Tips for Investors in Detroit Foreclosed Housing Inventories

Investors from around the U.S. and the world have been taking advantage of bargain-priced homes and large foreclosed housing inventories in Detroit.

According to Jeremy Burgess, co-owner of Urban Detroit Wholesalers, most investors snapping up properties in bulk from foreclosed housing inventories in Detroit come from outside the state and outside the U.S.

Burgess buys underpriced homes, repairs them and then rent them out or sell them to other investors.

Another realtor, Mike Shannon, said only a few are local investors because they are either unemployed, out of money or have already made their home investments. Shannon specializes in selling foreclosed housing and has customers from Australia, New Zealand, England and other countries.

Shannon advises investors in Detroit?s foreclosed housing market to plan for an investment period of five to ten years. He also advises them to take advantage of the Section 8 housing federal program, which is a voucher program designed to help lower-income households.

Under the voucher program, needy families can rent privately-owned housing with the rent fully or partially paid by the national government.

An investor can buy a repossessed property, repair it, find a qualified Section 8 renter and then collect a fair market rent, which could be anything between $850 and $1,200 for a three-bedroom unit.

Another tip from Shannon is to get in touch with local housing nonprofits that are helping families with lower credit scores. These nonprofits work with these families to repair their credit and find affordable financing for them. Investors can sell their restored foreclosed housing units to these families.

Another Detroit investor, David Butler, said he has moved away from speculative investments. What he does is to buy foreclosed homes from Urban Detroit Wholesaler and then offer these restored homes through lease-option agreements.

Lease-option agreements enable lower-income families to rent while accumulating amounts for a future purchase of the rental property. The families can complete the purchase when their incomes improve or when the mortgage market improves and they are able to obtain affordable home loans.

Butler said that he looks for ways to make costs minimal so that the final product would be affordable. He said he limits his purchase, repair and tax costs for one housing unit to only $45,000 and then sells it through a nonprofit with a profit margin of about 12 percent.

Altogether, the investors in the Detroit repossessed house market have various ways to earn income from their investments. The best ways would be those that make profits and at the same time help low-income households finally own a home.

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