Taken from the weekend edition of the Courier Mail newspaper:
Bargain hunting Australians are rading the recession-ravaged US housing market where huge family homes are for sale for only $1.50. Foreign buyers are travelling to US foreclosure hotspots where properties are listed for US$1000, US$500 - even as little as US$1. One prominent dealer in Detroit - a city crippled by the collapsing auto industry - has sold properties to Australian buyers for just US$3000.
Vacuum cleaner manufacturer Theo Szinger, 67, of Brisbane, cashed in his suoerannuation and plunged into the ailing Detroit property market. He has not looked back, snapping up properties for as little as US$5000. "You can't even buy a second hand car for that," Mr. Szinger said. He said his latest buy, a $16,000 dollar home in such good condition it did not even need a paint job, came with a $10,000 US tax bill, but he was still thrilled with the deal. "I have rented three of them already - I had tenants lining up before I had finished renovating one," he said. He was pocketing about $1000 a week in rental income from each property.
He is among the enterprising Aussies who have swooped on the ailing US home market, where homes worth $200,000 18 months ago are going for a few thousand dollars. "We've had a handful," Detroit foreclosure specialist Mike Shannon said. "Typically, they have been paying US$3000 to US$5000," he said. Mr Shannon said he had more than 100 lower quality homes listed in the Detroit metro area for sale for just $1. His real estate website lists a double-storey, brick pre-war home with decorative ceilings for US$2900, while US$900 buys a three-bedroom, double storey home that needs renovation.
Banks were desperate to offload the foreclosed properties rather than paying the fees associated with maintaining them, he said. "At some point, when the bank realizes they're not going to make any money back, they get rid of them," Mr Shannon said.
Data out yesterday shows foreclosure filings in the US were up 30 percent last month compared to the previous February. More than 290,000 homes nationwide were dealt a default notice and seized by the lender in February alone, the new figures from, US housing monitor Realtrac show. There was one foreclosure filing for every 360 Michigan homes last month.
Nevada, Arizona, California, Florida and Idaho are the other foreclosure capitals. Declining prices drained $3.6 trillion in value from the US's residential market last year, according to First American CoreLogic.
I’d love to own some property in the US, so I guess now is a good time to buy, huh!
Drawbacks of buying a house in Detroit, from what I’ve heard:
[i]Detroit’s population is dropping. Its population has dropped by 50% since the late 50s.
26%+ live below poverty level.
In June the city of Detroit reported a 14.9% unemployment rate, the metro as a whole was 7.9%. And remember that Detroit loses an average of 200 people a day…look at the census and do the math…This means that employment is still shrinking faster than people can get out.[/i]
Obviously there are the success stories such as that Theo Szinger guy mentioned in the news story above. I think it has to do with choosing wisely and selecting properties that can return your money, offset maintenance costs and profit you in the form of rental income.
There are a lot of deals to had, but you have to be careful. Some areas of Detroit are like a war zone and if you are an absentee landlord you could have have a hard time enforcing rent. Make sure you know the rental laws.
My suggestion would be to buy in college towns and waterfront.
There’s a reason homes are so cheap in Detroit. What are you going to do when they don’t pay rent? Go through the 6 month legal hassle of having them evicted? Report them to the credit bureau? Sue them? All while they live and trash your place for free. People that live in $100 homes have nothing to lose.
Sure there are some good people that are working hard and just getting by living there, but what happens when they lose their job? Are you going to evict them?
[quote]JohnnyBlaze wrote:
He said his latest buy, a $16,000 dollar home in such good condition it did not even need a paint job, came with a $10,000 US tax bill, but he was still thrilled with the deal. “I have rented three of them already - I had tenants lining up before I had finished renovating one,” he said. He was pocketing about $1000 a week in rental income from each property.
[/quote]
So people are paying $4,000/month in rent on a $16,000 home?
Yea I totally call bullshit on that rent. For 1k a week here you can rent out a pretty fucking big place that would be worth 800k-1m to buy. So I highly doubt people are paying 1k a week for something they could obviously afford to buy.
I thought of doing this about a year ago, I looked into it a little and it really isn’t what the papers make it out to be.
Although, I would seriously consider moving to America for the fact I could buy a house on the spot with cash whereas over here I’d pay $400/week for 25 years.
Basically anything you read in the courier mail regarding investing is rubbish. Just do your homework.
Most of those “great deals” are pieces of trash that you will never find a good tenant to rent. I lived just outside of detroit for 8 years and I have a friend who sells homes there still… I talked to him about this a while back and he told me, “do you really think buying a 16k home for 10k is a good deal?” a nice home in / around detroit goes for 250 to 400k AFTER the price drop… so if that house is only worth 16k you do the math"
that pretty much ended that convo for me…
Also, as stated before, good luck evicting someone with the American legal system. They know it takes more then 6months so they will agree to any amount of rent knowing full well they wont pay anything…
You could buy those mega cheap houses, and rip them apart and sell the windows, plumbing, doors, taps etc… possibly for a profit. And leave a big hole in the ground.
[quote]Magarhe wrote:
You could buy those mega cheap houses, and rip them apart and sell the windows, plumbing, doors, taps etc… possibly for a profit. And leave a big hole in the ground.
[/quote]
Not a bad idea. Here’s a refinement of that:
Buy four or five contiguous houses, rip them apart and sell the components as you suggest (offsetting much if not all of the purchase price), and then hold the vacant land until the economy turns around again. Land will always be worth something. You could pave it and use it as a daily parking lot in the meantime, so that it generates revenue.
If you buy a big enough chunk, you could sell it to a developer who would put in office buildings or apartments or some such. Might turn a nice profit.
[quote]Varqanir wrote:
Magarhe wrote:
You could buy those mega cheap houses, and rip them apart and sell the windows, plumbing, doors, taps etc… possibly for a profit. And leave a big hole in the ground.
Not a bad idea. Here’s a refinement of that:
Buy four or five contiguous houses, rip them apart and sell the components as you suggest (offsetting much if not all of the purchase price), and then hold the vacant land until the economy turns around again. Land will always be worth something. You could pave it and use it as a daily parking lot in the meantime, so that it generates revenue.
If you buy a big enough chunk, you could sell it to a developer who would put in office buildings or apartments or some such. Might turn a nice profit.
But of course, location, location, location.
[/quote]
You can’t legally do stuff like this, not even with one house. Cities have realized they need houses to be a city.
[quote]johnnytang24 wrote:
JohnnyBlaze wrote:
He said his latest buy, a $16,000 dollar home in such good condition it did not even need a paint job, came with a $10,000 US tax bill, but he was still thrilled with the deal. “I have rented three of them already - I had tenants lining up before I had finished renovating one,” he said. He was pocketing about $1000 a week in rental income from each property.
So people are paying $4,000/month in rent on a $16,000 home?[/quote]
I call bullshit on the $1,000 per week rent too! That would have to be the amount per MONTH.
Who would pay $1,000 per week to live in a sub-average home in Detroit, when the city has all those problems in it? You could be living in luxury for that price.