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How to Become a Successful Property Investor in Detroit by Shah M Karim in Finance (submitted 2010-03-07)
When considering a property as a investment you must be practical in order to maximize the financial advantages of your property investment.
Detroit represents an excellent investment hub as the city offers investors cash flow, potential capital growth and tax benefits. However, you will need to be practical as the three investment benefits will occur at different periods in the property cycle. Currently, investors are purchasing properties in good
Detroit neighborhoods for cash-flow and predict that regeneration of large tracts of Detroit and capital investment by the federal government will lead to the appreciation of property values.
The Detroit property investor needs to take a careful look at the financial analysis at the time of purchase: cash flow and tax benefits. Currently, in this location, cash flow is likely to be your most important consideration. Cashflow is basically the amount of rent you will receive from the property minus the expenses (PITI, water bills, maintenance and vacancies). Usually, you should factor that 50% of the rental income will be used for the expenses.
Therefore, if your rental income is $800 per month you should net $400 per month. For many investors, buying a property as an investment is vastly different from a property for you to live in. Investors should buy properties based on the figures and buy a property within their means that will be easy to rent and has some prospects for capital growth. There is no need for a flashy house, a Lake St Clair view or in the uber-wealthy part of town.
In Detroit the investor should focus on the following:
Vacancy Rates - in Detroit there are a lot of neighbourhoods that have high vacancy rates. Equally, there are neighbourhoods with have lower vacancy due to the desirability of the location. This can easily be seen as the different between bad neighborhoods and good neighborhoods.
Secondary Re-sale Market - there are numerous types of resale markets in Detroit. Firstly, there are the end-investors, who are looking to acquire performing income properties. Secondly, there are the tenant-buyers or the lease option market. Due to the number of foreclosures in Detroit many people are seeking to acquire a long term property that they can purchase after they have repaired their credit rating. Finally, there is the conventional owner-occupier market
Maintenance - when you have renovated a property, be sure to repair all the defects at the property. Remember, when dealing with investment property, prevention is better than cure.
Right location - Detroit like other American cities has neighborhoods which can change dramatically in a short distance. So selecting the right neighborhood is of vital importance in Detroit.
Tax benefits - tax benefits are an important factor when it comes to USA property investment. By ensuring you can deduct all expenses you can maximize your cash-flow and overall profitability of the investment.
By carefully considering these factors, when purchasing a Detroit property you should ease your transition into becoming a successful Detroit property investor.