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Detroit is implementing a program along these lines. They are selling properties in so called 'bad neighborhoods' and mandating that they be rehabbed and renova

Detroit is implementing a program along these lines. They are selling properties in so called 'bad neighborhoods' and mandating that they be rehabbed and renovated within 6 months to code. The average cost of rehabbing a home bought for $1000~$2000 say is $50,000. Have a look at the website: http://www.buildingdetroit.org/ http://www.buildingdetroit.org/ The 'Rehabbed and Ready' (http://auctions.buildingdetroit.org/RehabbedAndReady http://auctions.buildingdetroit.org/RehabbedAndReady) homes demonstrate the transformation from a $1000 to a $50000 property. To my eyes this approach closely matches the 10% target described in the article, and seems to be a smart way to build a tax base.

omegaworks 10y ago
From a cursory view I couldn't find information on buildingdetroit.org about incentives to create neighborhoods from these rehabbed properties that would solve this infrastructure debt issue. Looks like the argument the article is trying to make relates to zoning, traffic design, and density - which I don't think is changeable by people taking advantage of this house flipping program.
yabatopia 10y ago
These conditions are crazy. Requiring in investment of ten thousands of dollars in a home in a high risk neighbourhood within six months after purchase is borderline preying on the gullible. A street in Detroit can go in a downward spiral within months. All it takes is one bad apple (home) that gets boarded up or goes down in flames near your investment and your purchase becomes a super high risk gamble, most probably with a very unhappy ending. Add the high property taxes, completely out of touch with the current values of the properties in such neighbourhoods. And don't forget the back taxes from previous owners that you're often required to pay. You lure people with a limited income, attracted by the low auction prices, force them to invest a significant sum to renovate a property to code within a limited time frame, saddle them with a mortgage and then you slap them with high taxes. I'm not saying investing in such properties in Detroit is a bad move, you can make a lot of money with it, but it's not for the inexperienced or someone without a buffer to overcome setbacks!
- pentae 10y ago
  Or maybe.. these investors know exactly what they are getting themselves into?
  - forgetsusername 10y ago
    Like all the house flippers you saw on TV previous to the last housing crash? Buying investment property with no experience because real estate "can't lose"? The average investor rarely" knows what they are doing".
- erikpukinskis 10y ago
  Not every street is on this program though, right? So you're free to buy regular property on other streets with no strings attached. The program is basically just a mechanism for a bunch of buyers to signal intent.
- GreenPlastic 10y ago
  I knew a real estate investor who was really successful who's motto was the best investments are those in the worst areas that most people wouldn't touch. Large trailer parks with high vacancy rates, run down neighborhoods, etc. We don't live in Detroit but bought 3 properties for 40k each with about 18-20% yields. The renters aren't the best (they're paying 800 in rent because they can't afford an 8k downpayment), but they're great investments.
  - yabatopia 10y ago
    Agree. However, I wasn't talking about 40k homes here, but about $1,000 homes in risky neighborhoods, with the obligation to renovate to code, potentially costing ten thousands of dollars in the process. There's a reason why the value op the property, including home and land, cratered to $500 or a few thousand dollars. It's the state of the neighborhood that dictates the value and it can change rapidly, faster than in regular neighborhoods. It's not an investment I would recommended for inexperienced investors or people with limited savings who put all eggs in one basket. And sadly, the low prices attract quite a few of them.
pjc50 10y ago
Similarly Stoke-on-Trent was selling houses for £1 with an obligation not to rent or sell for 5 years: http://www.dailymail.co.uk/news/article-2986152/Quids-Couple-bought-dilapidated-house-just-1-s-worth-60-000-not-including-teddy-bear-collection.html http://www.dailymail.co.uk/news/article-2986152/Quids-Couple...
dalerus 10y ago
Well and the actual cost isn't $1000-$2000. From the website: "The Detroit Land Bank will issue a Quit Claim Deed at closing, which transfers its interest in the property. The purchaser will be responsible for any delinquent taxes, water bills, or liens on the property." That could be quite a large amount depending on the back-taxes and liens that could have been placed on the property.
kdamken 10y ago
It's a shame that a lot of those nicely new and rehabbed homes will be likely be destroyed by their new tenants.

omegaworks 10y ago

From a cursory view I couldn't find information on buildingdetroit.org about incentives to create neighborhoods from these rehabbed properties that would solve this infrastructure debt issue. Looks like the argument the article is trying to make relates to zoning, traffic design, and density - which I don't think is changeable by people taking advantage of this house flipping program.

yabatopia 10y ago

These conditions are crazy. Requiring in investment of ten thousands of dollars in a home in a high risk neighbourhood within six months after purchase is borderline preying on the gullible. A street in Detroit can go in a downward spiral within months. All it takes is one bad apple (home) that gets boarded up or goes down in flames near your investment and your purchase becomes a super high risk gamble, most probably with a very unhappy ending. Add the high property taxes, completely out of touch with the current values of the properties in such neighbourhoods. And don't forget the back taxes from previous owners that you're often required to pay. You lure people with a limited income, attracted by the low auction prices, force them to invest a significant sum to renovate a property to code within a limited time frame, saddle them with a mortgage and then you slap them with high taxes. I'm not saying investing in such properties in Detroit is a bad move, you can make a lot of money with it, but it's not for the inexperienced or someone without a buffer to overcome setbacks!

pentae 10y ago
Or maybe.. these investors know exactly what they are getting themselves into?
- forgetsusername 10y ago
  Like all the house flippers you saw on TV previous to the last housing crash? Buying investment property with no experience because real estate "can't lose"? The average investor rarely" knows what they are doing".
erikpukinskis 10y ago
Not every street is on this program though, right? So you're free to buy regular property on other streets with no strings attached. The program is basically just a mechanism for a bunch of buyers to signal intent.
GreenPlastic 10y ago
I knew a real estate investor who was really successful who's motto was the best investments are those in the worst areas that most people wouldn't touch. Large trailer parks with high vacancy rates, run down neighborhoods, etc. We don't live in Detroit but bought 3 properties for 40k each with about 18-20% yields. The renters aren't the best (they're paying 800 in rent because they can't afford an 8k downpayment), but they're great investments.
- yabatopia 10y ago
  Agree. However, I wasn't talking about 40k homes here, but about $1,000 homes in risky neighborhoods, with the obligation to renovate to code, potentially costing ten thousands of dollars in the process. There's a reason why the value op the property, including home and land, cratered to $500 or a few thousand dollars. It's the state of the neighborhood that dictates the value and it can change rapidly, faster than in regular neighborhoods. It's not an investment I would recommended for inexperienced investors or people with limited savings who put all eggs in one basket. And sadly, the low prices attract quite a few of them.

pjc50 10y ago

Similarly Stoke-on-Trent was selling houses for £1 with an obligation not to rent or sell for 5 years: http://www.dailymail.co.uk/news/article-2986152/Quids-Couple-bought-dilapidated-house-just-1-s-worth-60-000-not-including-teddy-bear-collection.html http://www.dailymail.co.uk/news/article-2986152/Quids-Couple...

dalerus 10y ago

Well and the actual cost isn't $1000-$2000. From the website: "The Detroit Land Bank will issue a Quit Claim Deed at closing, which transfers its interest in the property. The purchaser will be responsible for any delinquent taxes, water bills, or liens on the property." That could be quite a large amount depending on the back-taxes and liens that could have been placed on the property.

kdamken 10y ago

It's a shame that a lot of those nicely new and rehabbed homes will be likely be destroyed by their new tenants.