Download - The Investors Guide to Detroit Real Estate

5/24/2018 The Investors Guide to Detroit Real Estate

1/24

Tel: +66 (0) 86 266 7032

Web: www.ovginvest.com

Email: [email protected]
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2/24

It's no secret that Detroit was hit hard by the recession.

Massive job losses meant people could not pay their mortgages and

foreclosures were at a record high.

As a result house prices have fallen to their lowest since 1993.

Today, even when people can afford a mortgage, banks are too scared

to lend.

So these people are forced to rent.

This means there is a huge demand for high quality rental homes in

good areas.

Now is the me to take advantage...

Detroit is starng to recover.

Unemployment rates are falling.

House prices are rising.

But prices are sll at their lowest since 1993.

And because they are so low, you can achieve rental yields of 16% and

oen more.

Big business is now invesng millions of dollars in Detroit.

Once banks start to lend again - prices will rise quickly and this

opportunity will be gone.

Investment opportunity

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What is on offer?

Today you can buy 3-bedroom homes in middle-class areas of Detroit fora fracon of what they sold for just a few years ago.

These are completely refurbished, tenanted properes. With rental

yields in excess of 16% ne.

This is an easy to manage, hassle free investment.

As an experienced management company looks aer everything for you.

Key Points:

Homes from US$ 31,000

Already tenanted

Yields of 16% plus

Prices at their lowest since 1993

High capital gains

Newly refurbished

High quality, 3-bedroom, brick built homes meeng government

standards

Turn-key, hassle free investment

Experienced management team take care of everything for you

Investment opportunity

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Investment opportunity (cont.)

Page 3 of 23

High Rental Yields

The high number of foreclosures and lack of mortgage financing has

resulted in a large demand for rental properes.

The average rent for a 3 bedroom home in a middle-class area of Detroit

is US$ 900 a month.

With house prices as low as US$ 31,000 - yields are around 16%, oen

more.

That is net - aer management fees, property taxes and insurance.

All properes have tenants in place.

You earn an income from day one.

Strong Capital Growth

House prices are already rising.

According to the Naonal Associaon of Realtors, in the last 12 months

the average price of property in Metro Detroit has risen by 7.7% to US$

70,000.

This is sll far below the 2005 average of US$ 172,000 - so it leaves you

plenty of room for capital growth.

In November 2011 mulple lisng service Realcomp II Ltd. reported

property sales in Metro Detroit rose for the fourth month in a row:

"Aer four months of consecuve gains in the local housing market, we

can probably say it's the start of a recovery," said Realcomp CEO Karen

Kage.

In September, sales increased by 8.2% over 2010.

And in October 4,176 homes were sold compared to 3,983 in 2010. A

rise of 4.8%.

As the economy improves and banks start to lend again, demand will

increase considerably.

This means you will benefit from high capital appreciaon and have a

large target market to sell your property to when you are ready.


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Easy to manage, hassle free investment

These properes have been completely refurbished oen with new

roofs, re-wiring and plumbing.

They are cerfied to meet current Government health and safety

regulaons.

This means you dont need to worry about any costly repairs or

maintenance bills in the next few years.

How can you be sure your investment is being looked aer?

A top Detroit management company with many years of experience

looks aer everything for you.

They will find you new tenants if you need them.

Theyll make sure your house is well maintained.

They will even collect your rent and pay your money into your bank

account.

On top of that, you get access to a 24 hour help line - so you can call

anyme.

You also get your own website login where you can access your monthly

account statements, signed contracts with tenants, your property tax

receipts, maintenance quotaons and bills, a copy of your management

agreement and inspecon reports for your property.

Your rent is paid directly into your nominated bank account. This can be

in the US or anywhere in the world.

Locaon, Locaon, Locaon...

As with any city there are good and bad areas.

The properes we offer are all in middle-class suburbs of Detroit.

They are close to major highways, good schools and amenies in

desirable areas where respectable families want to live.

We can provide the address for every property we offer so you can see

the locaon for yourself, thanks to Google Street View.

Investment opportunity (cont.)

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This 3 bedroom, 1 bathroom property is typical of the type of house you

can buy.

It has recently been refurbished, including a new roof, new plumbing,

re-wiring, interior painng and re-finishing.

What type of property can you buy?

Ohio Street, Bagley, North West Detroit - Price US$ 49,500

Previous sale price US$ 87,955

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The Locaon

The house is in Bagley - a middle-class area of Detroit.

It has access to major roads including McNichols Road and

Lodge Freeway.

And its within walking distance of Mumford High School and

Marygrove College.

The Detroit Public Library is a short drive away.

Previous Price

The house was last sold on 2nd January 2007 for US$ 87,955

(Source: Detroit Department of Public Records).

Today you can buy it for just US$ 49,500 - saving you US$

38,455.

Rental Yield

The house has tenants paying US$ 950 per month. The rental

yield is 16,1% net - aer all management fees and taxes.


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The Boom Line...

Your Rental Yield

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Ohio Street, Detroit Purchase Price US$ 49,500

Annual Rental Income US$ 11,400

Management Fee US$ 1,140

Net Annual Income US$ 7,960

Net Return 16.1%

Annual Property Tax and Insurance US$ 2,300

Average rental yields are 16% and above.

That is net - aer management fees, property tax and insurance.

All properes are sold with tenants in place.

How is your income paid?

Your rental income is paid into your nominated bank account every month.

This can be a bank account anywhere in the world.

We would recommend a US Dollar account to avoid currency fluctuaons.

But the choice is yours.

Experienced Management

Your property will be looked aer by an experienced Detroit management

company.

They will:

Collect and manage rental payments

Pay your rent into your chosen bank account Adverse for and screen new tenants

Provide maintenance and call out services

Supply online property management accounts, so you can track your

investment at all mes

Carry out regular property inspecons and produce reports based on

these


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The Boom Line (cont.)

Ownership

Ownership is freehold.

Payment Terms

A reservaon fee of US$ 5,000 secures your property.

The balance is payable on transfer of tle deeds - usually within 21 days.

Finance

Finance is not currently available.

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Its a sellers market.

Well not quite - but it wont be long before it gets that way.

According to data from Real Estate One - Michigans largest real estate

company - at the end of June 2011 there was a 5 month supply of homes

in the Detroit Metropolitan area.

That compares with an 18.9 month supply at the end of 2007 when the

area was awash with foreclosures.

To give you an idea - in good mes the US housing market usually has

between 3 and 6 months supply.

More than 6 months supply and it is a buyers market.

Less than 3 months is considered a sellers market.

So you could say Detroit is close becoming a sellers market.

Houses are being snapped up faster than the naonal average and

property is typically on the market only 67 days before it is sold.

When the US banks start lending again house prices will rise fast.

That is when you should be looking to sell.

And remember, you will get a 16% rental yield on average - oen more.

So you stand to get ALL your money back in rental returns in just over 6

years.

And you will sll own the property.

How do we have access to these properes?

We work with a major Detroit company who has been invesng in

foreclosures for the last 3 years.

They buy the properes directly from the banks.

Then they refurbish them, find tenants and sell the properes on to

investors like you.

Why should I buy now?

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A Shortage of good quality homes

According to local Detroit estate agents there is a big shortage of goodquality houses in good neighbourhoods.

This is causing a bidding war on some properes.

"As soon as anything [good] hits the market, it's a stampede to get

there," said Realtor Andy Hargreaves. "It's not uncommon for us to see

five to eight offers on a good home."

Why?

Because many of the homes available are poor quality or badly main-tained.

Foreclosures too badly damaged by their previous owners who could

not afford to keep up with repairs.

Or, they are owned by people with negave equity who won't sell be-

cause they simply can't afford to.

So any quality homes which do come onto the market are snapped up

fast.

Case Studies

Rob and Kim Draper spent a year looking for a house in metro Detroit

travelling from Chicago on weekends to search.

"With the economy being bad, I just thought there would be a lot more

houses," Kim Draper said. "I was surprised with how fast they were sell-

ing."

Another buyer, MaAccivathought it was a buyer's market when he

started looking for a house last year, but aer geng beat on four

offers, he realised things had changed.

Accivawas outbid on a foreclosure and a short sale, both in New Ha-

ven, and on two privately owned homes in Algonac. He finally beat six

offers to buy a three-bedroom, 1 1/2 bath house for $115,000.

The home was bought by an investor last year, gued and fixed up to

flip. "The basement is finished, it has new siding and everything was

done," Accivasaid.

Stories like this are common in the Detroit Metropolitan area.

Why should I buy now? (cont.)

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Detroit is the largest city in the state of Michigan.

The metropolitan area of Detroit is made up of 6 counes and is the

11th largest in the USA. It has a populaon of 4,403,437.

The city is probably best known for the motor industry.

Motor City

It is no secret that the recession hit the motor industry hard and lethe

three largest car manufacturers, Ford, Chrysler and General Motors, in

deep financial trouble.

Ford set aside US$ 25 billion before the recession began and survived

without any financial assistance.

General Motors went bankrupt. The company is now 61% owned by the

US Government. The Canadian government, a health care trust for the

United Auto Workers union and bondholders own the balance.

Chrysler were bailed out by Fiat, who now own 20% of the company.

All of this had a massive impact on Detroit.

Between them these three companies employed around one fih of the

city's work force - 80,500 people.

Many were laid offand as a result lost their homes.

But today things are on the up and up.

In April 2011 Ford reported profits of US$ 2.6 billion - its highest since

1999.

In October 2011 Chrysler reported third quarter net income of US$ 212

million and raised its profit forecast to US$ 600 million for the year.

And in February 2011 General Motors announced profits of US$ 4.7

billion - the highest in over a decade.

Why Detroit?

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Economy and Employment

In 2010 the metropolitan area of Detroit reported a gross product of US$197.6 billion.

According to Simplyhired.com Detroit Trends data, the number of

Detroit, Michigan jobs has increased by 34% since March 2010.

The motor industry, which today employs around 75,000 workers in the

city, have announced they are hiring again.

According to Sean McAlinden, chief economist at the Center for

Automove Research, car manufacturers will hire about 36,000 workers

by 2015 to meet rising demand.

In April 2011 in a speech at Wayne State University in Detroit, he said

employment at General Motors Co. (GM), Ford Motor Co. and Chrysler

Group LLC will rise to about 137,000 in 2015.

Were at such record producvity that any addional producon

requires new hiring.

Aside from the motor industry, firms in the Detroit Metropolitan area are

involved in emerging technologies including biotechnology,nanotechnology, informaon technology, and hydrogen fuel cell

development.

Fortune 500 companies headquartered in Detroit include General

Motors, auto parts maker American Axle & Manufacturing and DTE

Energy.

The law firm of Miller, Canfield, Paddock & Stone, one of the largest in

the U.S., also has offices in Detroit.

Why Detroit? (cont.)

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Big business is invesng

Billions of dollars are being pumped into the Detroit economy.

But, importantly it's not Government money - it is money from industry

and business.

In August 2010, Quicken Loans, the biggest mortgage broker in USA

moved its 4,000 employees to Detroit.

Dan Gilbert, Founder and Chairman of Quicken, said of the move, "Words

do not express the excitement we all feel about moving to downtown

Detroit. Detroit is in the infancy stage of becoming a hotbed of new

economy technology, Internet and entertainment-based entrepreneurial

growth companies. Detroit 2.0 is under way. The only quesons leare:

How big will it grow and how fast can you get down here."

Compuware, a Fortune 500 company which provides IT services to

thousands of customers across the world, also has its corporate

headquarters in Downtown Detroit.

Detroit Medical Center (DMC) together with partners Vanguard and

Blackstone Operaons have recently commied to invesng $1.2 billion

to improve healthcare in Detroit.

This is the single largest private investment in Detroit history.

It will create 12,000 new jobs by expanding and upgrading the five main

Detroit hospitals.




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Hollywood in Detroit

In 2008 Detroit introduced the Film Incenve Package.

This gives huge tax credits (40%) for any movies filmed in the city and has led to

a large increase in the number of Hollywood blockbusters being made in Detroit.

Some recently tles include:

Scream 4 (2011) with Neve Campbell, Courteney Cox and David Arquee

Laughing Out Loud (2011) with Miley Cyrus and Demi Moore

Real Steel (2011) with Hugh Jackman

The Double (2011) with Odee Yustman, Marn Sheen, Richard Gere

The Mechanic (2010) with Donald Sutherland and Ben Foster

Vamps (2011) with Alicia Silverstone and Sigourney Weaver

Casinos

Casinos generate a huge amount of income tax for Detroit.

In 2010, the three Detroit casinos made a total income of US$ 1.38 billion,

generang over US$ 99.2 million in taxes for the city.

In 2009 two of the major casinos, Greektown and Book Cadillac Hotel were

renovated at the cost of US$425 million and $200 million respecvely.


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Investment in infrastructure

Detroit is an important transportaon hub.

The city has three internaonal border crossings; the Ambassador Bridge; De-

troit-Windsor Tunnel; and Michigan Central Railway Tunnel, linking Detroit to

Canada.

The Ambassador Bridge is the single busiest border crossing in North America,

carrying 27% of the total trade between the U.S.A. and Canada.

Rail

The U.S. Department of Transportaon announced in October 2011 that it has

awarded the state of Michigan a $196.5 million federal grant to build a high-

speed passenger railway between Detroit and Chicago.

"Invesng in rail service will spark economic development in communies along

a corridor linking Detroit and Chicago, two vital Midwest cies. A faster, reliable

passenger rail system is a priority for younger generaons and vital to Michigan's

ability to compete globally as businesses look to locate or expand." commented

Michigan Governor Rick Snyder.

RoadsSix major roads serve the Detroit Metropolitan area.

There is also an extensive expressway system.

The Interstate 75 and Interstate 96 connect Detroit to Kings Highway 401 and to

major Southern Ontario cies such as London, Ontario and the Greater Toronto

area.

Air

There are long term plans to build the Worlds largest airport in Detroit -

The Aerotropolis.

Detroit currently has two internaonal airports; Wayne County and Coleman A.

Young.

Wayne Country Airport is the main hub for Northwest Airlines and Spirit Airlines.


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Re-generaon

In 2008 The city of Detroit announced a US$ 300 million smulus plan to

create jobs and revitalise neighbourhoods.

The money came from sales of city bonds and tax revenues originang at

Detroits casinos.

As a result blighted neighbourhoods were demolished and prime

neighbourhoods are in the process of being upgraded and restored.

The 9th wealthiest city in the US

In July 2011 Detroit was ranked as the 9th wealthiest city in the USA.

An extract from the Capgemini Report of Top Ten Wealthiest US Cies

reads:

"Post-recession growth in the auto industry has driven Detroit to

Capgeminis No. 9 ranking. Detroits populaon of wealthy individuals

grew 3.4% to 92,000 in 2010 from 89,100 in 2009 - and that compares

with a 15.9% drop to 79,500 individuals during the financial crisis of

2008."

Why Detroit? (Cont.)

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Homes from US$ 31,000

Already tenanted

Yields of 16% plus

Prices at their lowest since 1993

High capital gains

Newly refurbished

High quality, 3-bedroom, brick built homes meeng government

standards

Turn-key, hassle free investment

Experienced management team take care of everything for you

The opportunity...

Page 16 of 20

Today you can buy high quality, 3-bedroom homes in middle-class areas

of Detroit for a fracon of what they sold for just a few years ago.

These are completely refurbished, tenanted properes, with rentalyields in excess of 16% ne.

That is aer all management costs, taxes and fees.

The key points again:

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Are there any other costs?

Legal fees for due diligenceA tle company, similar to a lawyer, will perform due diligence and

check that your property is free from debt.

They check the sale and purchase contracts and provide you with a full

break down of costs and fees.

Their typical fees are US$ 360 per property.

Title companies are heavily regulated by Federal Law and any payments

you make are securely held in escrow unl compleon of the sale.

Management fees

Management fees are 10% of your rental income.

These are deducted before the rental income is paid into your bank

account.

Property tax

Property tax is paid twice yearly in January and August.

It pays for the local town council to collect rubbish collecon, maintain

roads and for street lighng.

The average cost of property tax is US$ 2,000 per year.

Insurance

Buildings insurance is required if you are renng your property.

The average cost is US$ 600 per year.

Tax on rental income

Under US law you need to pay 10% tax on your rental income.

This is paid to the Inland Revenue Service (IRS) once a year.

The opportunity...(cont.)

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Your exit strategy

For best results you should view this as a mid to long-term investment

(5 to 10 years).

House prices are already starng to rise in the Detroit metropolitan

area.

Plus, there is a shortage of good quality housing in some areas.

As the housing market and economy recovers it is likely there will be an

increasing demand for good quality housing in these areas.

Remember, you will get a rental return of 16% or more.

So you will get all your money back in just over 6 years.

And you will sll own your property.

Lease-to-own

Another opon is to offer your property to your tenants on a Lease-to-

own basis.

This is an agreement between you and your tenants to sell them your

house at afi

xed price infi

ve years

me.

Over five years they make addional monthly payments towards the

price of the house.

At the end of five years, a balloon payment is made for the balance of

the agreed purchase price.

If the tenants cannot make this payment, any money they have already

paid towards the house is legally retained by you.

The opportunity (cont.)

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The next steps...

For assistance you can contact Rebecca directly on +66 86 266 7032

Or if you prefer you can email Rebecca directly at:

[email protected]

1. Choose your properes

Please contact Rebecca for an up-to-date list of the properes currently

available.

You can give her a call or send her an email. Her details are below.

2. Complete the reservaon form aached

If you need any assistance please dont hesitate to ask.

3. Pay your deposit

A US$ 5,000 reservaon fee is paid directly to the tle company (your

lawyer) into an escrow account.

Any funds paid to the tle company are completely secure as they are

held in escrow unl closing.

4. The tle company (lawyer) will do due diligence

Your tle company carry out due diligence and confirm everything is in

order.

5. Closing costs are calculated

Closing costs, including property taxes, are calculated and a specific

closing date is scheduled. Contracts are then prepared and issued to

you for your approval.

6. Final Payment

The tle company will request the payment of the balance plus closing

costs and fees.

This is typically 14 to 21 days from your inial reservaon.

Once the sale is completed the tle company will send all documents

and your property tle to you.

7. Start receiving your money

Your rent (less management fees) is paid directly into your nominated

bank account every month.

Read on to see what previous investors think...

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mailto:[email protected]:[email protected]


21/24

"I was introduced to the opportunies for property investment in Detroit

some four months ago. I was impressed and ended up purchasing two

units. Im now collecng my monthly rents without any problems." -Alan

Johnson

"Having already built a medium size UK buy to let porolio, I can say

that I have never seen rental yields such as those being achieved on my

US investments. -Anjat Munir

"We purchased our US property to provide us with an addional monthly

income and to counter the very low rates our cash was returning us

whilst sing in the bank. Wouldnt hesitate to recommend this

investment." - Peter and Anna Hopskiss

"We travelled to Detroit on a property inspecon trip. The whole trip was

excellent, informave and eye opening, we were happy to buy and are

looking to purchase a second property in the near future." - Kevin Deans

and Tricia Williams

Investor opinions

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If you would like to see Detroit and the properes for yourself we can

arrange a two night, three day inspecon trip.

During your visit you will be able to see examples of homes for sale

before and aer refurbishment; meet with the property management

company and take advantage of their expert local knowledge.

If you would like more details you can call Rebecca directly on:

+66 (0) 86 266 7032

Or if you prefer you can email Rebecca directly at:

[email protected]

Inspecon Trips

mailto:[email protected]:[email protected]


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Reservaon form

A single reservaon form must be completed for every property sold even for bulk purchases.

Full name (purchaser)

Address

Postcode

Telephone number

Sales execuve

Primary source

Email address

Passport number

Driving licence number

Date and place of birth

Naonality

Date of Issue

Issuing authority

Email

Property address

Property descripon

Contract price (USD)

Deposit

Reservaon procedure

1. This reservaon represents a pre contract agreement and is subject to the issue of a full contract.

2. This reservaon payment will secure withdrawal of the property and freeze the price.

3. This reservaon payment is non-refundable, subject to confirmaon of clean and clear property tle.

4. As the purchaser you must be fully aware of your obligaons to make the final stage compleon payment as menoned in this reservaon

agreement.

5. If this property has been purchased for investment there are no guarantees that it will be resold within a specific me scale and projected capital

growth can only ever be esmated.

6. Exclusion of Liability: Both the Buyer and the Vendor Expressly exclude Ocean Villas Group or its employees and agents from any liability of

whatever nature arising from breach of this agreement. The value of property can rise or fall and past performance is not a guarantee of future

returns. No guarantee can be given that a property can be resold at a pro fit within a specific meframe.

FEES TO BE PAID TO: JPMorgan Chase Bank, N.A., 620 S Capitol, 3rd Floor, Lansing, MI 48933, USA

Roung/ABA/Transit number 021000021Account number: 960336816

For credit to account: Escrow & Title Services Inc.,

d/b/a Bell Title Agency,

32826, 5 Mile Road,

Livonia, MI 48154, USA

Signed purchaser

Date

Signed Ocean Villas Group

Date

How has your experience of working with us been so far?

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Rebecca Smith has 22 years of experience in

real estate sales and development.

Originally from Leeds in the UK, she is also a

prolific property investor.

Rebecca says; Research into any real estate

market is crucial. You cannot simply follow the

hype.

It is essenal to have a long term plan - especially in todays market.

Her moo is:

I will never recommend anything I would not buy myself.

Rebeccas other publicaons include:

The Investors Guide to UK Student Property

The Definive Guide to buying property in Thailand

10 simple ways to slash your markeng costs and sell more property

You can contact Rebecca directly on [email protected]

Copyright

The contents of this guide are original copy.

The author would like to state that she is extremely happy for

individuals to distribute this guide to anybody they feel will enjoy and

benefit from its contents.

Just please be sure not to alter it in any way, or claim that its yours -

that is just not cricket.

Disclaimer

The contents of this guide are for a general overview only and should

not be taken as an authoritave statement of internaonal law and

pracce.

Neither the author nor the publisher is responsible for the results of

acons taken on the basis of informaon contained in this summary, nor

for any errors or omissions.

This text is not intended to provide legal, accounng or tax advice.

Page 23 of 23

About the authorAbout the author
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Download - The Investors Guide to Detroit Real Estate

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