Detroit Mortgage | Foreclosure Homes for Sale in Detroit
Published March 12, 2010 | 
Foreclosure Homes for Sale in Detroit
In the third quarter of 2006, Detroit real estate suffered more foreclosures than other states; in fact, bank foreclosed on four times as many homes there as compared with the national average.
RealtyTrac is an online foreclosure resource, which documented that Detroit’s mortgage failures were up 43% since 2005. Some contributing factors have been the steadily rising home prices, as well as the resetting of variable mortgage rates.
Two other cities suffering similar rates of foreclosures were Fort Lauderdale, FL and Denver, Colorado.
During the same time period, among metropolitan cities, Bethesda, Maryland, boasted the lowest foreclosure rate – about one in 5,500 homes, or roughly 1/68th of what was reported for Detroit.
Among cities with high foreclosure rates, only Indianapolis achieved any recovery during that same quarter, slowing just fewer than 3%.
Local dynamics of Detroit economics
The Detroit real estate landscape has been exacerbated by specific regional challenges, such as the local employment market. Detroit foreclosures followed auto industry layoffs, which continue to be prevalent.
In early 2007, Michigan’s unemployment rate was 7 percent, the highest in the country, as documented by the Bureau of Labor Statistics. That rate of joblessness was began around 2003, when Ford made considerable cost cuts and eliminated jobs in its efforts to meet Japanese competition.
Loans carried by “solid” borrowers
Ironically, a higher percentage of Detroit area mortgages are prime loans, made to the most credit-worthy borrowers. Nearly 80 percent of the loans originated in 2006 were “A paper,” a few points higher than the national average.
Even those homeowners in Detroit who are making timely mortgage payments are feeling the impact of the high foreclosure rate. As neighbors’ loans default and Detroit REOs rise, prices quickly dropped 10 to 20 percent. This kind of decline in value can leave homeowners upside down, owing more than the property is worth.
There is a type of “guilt by association.” A whole neighborhood is stigmatized when auction signs and bank foreclosures appear. The good neighbor, who meets his payments and maintains his property, is nonetheless negatively impacted.
Even on Wildemere Street, an upscale Northwest Detroit neighborhood, there is some adversity. The two-car garage, Tudor homes sell for twice the city’s median price, yet one fourth of the houses are vacant. Many of the unoccupied properties display auction or foreclosure signs.
Taking profitable advantage of Detroit foreclosures
While the statistics regarding Detroit real estate seem a bit depressing, from an investor’s point of view, there may be ample opportunity. The 30th Street area, a couple of miles from City Center, is nearly gutted, with the majority of row houses empty and dilapidated. To some savvy investors, this bottomed out market phase can be the raw material for rebirth and even capital growth.
In Delray Beach, Florida, for example, builder Frank McKinney bought an entire block of similarly derelict homes on what is now called “Bankers Row.” Many of the small bungalow style homes were vacant and unsecured. McKinney applied his skills to renovate and beautify the block with municipal cooperation. Buying the properties for back taxes, he created a new look to the block, which was then dual-zoned. Today, Bankers Row is fully occupied by a mix of residential and commercial occupants. Colorful paint schemes suggest Caribbean charm, and pretty awnings make the little structures seem just a bit larger, with a hint of whimsy. Similar neighborhood uplifts followed the Bankers Row success story in Delray Beach, converting what were considered dangerous neighborhoods to communities. Delray does not have an auto industry. The major source of jobs is hospitality, mainly restaurant and bar services. But in the case of that Florida city, perhaps the homes brought the people and the jobs.
Can Detroit be the next such revival? With the severely discounted foreclosures and ample profitable opportunity, the answer may indeed be a resounding yes.
Urban Detroit Wholesalers is dedicated to upgrading the value of your Detroit real estate portfolio. Read our market analysis, current news, and pertinent case evaluations of Detroit investment properties.
Detroit Mortgage | Using Hard Money to Purchase Detroit Real Estate
Published March 9, 2010 | Using Hard Money to Purchase Detroit Real Estate
Although the credit marks have tightened their belts in lending, savvy investors still have options when it comes to profiting from Detroit real estate. Indeed, there are many investment opportunities of deep value, providing an investor with ample room to create rental properties, flipped homes, or long-term equity holds.
Low cost of foreclosures create ample profits
In today’s market, homeowners facing foreclosure are double in numbers in comparison to a year ago, according to industry data analyzer Realty Trac. Indeed, many economic and historical factors play into the national decline of housing pricing, conspiring against value like a perfect storm.
Consumers were buying into their piece of the American Dream in record numbers, thanks to easy mortgage money from lenders with liberal guidelines. One hundred percent financing, with seller concessions encouraged, meant that nearly anyone could get their name on a deed without any “skin in the game.”
Detroit Real Estate has not been spared its share of the pain. In 2007, Michigan was ranked in third place among the states for failing mortgages and impending foreclosure. Almost two percent of Detroit Michigan properties were vulnerable to foreclosure due to mortgage default.
Taking advantage of hard money for investment properties
In Detroit Michigan real estate markets, hard money can be a useful tool in the purchase of Detroit foreclosures, intended flips or rehabs. Traditionally, this would require significant down payment from the investor because of the low loan to value given. However, for an opportunity to buy valuable properties at a distressed price, hard money may be useful.
With hard money, investors have the power of leverage, which multiplies the return on your Detroit investment properties. You only need to invest a small percentage of the house’s value, such as 10%, yet you earn your returns on the entire value of the home.
For example, you want to purchase a 0,000 Detroit investment property, and you have the option of putting 10% or 20% down on the home. If the value of the home grows to 0,000, then only placing ,000 down on the home will give you a 100% return on equity. Had you placed 20% down on the home, your ROE would only have been 50%. As long as the profit you reap is larger than your interest costs, then in the long-term, using leverage is always more advantageous.
The supply of Detroit real estate, available at less than half of its appraised value just a few years ago, creates the ideal opportunity to accumulate Detroit investment property or flip a fast rehab.
While declining markets can be tricky, a knowledgeable contractor or handyman can renovate a Detroit rehab into a suburban residential viable rental property or flip sale. For would-be buyers of Detroit Michigan real estate, hard money loans may be the fastest kind of loan transaction to closing, since there is usually no verification of income, employment and credit.
Types of Hard Money Loans
There are several different types of hard money loans available for Detroit foreclosures and Detroit investment properties:
Acquisition Loan
This type of hard money loan is used to specifically buy Detroit real estate. It is ideal for short term holdings, such as a flip, as interest is generally in the teens, typically 11% to 18%. Ideally, the loan would be paid off within a few years from a lower cost source of funds.
Mezzanine Loan
A mezzanine loan is subordinate (in second lien position) to another bank or lender who holds first lien position. It is repaid at the same time that the primary lender is paid off. Sometimes equity is given to the lender, in addition to loan repayment. Debt and equity are blended in the terms of this type of loan.
Development Loan
This hard money loan is used for acquisition plus improvement of a property. The total loan amount is based on the fully improved value, and interest-only payments are made to the lender.
Bridge Loan
A hard money bridge loan is an immediate solution for a resolute buyer who must act quickly. For Detroit MI real estate, a plethora of buy opportunities would present the need for such a loan. These might include acquisitions of commercial buildings, including apartment houses, and commercial businesses and properties. Bridge loans are short term by nature, and are usually paid within two years.
Other forms of hard money can be used wherever equity secures the loan, including construction of new improvements on raw land.
In today’s market, it is important that savvy investors of Detroit investment propertie sand Detroit real estate act decisively. To hesitate on a great acquisition opportunity is to lose the deal and likely future capital growth. Therefore, hard money can be the right leverage for Detroit Michigan real estate investors, even those who may have flawed credit.
Urban Detroit Wholesalers is dedicated to upgrading the value of your Detroit real estate portfolio. Read our market analysis, current news, and pertinent case evaluations of Detroit investment properties.
Urban Detroit Wholesalers owner Jeremy Burgess describes changes to the mortgage industry and how it affets Detroit Investment Property Investing and foreclosure real estate in Detroit. The limits with Fannie Mae and Freddie Mac will now be 4 properties. www.WholesaleMi.com
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