HOUSING NEWS REPORT
ATTOM DATA SOLUTIONS
of all home sales in the metro area in the third quarter, according to ATTOM. That was a 12 percent increase from the same quarter of 2016. In all, 78.9 percent of the flipped properties were purchased with cash while the remaining 21.1 percent were financed. The median purchase price was $70,000 while the flipped price was $119,000 — an average gross flipping profit of $49,000 per flip (70 percent gross return on original purchase price). “Where else in the country can you get housing for a few hundred dollars. It’s still a completely desolate area,” Borland said. “That’s the reason investors are attracted to it. They all want quick returns and quick cash. When you can make your money back in a year to a year and a half what do you have to lose? Still, the risk is very high. You’re dealing with tenants who are not the best tenants.” Although Borland’s firm is focusing more on building a portfolio of multi- family and commercial properties these days, when he did focus on the single family product it was because at the height of the foreclosure crisis the city was selling about 1,800 properties a month. By contrast it is now down to about 100 foreclosures a week at the auction sale. The bulk of Borland’s Livonia-based firm’s investing is in Wayne, Oakland and Macomb counties. At present he owns three multi-family properties that are 100 percent occupied. “The rents are significantly higher now. Our apartments rent for $1,100 to $1,200 a month and they rent out in a couple of days,” Borland said. FOREIGN (AND FLORIDA) INVESTORS FLOCKING Foreign investors flocking to Detroit have transformed Albert Hakim’s real estate business. “We had to start doing property
A total of 972 single family homes and condos were foreclosed on as a result of mortgage foreclosure in the Detroit metropolitan statistical area in Q2 2017, down 28 percent from a year ago to the lowest level since Q4 2001, according to ATTOM Data Solutions. Mortgage foreclosure activity ticked up slightly in Q3 2017 to 981 completed foreclosures, but that was still down 22 percent from Q3 2016. While unemployment in the Detroit metro area is down 1 percentage point between November 2016 and November 2017 to 3.7 percent, according to the Bureau of Labor Statistics, the area has not recovered from the population loss it has seen since the foreclosure crisis and the Great Recession. That population loss means there are still blighted areas just outside the CBD with vacant homes and homes occupied by Section 8 tenants. ATTOM Data Solutions reported that A ‘WAR ZONE’ OUTSIDE DOWNTOWN
the Detroit metro area led the nation in total vacant residential properties in 2017 with more than 56,000 properties. However that represented a 12 percent decline in vacant properties from 2016. The Detroit metro ranked ninth highest in terms of vacant and underwater properties for last year with 2,324, a 10 percent decrease from the year before. The housing situation on the outskirts of the CBD is troublesome, according to Dylan Borland, president of The Borland Group, who noted he is still pleased to see the transformation and revitalization taking place in the city’ s central core. “The city itself outside of downtown has a long way to go. You get outside of downtown and it’s still a war zone,” said Borland, who said his real estate investment firm has fixed and flipped more than 2,500 homes in Detroit since 2006.
management because of all of the overseas investors,” said Hakim, who early in his career was an REO broker handling as many as 1,200 REO listings himself but has since founded City Management Group to manage 400 houses throughout the city. “We have groups coming in from Israel, Argentina and Brazil as well as investors from Florida. Eighty percent overseas investors and 20 percent locals. And they’re all buying a minimum of 10 properties each.” Hakim provided as an example Miami brokers who come to him, buy a rental property for $35,000 with a renter in place who’s paying $750 a month, giving the investor a nice return on their money. Those brokers then turn around and sell the property to a Brazilian investor for $70,000 — still providing solid rental returns. But those eye-popping rental returns to come with risk, Hakim cautioned. “You’re dealing with lower income people,” he said. “The problem is half the people don’t have jobs. They’re getting state aid. If you can get between $600 and $750 (a month) be happy.” “Investors only want the city because of the numbers. It’s all about the numbers. Every one of these investors are buying with cash. Not one mortgage.
Then they’re selling them with tenants in place,” he explained. Hakim also said that a lot of the properties he’s selling are off-market properties he finds through his sources like other investors who bought them and now want to sell. DETROIT DEMOLITION DERBY Some off-market, vacant properties in Detroit prove even too risky for investors. Those properties are identified by the Detroit Land Bank Authority and, when possible, demolished. In fact the city’s website has a demolition tracker. According to that site, since 2014 the city has taken down 13,300 vacant buildings, and hopes to take down as many as 40,000 buildings in eight years total. “The land bank is in the media more than anything else because of the demolition program,” said Nick Najor, project liaison for the land bank authority. Najor noted that the number of buildings the city can demolish is limited because it’s using its allocation of the federal Hardest Hit Funds to finance the demolition effort. By law those funds can only be used in federally designated
areas of the city. Originally created in 2008, the land bank was expanded in 2014 in the aftermath of the municipal bankruptcy. PUTTING PROPERTIES BACK INTO PRODUCTIVE USE Najor estimated that the land bank owns about 100,000 properties in the city of Detroit. About two-thirds them are vacant lots and one-third are either single family residences or two-unit houses. “With this gigantic inventory we have different programs to get homes back into people’s hand to be put into productive use. We are the only avenue through which you can buy a Detroit property that’s guaranteed to be to code and move-in ready.” Land bank properties are available only to owner-occupants, not investors. The houses are sold at auction and some can be purchased on the spot for as little as $1,000. Additionally, the land bank has a “side lot” program allowing homeowners to purchase the vacant side lot next to their home for only $100. “The goal of every program is to make neighborhoods better and beautify every block of the city. There’s no city in
LOWPRICES ATTRACTING HOME FLIPPERS Home flips accounted for 6.1 percent
DETROIT METRO MORTGAGE FORECLOSURES
Third-party Foreclosure Auction Sales
Bank Repossessions at Foreclosure Auction (REO)
12,000
10,000
8,000
6,000
4,000
2,000
! 0 Q1 2000 Q1 2004 Q1 2008 Q1 2012 Q1 2016
32 | think realty magazine :: march 2018
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