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Detroit Homes Become Big Investment for Realtors

International and local real estate investors are buying up vacant and abandoned homes in the metro Detroit area in hopes to revitalize the city

Detroit is home to nearly 80,000 vacant and abandoned houses, left to sit and rot—or burn. The houses—some with broken windows, kicked in doors and foot-long grass—become free living quarters for squatters and a free-for-all for scrappers who cash in on wrought iron rails, security doors, copper and anything else worth a few bucks they can find, making them uninhabitable or too expensive for anyone else to rehabilitate.

This plethora of houses has left once-breathtakingly beautiful blocks looking like snaggletooth old ladies. The blight and safety risks these houses pose is a key reason Detroit ranked highest on Forbes Magazine's 2013 list of "America's Most Miserable Cities"—for its crime, unemployment, home prices, taxes, foreclosures and population loss.

The precarious situation for Detroiters represents a gold mine for international bulk real estate investors from countries as far away as China, Australia and Singapore who are buying hundreds of houses. In fact, buying up Detroit has become so popular, the demand outnumbers properties immediately available for purchase and crews to renovate them. These coveted real estate treasures could usher in a golden era of revitalization in Detroit.

"It's creating a buzz around the world," says Haig Istamboulian, a metro Detroit real estate broker who sells bulk properties to international investors.

"Detroit is world-renowned for being one of the best spots for buying real estate, because it's so cheap. You can buy a pretty decent house in Detroit from $10,000 to $30,000."

Some houses can be purchased for a few hundred dollars, he says, through the City of Detroit and the Wayne County tax auction, which drew national attention as the international investors snapped up Detroit properties by the dozens.

The ripple effect has been good for the city. Detroit home prices rose 19.8% percent last year, according to the Standard & Poors Case-Shiller index of 20 leading cities.

Quiet Concerns

Now, as hammers swing and investors renovate, rent and sell houses, this trend promises financial salvation to spruce up Detroit's neighborhoods. Nevertheless, weary Detroiters have heard promises before and seen them fizzle into obscurity.

No one is sure what will happen this time.

"Big picture-wise, things are—or at least seem to be—getting better," says Janai Gilmore, manager of the Vacant Property Coalition of Detroit, a citywide advisory group that explores resolutions for vacant properties.

Her colleague, Elizabeth Luther, says, "It's exciting that people look at Detroit and see potential for investment from the other side of the globe."

The planning and technical program manager adds, "The theory of it is exciting, but the actual practice is another story that is yet to be seen."

That's what many residents say—hoping that investors stay committed to a long-term vision to help Detroit flourish with more residents, increased tax dollars and higher property values.

"Our hope is that it's a plan that keeps these neighborhoods stable," says Joe Balistreri, a neighborhood association vice president in East English Village, where residents tend flowers, shrubs and lawns in front of distinct tudors and brick colonials to compete in an annual landscaping contest and to show off in this month's annual home tour.

But the foreclosure crisis plagued the 100-year-old, racially diverse neighborhood with vacant homes, squatters and renters sometimes unconcerned about curb appeal, noise ordinances and neighborly respect.

Now, a neighborhood drive reveals many houses with windows and doors secured by gray steel VPS panels, along with lawn signs marketing Metro Property Group, which is the region's largest local bulk real estate investor.

Neighbors—who'd been cutting lawns and shoveling snow—are glad Metro is paying property taxes and association dues for the 71 homes they purchased there. But they're anxious about the timetable to renovate and fill the homes, preferably with people who care about helping property values rise.

"I love it when I hear that certain community members are worried about the pace or how long it's taking to turn it around," says Sameer Beydoun, CEO of Metro Property Group.

He says Metro is the largest private owner of residential property in Detroit, with nearly 1,600 properties in Rosedale Park, East English Village, University District, Bagley, Aviation, Grandmont, North Rosedale Park, Minock Park and Morningside neighborhoods.

"That's a positive for me. Well, I'm worried about it, too," says Beydoun, shortly after the June announcement that the U.S. Department of the Treasury awarded $100 million for blight demolition in Detroit and four Michigan cities. "I want it to move faster. We're going to keep pushing."

The Dearborn native, who left selling real estate in New York to start his company in 2009 with a team of lifelong Detroiters, says Metro is renovating "at a pace of 70 to 80 per month from start to finish. We want to get to the point where we're able to renovate 100 to 200 homes per month. We just feel like it's a race, and we want to keep pushing as hard as we can, as fast as we can."

To do that, Metro has streamlined its system to "acquire, enhance, maintain and prosper" since its "Believe in the D" team bid on houses at the Wayne County Tax Auction in 2010. By developing a software program with a 237-point quality control checklist, it renovates each home with similar landscape, paint color, windows and roofing (if necessary), neutral interior paint, hardwood floors, new bathrooms and updated kitchens. Every house gets new plumbing, a new furnace, hot water heater and air conditioner.

"There's definitely great architecture in the city of Detroit, and we try to preserve as much as we can," he says, pointing to an ornate ceiling medallion and archway inside a 1,300-square-foot three-bedroom colonial on Detroit's west side that passed city inspection and is ready to rent for $850 monthly.

But not everyone loves uniformity.

 

Good Neighbors?

"What got everyone up in arms in the neighborhood was they took one of our beautiful houses and took all the landscaping out," says Helen Broughton, an 18-year East English Village resident. "I understand it saves money from a business perspective, because it costs money to manicure. But if they downgrade the look of the neighborhood, who's going to move in?"

Attracting quality renters is a concern that residents share about any investor.

"Until the crash of the mortgage industry, this area was 98 percent homeowners," says Stacy Pugh, president of the Rosedale Park Improvement Association in the northwest Detroit neighborhood of nearly 1,600 houses, where Metro purchased 61 houses.

"Now we've seen a shift in that a lot of renters who couldn't afford this area before (have moved in, and) sometimes they bring the bad habits with them," Pugh says, citing grilling on the porch, violating noise ordinances, putting a basketball rim in the middle of the street, and parking that blocks the street, corner or berm.

"I can't say that these are all (Metro) properties," Pugh says. "I'm giving you some of the issues we face with new people moving into the neighborhood."

Balistreri, 27, says East English Village has experienced individual "slum lord" investors who have not maintained properties or resolved complaints.

However, Balistreri says he has received no complaints about Metro tenants. And he has assurance from the company that "if we have any issue with a tenant, it's a no-tolerance policy ... they'll evict them and find someone else."

So far, he says, "the tenants in the neighborhood have been great," and several young homeowners who've moved in have attended neighborhood meetings.

Beydoun—with a 99 percent occupancy rate and a tenant waiting list—says he's so committed to smoothly integrating renters into traditionally owner-occupied neighborhoods that Metro is developing a course teaching tenants about home maintenance, neighborhood culture and ownership.

"The American Dream of home ownership is where the residents of Detroit will prosper the most if things come to light for us," says Beydoun. "We say it all the time: Our goal is not to be landlords in the city. Helping someone become a homeowner is a big issue for us."

That's why he says his company has met with Quicken Loans' Fresh Start Program to help tenants raise credit scores and qualify for mortgages.

Meanwhile, Beydoun says his landscaping crews mow more than 900 properties across the city—about 250-300 a week; vendors are penalized for complaints or fined if problems are not remedied within 24 hours.

Balistreri says he recently called Metro to clean up a "trash pile" in front of a house, and "they took care of it within 24 hours. That is indicative of my experience with (Metro); they're very responsive and quick."

Beydoun welcomes feedback: "If everything that you heard was 100 percent positive, then it would sound staged."

Metro donated $500 to each neighborhood association, he says. "At first they said, 'What do you want for this?' We said, 'It's like the olive branch to extend our good faith to show you that … we're going to be good community partners.'"

Some Improvements

Broughton says she was impressed when the association requested a meeting with Metro and the company met with the board and members—and agreed to fund the area's "voluntary paid security patrol."

Residents are relieved that more investors mean fewer squatters.

"My block is one of the longer blocks with 55 or 56 addresses, and some are two-family flats," says Latisha Davis, 37, an East English Village block captain. "Last summer, I think my block had … 12 vacant properties. Of those, five houses had squatters. This summer, I think I may have one."

Balistreri says the problem has improved significantly. "When I first moved in, there were two or three squatters. I can say for certain that there are no squatters on my block now."

Istamboulian adds: "There's a lot of criminal activity with abandoned homes. Sometimes you risk your life because of the lawlessness. You really have to be careful. I've walked into homes with squatters, and run into people taking drugs in the home."

Vandalism is another problem. "You can't leave a finished home unoccupied," he says. "When my guys finish a home, overnight vandals come in and break the windows; steal the furnace, water heater and air conditioner. We have to pay people to stay at the homes until a tenant moves in."

Still, Istamboulian says, "The pace is actually picking up right now," especially along the Grosse Pointe and Southfield borders. "Slowly, the neighborhoods are changing."

 

Singapore Savvy

Istamboulian says his biggest client is Fabian Tan, owner of Midas Development Corporation in Singapore. 
"According to him, they're going to revitalize one neighborhood at a time," Istamboulian says, adding that they've "mapped out a five-year plan" to purchase whole neighborhoods. "We started a year ago with roughly 110 houses," he says; they've steadily obtained packages of 10 to 15 houses.

"Out of 280 homes just purchased a few months ago, they just finished 40 of them last week." He says most have already sold to investors.

"These crews can't work fast enough for people who want to move in," he says; they have a waiting list for tenants.

Midas' website includes testimonials from people such as Singapore investor Shawn Moh, who says, "With so many investments in the market, Midas is truly a rare gem for offering a fixed 15 percent per annum rental yield for Detroit houses!"

The Midas website says the company "has provided affordable rental homes for 300 families in Detroit" with "a portfolio of more than 500 homes in the renovation phase" and "plans to acquire and manage up to 2,000 more distressed single-family homes by 2014."

Istamboulian says he's hosted seminars to sell Detroit real estate to investors in Singapore, India and China, with plans for Vancouver, Great Britain and Australia.

But his team recently canceled a California trip; the Midas homes sold so quickly, Istamboulian says, that they had no inventory to offer investors.

"We actually wanted to move a little faster; we were shooting for 100 a month." Standing in a freshly painted, two-bedroom bungalow that's being renovated on Detroit's east side, Istamboulian adds, "It's good for the city. The neighbors are happy, the investors are happy and the tenants are happy."

"I'm very happy being here," says Keith Bingham, 38, beaming in front of the three-bedroom brick bungalow that he's rented for seven months. "My landlord is a good guy. I asked him to cut down a tree and he came right out and took care of it."

Istamboulian says when Midas Development obtained the house at the county tax auction in October, its busted roof and boarded-up windows made it seem destined for demolition.

But now it's got a picture window, white shutters, a new roof and a manicured lawn on a vibrant street.

Bingham, a health care provider, says the house enabled him to leave a rougher neighborhood and provide a nice home for his five kids; he hopes to own it someday. "It's home!" he says.

Detroit's real estate revolution coincides with Wall Street investors buying homes in bulk across America, says Alan Mallach, senior fellow at the Washington, D.C.-based Center for Community Progress.

Detroit investors, he explains, "are putting in millions, not billions," like giant hedge funds investing in the Sun Belt.

"I've got my fingers crossed for these Detroit investors," Mallach says.

Beydoun says everything will get better with time.

"I believe wholeheartedly that our city is already turning around. It's in the process. If you look at (home) prices increasing in value and inventory in the market, that equalizes stabilization of the market."

Investors cite other indicators of Detroit's renaissance: Quicken Loans founder Dan Gilbert's plans for downtown, more companies moving downtown, the Ilitch family's commitment to Detroit, and the opening of Meijer and Whole Foods Market.

Istamboulian says complete revitalization is "not anything that's going to happen quickly. Hopefully, in 10 years Detroit will be vibrant."

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Comments, page 1 of 2 1 2 Next »
Jul 5, 2013 12:11 pm
 Posted by  Mind The Gap

SAMEER BEYDOUN OF METRO PROPERTY IS BEING SUED FOR FRAUD AND RACKETEERING. SEE PART OF ARTICLE TAKEN FROM COURTHOUSE NEWS BELOW. SURELY THE WRITER OF THIS ARTICLE IN B.L.A.C.SHOULD HAVE DONE A BIT OF RESEARCH BEFORE PROMOTING THIS PERSON AND HIS COMPANY.

THE COMPLAINT ALLEGES THAT METRO SELL EMPTY AND UNREFURBISHED HOMES TO UNWITTING FOREIGN INVESTORS. THEY THEN PAY THE INVESTOR THEIR OWN INVESTMENT MONEY BACK FOR A FEW MONTHS - PRETENDING IT IS RENT FROM A TENANT - AND THEN TELL THE INVESTOR THE TENANT HAS GONE AND THE PAYMENTS STOP. THE INVESTOR GEST DUMPED WITH A MONEY PIT THAT NEEDS MASSIVE REPAIRS AND THAT IS DIFFICULT IF NOT IMPOSSIBLE TO RENT.

LEASES ALLEGEDLY FORGED BY SAMEER BEYDOUN, IN ORDER TO CON INVESTORS, HAVE BEEN EXHIBITED IN THE CASE. THIS ARTICLE DOESN'T MENTION ANY OF THIS.

VERY POOR AND MISLEADING JOURNALISM IN MY OPINION.

Tuesday, May 07, 2013
Giant Home Scam Alleged in Detroit
By JACK BOUBOUSHIAN

DETROIT (CN) -
The complaint states: "Defendants Sameer Beydoun, Ali Beydoun, David Makki, and Mike Alaweih, doing business as defendants, Metro Property Group, Apex Global Properties LLC, and Global Power Equities LLC, purchase extremely rundown, rarely tenanted, usually uninhabitable properties out of foreclosure from the City of Detroit, and they are, upon information and belief, the single largest purchaser of such foreclosed Detroit homes. Upon information and belief, Ponzi scheme defendants have purchased thousands of such homes for between $500.00 and $5,000.00 and/or similar small amounts. (Ponzi scheme defendants purchase a scant few homes for larger amounts.) They make a profit by duping and defrauding investors, including plaintiffs, into buying them for $40,000.00 to $50,000.00 and/or similar amounts.

Jul 6, 2013 05:24 am
 Posted by  Ned Smith

Metro Property are being sued for Fraud and It is the exposure of scams like this- allegedly masterminded by the Beydoun in this article - that will ultimately bang the final nail into the coffin of Detroit's precarious finances.

Beydoun claims to renovate 100 houses a month . How preposterous a statement is that and who actually believes it?

Beydoun also claims to have a waiting list of tenants. In fact Metro have hundreds of empty properties on their books for rent, look at their website - and that only shows a fraction of the empty and boarded up houses that are out there. The better ones, not the absolute tat that was sold to investors in previous years.

It is a very old trick. Persuade an investor to part with a large amount of their money (in this case for a run down property worth a few thousand dollars) . Then pay them a hefty monthly return for a few months out of their own cash, just for long enough to get them to buy some more run down properties Then announce that the payments are going to stop because the fake tenant has vanished.

Are any of the other developers named in this article affiliated with Beydoun ? If not do they know that by appearing in the same article they are likely to be associated with the alleged scam? Those who are genuinely trying to do a good job for Detroit and its citizens should avoid any association with those who are being dishonest and subject to lawsuits.

Jul 6, 2013 09:31 pm
 Posted by  Bogart747

Amen, keep the truth out there. To many carpet baggers our city really needs a chance and I can see the beginning from here.

Jul 6, 2013 10:59 pm
 Posted by  Mad Off

I cannot understand an article appearing like this without any form of research. It is very easy to see what is happening in these times and these guys are out for personal gain only. Saviours of Detroit, give me a break! If you are really interested in the truth follow this link. www.courthousenews.com/2013/05/07/57371.htm‎
Please do not get sucked into this, there is absolutely no benefit to investors or the City.

Jul 7, 2013 04:26 am
 Posted by  Turners47

I believe the journalist who wrote this piece of rubbish has been taken for a fool by Beydoun. She should have asked the tenants who live in the crumbling wrecks owned/managed by Metro what the miserable reality is like. Quite rightly Beydoun is being sued as a con artist. This journalist should have taken this into account before she printed the absolute bs that Beydoun is spouting here. The whole article is a disgrace.

Jul 7, 2013 07:47 am
 Posted by  Defrauded Investor

I find it unbelievable that not only is Beydoun from Metro Property Group still pretending to be an honest Businessman, and has the gaul to claim hes helping Detroit but that he is still able to find Journalists gullable enough to believe him. DO YOUR HOMEWORK. There are literally hundreds of investors liek me who were foolish enough to do so and have yet to make anything but losses on the properties he flipped and sold us. The small group of brave individuals who have sued him so far, myself included have uncovered at least 13 counts of proven illegal behavior and the number of lawsuits against him and His Metro Team are mounting daily such that I doubt he will be in business much longer and will have to flee the country back to his Hezbollah friends in Lebanon if he doesn't want to be arrested and thrown in jail! Shame on the journalist who printed his propoganda ! Come on Journalists - do your job !

Jul 7, 2013 08:41 am
 Posted by  scamwatcher

One of the Baydouns from Metro Property that is being sued has persuaded his wife to contact Dearborn residents, on his behalf, basically begging for funds to support him in this legal action. How tacky is that, and what kind of a man asks his wife to do his dirty work for him in such a humiliating way? Well I think we all know the answer to that one. So not only are Dearborn residents supposed to turn a blind eye to his illegal activities, which will probably be the absolute ruin of the Detroit housing market when all is revealed at trial, but he wants them to help pay to try and get him off!!

What on earth was Elizabeth Atkins thinking when she wrote this piece of garbage.

Jul 7, 2013 11:26 am
 Posted by  Also Defrauded

I have lost my live savings to these scammers. I was told lies about the condition of the houses (they were near derelict when I purchased them and I can prove it) and I was told there were tenants in them when there were no tenants in them at all (I can prove that as well). A year down the line all the "rent" money stopped and I have not earned a dollar in over a year. Instead I have been presented with massive bills for things like furnaces and roofs and plumbing. Now, the taxes are due on them again and I don't know where to turn. It is outrageous to see articles like this promoting, Beydoun who in my opinion should be behind bars along with the rest of them. Carpetbagger is a good word although Scumbag is how I feel about him. How did he keep a straight face when he was telling this writer that all the homes get a new furnace and AC unit and doors etc ect. He took you for a ride lady just like the rest of us.

Jul 7, 2013 04:38 pm
 Posted by  catcher

Why are these people still in business, do we need a separate government department created to catch people like them and put them where they belong. Affecting peoples lives by destroying their savings and investments should carry one penalty, and we all know what that should be.

Jul 8, 2013 06:06 am
 Posted by  Also Defrauded

Metro Property have hired someone to get them publicity and false credibility. See below taken from Courthouse News. So that is probably how this article in B.L.A.C. came into being. I posted on Canadian Real Estate Wealth magazine forum and so did some other victims of this scam. Canada seems to be the latest stop for Metro. All the posts were removed - from a forum which is supposed to be an open platform for other people to share their experiences. Next thing Beydoun is pictured on the front cover of the magazine with the headline Beydoun Talks Bull**** on Detroit (check it out it is on Metro's website). In my opinion it is just a glossy advertorial which Beydoun probably funded himself and I doubt it was cheap. Beydoun freely admits in the B.L.A.C. article that it only cost him $500 to gain the trust of the Neighborhood Associations. How despicable is that? So that is probably the answer to everyone who wants to know how on earth garbage like this keeps appearing about Metro and in particular Beydoun.

TAKEN FROM COURTHOUSE NEWS
"In support of this scheme, Ponzi Scheme Defendants hired former Detroit News and Detroit Free Press reporter, Darci McConnell and her McConnell Communications, to market Ponzi scheme defendants, specifically defendant Sameer Beydoun, as the 'savior' of Detroit in gushing, glowing feature articles in the Detroit Free Press, Bloomberg News, and other local, national, and international publications of note, furthering the Ponzi scheme and providing Ponzi scheme defendants with convincing mainstream media approval and cover for the Ponzi scheme fraud.

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