Research points to Detroit being future property investment hot spot in US
Overseas property investors are showing an increasing interest in different kinds of real estate investment opportunities in Detroit, it is claimed.
While the Michigan city may not be the obvious choice for foreign buyers, it is described as a location that could become a hotspot as US president Barack Obama declares he loves the place and the US government pours millions into its car industry.
According to Rod Thomas of Axis Property , Detroit displays the classic signs of being ripe for investment for buy to let investors in particular.
‘The US housing market, in general, remains ideal for investment opportunities. House prices are still low due to foreclosures and rental demand is high. Now, as Detroit enjoys an economic recovery, investors can benefit from Government subsidised rents, capital growth over time and re-selling back into the local market,’ he explained.
Interest doesn’t just come from the more traditional investors in Canada and the UK, says Thomas. Investors from Saudi Arabia and Singapore are also making enquiries and looking to buy.
He believes there are two potential investment strategies for Detroit, the first involving robust cash flow for purchase at a low cost, refurbish and rent and then a strategy for capital growth over time.
‘Detroit was in a terrible state when we first looked at investment opportunities there. However, this worked in our favour because we approached the City and offered to assist with the housing and economic regeneration by bringing in international investment. This led to the City endorsing our product and also offering a significant reduction in taxes for investors,’ said Thomas.
Analysis shows that employment and the local economy are picking up in Detroit. Auto companies such as Ford and General Motors (GM) are reporting second quarter profits in the $billions. GM’s electric car, the Chevy Volt, is about to go into production for worldwide sales. Chrysler’s Fiat 500 electric car is also planned for 2012.
Although approximately 230,000 workers were laid off when the motor industry crashed in Detroit a few years ago, the industry has already taken on around 15,000 new employees so far this year. Reports indicate 10,000 new auto workers will be required, per year, from 2011 to 2013. US Mortgage collective, Quicken Loans, is creating 4,000 new jobs in Detroit. Plus Marathon Oil Corporation is expanding its refinery and creating 2,000 new positions in the area.
Thomas points out that Detroit is also now being cited as a centre of excellence for healthcare. The healthcare sector in Detroit employs 60,000 people, with the St. John’s Hospital, a specialist cancer research and treatment centre employing 15,000 alone.
Detroit is also a major player in the film industry. Tax incentives mean that in 2009 parts of 470 movies were filmed in Detroit and a number of 2011 release films are being shot there this year including Scream 4, LOL: laughing Out Loud with Demi Moore, Real Steel with Hugh Jackman and The Mechanic with Donald Sutherland.
But Thomas points out that research and due diligence are needed when investing. ‘Some streets may present beautiful properties on one side, but if you pan around to view the other side of the street you could be in for a nasty surprise with burned out, derelict buildings,’ he added.
TheFPS Comment
We largely agree that Detroit presents a bottom of the market buying opportunity and that the City is moving up with a lot of investment being made. However, the key to real profits is selecting the right area, right house, at a bargain price and keeping refurbishment costs contained. This is where our long experience in Detroit pays off.
We aren’t middle men or just agents, passing on property from others. Our parent company, an international development company, put their money into buying the properties and as such will not act unless we are 100% sure it’s a great deal. It’s a fact that the very best deals have to be acted on very quickly. Often within hours. There’s no other way to secure a mega bargain.
Furthermore, our own teams of builders do the work, for a fraction of cost that might be expected as we provide runs of work and. If we keep costs down, we make a profit. If something untoward comes up and costs go higher, we take a loss. And renovation not being an exact science, even for the most experienced, we freely admit to having taken more than one cold bath financially. The point here is that our clients DO NOT incur this risk. They don’t have to deal with difficult builders or get the property past some arbitrary City inspector. And they don’t have to find and deal with tenants.
Cut out the middlemen and hassle and buy from source – The Foreign Property Shop. It’s the best way to profit from the temporary availability of absurdly cheap American property.
