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Nicholas Cage

Buying In Detroit

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After seeing media and the forum had articles about houses for $100 it doesn't seem to work out that way.

If you buy a house from a state auction you can be liable for some deliquent taxes or the interest on them, privately there isn't this risk. You just go to an office and show proof of ownership to get them cleared. Either way these don't come to much as houses are repossesed quite quickly and they want to avoid putting people off. Even rich people find the taxes high in Detroit, Wayne County compared to much nicer places. The offical line is "Generally no"

Tax is based on mils, a mill is $1 per $1000 of the value rated by the state, which is good on the way up and bad on the way down. It's only about 83mils for Winter+Summer or one year. YOu would pay around $830 pa on a a 10K house. It is capped after certain periods and reductions are available but still cheap.

The main cost is Housing Code, in 2004 Detroit changed that to Blight Notices to make it civil instead of criminal and speed up demolitions and fines. Blight Notices are weeds in the garden, old sofa in the backyard, parking on grass, graffiti, vermin or animal droppings, not clearing snow from the sidewalk (which you are responsible for repairing) fences not maintined. The minimum fine is $100 per day, up to $10,000 so these bombed out $100 shells would have a load of violations tacked onto them. The state has to maintain the property the same way owners do, so they really really want to get rid of it or just demolish it after reposessing for Tax or liens Banks have the same reason to dump it, $1 is the real value $100 pays for the adverts. There was a buy a house for a dollar scheme where you do the work yourself to fix it up and they waive certain requirements, but in at least one case the bank came back and paid the Tax bill so taking ownership and all the work was wasted by the new "owner", it's a vicous cycle as the City has less and less Tax income so squeezed people more, taking money from anyone who would pay, corruption played a part as well.

blight.jpg

Before selling you need a certificate and inspection with a time limit of around 6 months to fix these problems. Both will cost money and failing to fix the faults can get you fined again. Work on a small scale you can do yourself, like replacing a small section of sidewalk or redoing fencing, but anything else must be done by a contractor which will add further costs. The adverts I can see all ask the buyer to get the certificate done not the seller.

If you want to BTL the property must be certified for renting which is as strict selling some landlords have recently been fined and had assets seized and a lien put on the houses. Vacant properties can be demolished so being a non resident doesn't stop the responsibility to repair and maintain to a high standard.

Overall it would seem to cost about $1500 to buy and whatever costs to bring up to standard which would be 30K or so, then tax would be based on the rateable value so around 2.5K if you arranged discounts. Buying and leaving it alone would just result in reposession, fixing is expensive and BTL slightly more so.

In addition only 18% or so of people pay the fines, collection and enforcement tends to be a risk in Detroit, amny abandoned houses are used as squats or places to store weapons and stolen cars.

People in America can see the same low prices and people in Detroit could easily afford to buy and know the best areas. Any single or double family residence carries so many regulations you either don't pay like some landlords do and try to get what money you can out of it, or pay loads and then have no profit and a very limited rental market.

There may a very good case for BTL in proper real estate costing 70K or more and getting a reasonable return in nicer areas but nothing amazing from the $100 or $15K houses

The only get out I found and then lost relates to non resident vacant properties with no violations and someone to maintain it, so you could buy, lock it up and then aim only for capital gains like in the UK with 1/4 million or whatever of empty houses. But how likely is that in Detroit.

http://www.ci.detroit.mi.us/fintreasury/faq.htm

http://www.ci.detroit.mi.us/dah/default.htm

http://www.detnews.com

http://www.detnews.com/apps/pbcs.dll/artic.../802190329/1409

http://www.telegraph.co.uk/news/main.jhtml.../wdetroit06.xml

Edited by maxwell

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Wo!

Nice research.

What about buying for $100, not paying any bills, having a holiday there and then coming back here, leaving the state to forclose again?

:P:lol:

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Wo!

Nice research.

What about buying for $100, not paying any bills, having a holiday there and then coming back here, leaving the state to forclose again?

:P:lol:

It does look like a perfect holiday destination after all. :P

.

Great research Maxwell, thanks.

.

ST

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Some of the houses are very well built with hardwood frames and stone basements and were built by European tradesmen when things were working well out there.

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  • 292 Brexit, House prices and Summer 2020

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