We explore the flip side of Detroit’s real estate bubble: opportunity
etroiter Claudia Barnes thought another decade would pass before she could own a mortgage-free home. But her dream became closer to reality when the house she and her husband rented went into foreclosure in early 2010.
For months, they spent nearly every day scouring Detroit for a house for which they could afford to pay cash. Finally, they fell in love with a three-bedroom, two-bath ranch on Detroit’s west side. They paid $5,500 cash, and were able to move in a few days after they closed in October. Although it needs a new roof, windows, kitchen cabinets and flooring, it’s home.
“I’m proud of it,” says Barnes, 29, who purchased the house with her 30-year-old husband, Johnny Barnes. “It’s our first home. I’m excited about all the changes we’re making, and especially not having to pay rent every month. It’s definitely a blessing.”
The couple is among a growing number of metro Detroiters who have found unexpected financial freedom in a real estate market with record low prices. Driven down by the loss of thousands of jobs and massive numbers of foreclosures, prices for Detroit properties haven’t been this low since before World War II.
Real Estate Brokers
Despite recent national reports proclaiming Detroit has the nation’s worst real estate market, it offers a grand opportunity. Potential homeowners who are willing to search for a house, put in sweat equity and who have skin thick enough to withstand losing properties to higher bidders in the competitive market can cop extraordinary bargains.
Detroit real estate broker Austin Black II, who owns City Living Detroit, says he had a successful three-year run selling real estate in Birmingham at Max Broock Realtors, but discovered Detroit is the better place to be. Black launched his own full-service real estate sales and marketing firm in midtown last year. He’s luring suburbanites and transplants from other states who want interesting, structurally sound and historic properties to Detroit, where they find houses, condos and lofts at prices unheard of elsewhere.
“In another major city, it would cost millions to get these same properties,” he says. “You can get into these neighborhoods at an almost unbelievable price.”
Consider, for example, Detroit’s premier west side neighborhoods such as Palmer Woods, where mini-mansions that previously sold for millions can be obtained for about $65,000. Or in nearby Sherwood Forest or Boston-Edison, where houses that were up to a half-million dollars can be obtained for as low as $25,000. On Detroit’s east side, in prime communities such as East English Village, many houses that used to go for around $200,000 can be purchased for a mere $10,000 to $15,000.
Unfortunately, says veteran real estate investor Herbert Strather, still too few metro Detroiters are taking advantage of the already rising low prices.
“It’s the greatest recession of our time, and some people are sleeping through it,” he says. “They are not taking any definitive action to buy real estate. If you ever wanted to buy a house, buy it today. You know the prices are going to go back up. It’s a very temporary situation.”
To help people grow rich, Strather is sharing his secrets. He’s recently released the book, “How to Survive and Thrive in the Recession,” ($19.95, HerbsDeal.com) and teaches a weekly Cash at Closing Blueprint real estate investment class on Monday evenings at the Embassy Suites Hotel in Southfield, where dozens pack the room.
“I love being the guru,” says Strather, who acknowledges he began 2010 at least $21 million in the hole and was able to turn his own financial situation around by year’s end. “People listen to me, and I love teaching and sharing my knowledge with others. I have an obligation to help others who may not have the knowledge.”
With education, Strather says even people who don’t have any cash or who have poor credit can purchase properties. He’s also showing people how to discount their mortgages by 80 percent, and teaching people how to regain the equity they lost in their foreclosed homes. But the window of opportunity is closing.
Black estimates prices will remain at these prices only for about another year.
“I don’t predict any increase any time soon,” he says. “Jobs and the overall economy will impact that. The auto industry seems to be going well now. The economy is more stable and coming back, rather than the doom and gloom we’ve seen over the past several years. I predict 2011 will be the year when people are ready to get out there and purchase again. After that, the prices will begin rising.”
Pamela Easley, who owns First Millennium Real Estate, is a broker who specializes in the sale of houses on Detroit’s east side. She helps purchasers find gems at storybook prices. She agrees people have only about another year to obtain properties for such low prices.
“It’s pretty hard now to find what we could find last year or two years ago,” she says. “The kind of house you could find for $2,000 or $3,000, clean up, buy a furnace and move in is very hard to find now. The more decent houses have increased 25 to 30 percent in two years.”
Barnes says anyone can go out and find a great house in a good neighborhood, but expect challenges. “When you go into these houses, you have to be prepared to put work into them,” she says. “They need painting, may need a roof or furnace. People leave trash in them. People may be squatting in them. You have to see past that, and understand you are going to need to put some love into them.”
In December 2008, Detroiter Versandra Kennebrew closed on a one-bedroom riverfront condo for $6,000. Late last year, she obtained a house to develop a transitional home for girls aging out of foster care on Detroit’s west side for $4,500.
“These properties were miracles waiting for me,” she says. “I’m so elated. It’s an ideal time for people who have home ownership as a dream. You can’t sit on it and wait for things to change, because they are changing. A person just bought the same exact condo next to me and paid $40,000 more than I did. This is not going to last forever and people should move on it.”
KIMBERLY HAYES TAYLOR IS A DETROIT-BASED, NATIONAL AWARD-WINNING WRITER AND PROFESSIONAL SPEAKER.