments.

The Making Home Affordable effort, however, is geared toward borrowers who have jobs and income. The increased rate of delinquency and foreclosure on prime fixed-rate loans reflects massive job losses occurring nationwide. Workers losing jobs won’t qualify for housing help.

“The reason people are defaulting on these (loans) is they simply don’t have income, and there aren’t any loan modification programs for someone who does not have income,” said Rick Sharga, the vice president of the Irvine, Calif., firm RealtyTrac, which specializes in foreclosure research.

The trend will grow worse.

“The rising levels of unemployment will probably, over the next nine to 12 months, become the primary impetus for foreclosure activity,” Sharga said. “That’s the wave that is just starting to hit and we’re just starting to see the problems now.”

There was more bad news on the employment front Thursday, with the Labor Department reporting for a second consecutive week an unexpected rise in initial jobless claims. The 576,000 claims last week, following 561,000 the week before, likely sets up a bad employment report for August after a July reprieve.

The unemployment rate stood at 9.4 percent in July but is expected to peak above 10 percent. That means more foreclosures, which will put a drag on recovery.

“It will definitely slow down the housing market a bit, which will have a corollary effect on the overall economy coming back” to life.

HUD to Grant $50m for Foreclosure Rehab

The US Department of Housing and Urban Development (HUD) will distribute $50m to state and local governments to help address the inventory of foreclosed properties.

HUD is awarding $44.5m to nine national organizations and $5.5m to local communities for the purpose of purchasing, rehabilitating and reselling foreclosed properties in hard-hit neighborhoods.

HUD will make the grants through the Neighborhood Stabilization Program, established under the Housing and Economic Recovery Act of 2008. The funds are part of the American Recovery and Reinvestment Act.

“I am proud to announce today one more resource for neighborhoods and communities that have been hit hard by the national foreclosure crisis,” said HUD secretary Shaun Donovan. “Thanks to the Recovery Act, we are able to dispatch experts into these communities to help them better manage their neighborhood stabilization programs so that small problems don’t become big ones.”

State and local governments use NSP funding not only to buy and rehabilitate foreclosed properties, HUD said. Grants can also be used to offer downpayment and closing cost assistance to low- to moderate-income homebuyers or to crate so-called “land banks” to collect, manage and dispose of vacant land.

HUD will grant $11.9m to ICF Inc., $7.1m each to National Council for Community DevelopmentEnterprise Community Partners and $5m to Training and Development Associates, to name a few national organizations that will receive funds. On a local basis, HUD will give grants to organizations in California, Florida, Illinois, Indiana, Ohio, Georgia, New England and Michigan.

Detroit jobless rate a record 28.9%

The unemployment rate in the city of Detroit rose to 28.9% during July, the highest rate since modern record-keeping began in 1970.

The rate rose from a revised rate of 28.3% in June. Unlike statewide rates, the rates reported for the city are not seasonably adjusted.

Rates tend to rise in July because auto manufacturers lay workers off during the annual model-changeover period. And, of course, Michigan has been suffering the nation’s highest jobless rate for most of the past two-and-a-half-years. The state’s rate was 15% in July.

The national rate was 9.4% in July.

So to sum it all up….If you don’t have an entrepreneurial spirit, you might not want to come to Detroit looking for work!

Detroit: Known for it’s cheap foreclosure real estate

Detroit’s junk bond rating lowered again

A ratings agency has downgraded the city’s bond rating, citing Detroit’s growing deficit and the region’s continued economic woes.

Moody’s Investors Service rating for the city was already in junk status territory, but this week’s move — a rating of Ba3 — takes it down a notch further.

“The city’s weak financial position necessitates an increased reliance on short-term borrowing for cash flow purposes, which is likely to be increasingly difficult to obtain in the current credit environment,” according to the Moody’s report.

Mayor Bing went to Chicago this month to meet with the two top bond rating agencies, Moody’s and Standard and Poor’s, to discuss the city’s myriad of financial problems.

“This announcement is the latest evidence that we must make the difficult choices and change the way we do business in Detroit,” Bing said in a statement released today.

“My administration is working to stabilize the city’s finances and reduce our costs. That’s why I have called our unions to the table to be part of a comprehensive plan that will make Detroit leaner, more efficient and financially sound.”

Bing and his aides have said the city could run out of cash by October. They say there’s a $60 million to $80 million shortfall this year and up to a $300 million accumulated deficit.

Bing has proposed 10 percent pay cuts for union and non-union employees, bus service cuts and another 1,000 layoffs.

In January, Standard and Poor’s downgraded the city’s credit rating to junk status for the first time in recent years. That triggered a $400 million financial payout to creditors because the city entered into a so-called swap agreement that sought to secure the city’s interest rates as if the bonds had always been issued at a fixed rate.

An agreement with bond holders later was reached to keep the city from having to immediately pay out the $400 million by pledging casino taxes as collateral against the money owed.

So my question is…..What is lower than junk?

Taylor, Bean & Whitaker Ordered to Cease Foreclosures

Score One for the Consumer. Yeah!

http://www.housingwire.com/2009/08/24/taylor-bean-whitaker-ordered-to-cease-foreclosures/

Why Don’t More People Walk Away?

Finding Good Real Estate Deals

I’m surprised to hear many investors say, “I can’t find any good deals.”

My first response that comes to mind is: You’re not looking!

The truth is: There is an abundance of good deals out there with the way many housing markets are today,  but you have to do your homework to find the REAL true gems.

Unfortunately, many new investors believe the “investor fairy” will drop deals out of the sky and into their lap, when nothing could be further from the truth.

Just like the rest of the world, investors have to work in order to make money. The difference is that we’re not stuck in a nine-to-five rut and bound by the bosses’ rules. The job of real estate investing is fun, profitable. You can also make as much as you are willing to work for, and help people along the way.

The following are some tips for finding good real estate deals:

• Tip 1: The oldest method in the book: Knocking on doors. Due to the fact that many investors are not doing it, knocking on doors is still a way to find good deals. The biggest problem that investors encounter is that they don’t know what to say.
  It’s simple. Just tell the homeowners that you were at the courthouse doing some research and noticed that they have a pending problem with their property, and you‘d like to help. Never mention the word, “foreclosure.” Ask them if they’ve taken care of the problem.
  Typically they’ll say, “Yes.” Ask what they did. Usually you will get that blank look on their faces that they haven’t taken care of anything. Offer your assistance and move forward with your deal.
• Tip 2: Try using postcards Most investors mail postcards to people in foreclosure. It’s a great idea, but did you know that there is a wealth of other information that is public knowledge?
  Try mailing to people in probate, going through a divorce, or in the process of bankruptcy. This information is public knowledge, and the typical investor doesn’t tap into it. Don’t be typical.
• Tip 3: Buy a mailing list. Have you ever considered buying a mailing list and “farming” neighborhoods? You can buy lists by the zip code and mail them where you want to own property. It make more sense to have several properties in the same area as opposed to all over?
• Tip 4: How about phone calls? Using a Criss-Cross directory, you can find almost anyone. Take the time to find people who have moved or changed their numbers. If they have moved, you may have a deal because the mental attachment to the property is gone.
• Tip 5: Run some ads in the newspapers. How many deals do you have to do to pay for a year’s worth of ads? One? Here’s a good tip. Place your ads under “money to lend.” This will attract homeowners who will be looking to obtain funds (a source for great deals), and other investors who may have money issues and properties to sell at a discount.
• Tip 6 Bandit signs, as simple as they are, are still a highly effective way to market you real estate business especially in the early stages of your career. And, by the way, this holds true for both marketing for motivated sellers and motivated buyers.

Many times a homeowners first choice is to save their house, not sell it. Once you get them on the phone, you can negotiate your way into the deal.

You will make as much money as you are willing to work for. The question is: How much are you willing to make? The answer is: The sky is truly the limit. There are thousands of deals out there, but you need to make an effort to find them.

Foreclosure Investing with Realtors

Hey, real quick. I wanted to give a few quick pointers on working with a Realtor.

If done correctly, you can have the Realtor your working with sending you leads on property that you never have to look for. This allows you to sort through prospective properties for your foreclosure investing. A very important thing to remember is you do not want to work with just any Realtor. Make sure the Realtor you decide to work with is either a new one who is eager to make their mark because it make them listen like a well trained puppy to what you want. Let me warn, don’t do this if you are not getting deals done or just feeling your way. The other Realtor you’ll want to work with is one that specializes in REO’s and foreclosures.

Here are a couple of important things to cover.

1. Let the Realtor know exactly what you’re looking for and ask them to only send you the ones that fit your criteria.
2. Offer the Realtor an extra $200 to $500 outside of their regular commission for each property you close on that they send you. If you do this I guarantee, and you know you’re not getting many of these now, that they will have you on speed dial so you can be the first person to know about any properties that remotely fits what you’re looking for.One word of caution: You better produce here and do what you claim.

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