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
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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.
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.