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Mystery Bidder Bids $3.2M for 6000 Detroit Homes

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Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#31

Post by IkmoIkmo »

e40 wrote: post #28

I wonder what the property taxes, per year, will be on the 6000 parcels. And, since many cities allow you to challenge the stated value, it could be very expensive, in time, to challenge 6000 parcel values.

Me too. I'm actually in Europe, only lived in Canada, but I was inspired by this guy: http://www.buzzfeed.com/drewphilp/why-i-bought-a-house-in-de...

So I looked around a bit... the problem is you can often get a cheap house, but only if you take over taxes on the property, which are often multiples of the value of the house as they accumulated over the years. And then there's annual property tax which are really high.

I don't exactly know why... But I've seen houses which get taxed on a value that's 5-10x the value of the house. And beyond that, the tax rate is often 3x higher than other cities.

So you might have a house that's worth just $20k, but then it's valued-for-tax at $100k, and you pay 4% on that. So you're paying $4k in taxes or 20% of the house's value every year. It's insane.

And it's keeping people out. I for one am not interested in paying $10k in old taxes for a cheap home I have to completely newbuild, and then pay taxes on it as if I was paying rent on top of a mortgage.

But it's probably a goldmine for any company with a 50-year vision who can get economies of scale on things like construction, and can negotiate huge tax-relief deals, e.g. waive old taxes and waive taxes the first 5 years etc.

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#32

Post by couchdive »

drcode wrote: post #3

Pretty easy to see how this'll turn out: Some moderatley rich person with access to a 10% down payment of 3.2M is taking a gamble and is in way over their head... Just wait, within a year they will lose ownership of all these properties in bankruptcy and they'll be back in the hands of the city.

Almost all public auctions I know of do not allow loans at all.

You usually need a cash downpayment to even bid, and proof of funds in bank to participate.

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#33

Post by fiatmoney »

sp332 wrote: post #24
cpwright wrote: post #22

Earlier quoted context omitted.

You also need to sink another ~$24 million into the property to demolish the houses, and if you don't make sufficient progress it will be repossessed. That's gonna be a bunch of jobs, so I'm not sure Detroit would care. I also would think that you would probably want to have more liquid property, or at least something that might possibly generate some marginal income.

It can't be "repossessed" if you own it. (And it wouldn't be repossessed anyway since the bank probably doesn't want it back :p)

It can be seized (or a lien placed) by the city or state for not paying property taxes, or fines from lack of upkeep.

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#35

Post by eevilspock »

It seems obvious to me that too high taxes are the real problem here.

If the tax rate makes owning a piece of property unsustainable, then no matter what your political-economic beliefs you have to agree, right?

I say this as a supported of property taxes (as a stand-in for ground rent owed to the true owners of the land, the commons. Read up on Georgism or Geolibertarianism to understand what I'm talking about).

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#36

Post by specialp »

I hope whomever bought it was not planning on reselling the properties piece by piece on ebay and other places. A lot of these types of homes are sold that way to someone that is like wow I can buy a house for $1500! Then they realize there is nothing they can do with it, and it actually costs them a lot of money in taxes and upkeep, and abandon it.

Hey they could have had a sports stadium for just $500k more: http://www.nfl.com/news/story/0ap2000000360831/article/ponti...

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#37

Post by michaelbuddy »

sp332 wrote: post #24
cpwright wrote: post #22

Earlier quoted context omitted.

You also need to sink another ~$24 million into the property to demolish the houses, and if you don't make sufficient progress it will be repossessed. That's gonna be a bunch of jobs, so I'm not sure Detroit would care. I also would think that you would probably want to have more liquid property, or at least something that might possibly generate some marginal income.

It can't be "repossessed" if you own it. (And it wouldn't be repossessed anyway since the bank probably doesn't want it back :p)

If you don't pay property taxes on a house you own outright, the local govt can and does seize it. Repossessed isn't the right word but in the end, it would be resold and the gov't would make more money from it as well as new annual cycles of taxes. If you buy property and squander it or not keep it up to zoning regulations you can also lose property you own to the local govt. It's not repossessed by a bank, it would be more like a land seizure.

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#38

Post by IkmoIkmo »

therobot24 wrote: post #4

Land grab? Maybe. But at least someone is buying the property. The prices are very low for a reason, very little demand. I believe a renovation plan needs to be in place within 6 months of purchase. I very much doubt it'll happen for all 6000 homes, but will probably happen for at least some portion of them. I really hope the city doesn't twiddle its thumbs following up on these.

True, sort of. But the contrary point is that they want to discourage e.g. people from New York buying some home for $10k out of pocket, not doing anything with it and hoping to flip it in 20 years, as in any big city a plot like that alone is worth $50-60k. Demand is great, but you really want to get people to actually live there, too.

Haven't heard of any requirements for a plan, can you elaborate? Afaik, you own the plot and can leave it shitty if you want as long as it's not a safety hazard.

> Often buyers are legally required to rehab these homes to bring them up to code. In Detroit, buyers are required to sign Affidavits of Compliance Responsibility, which obligates them to make repairs outlined in an inspection report. Only after that can a certificate of occupancy will be issued, which makes the house legal to live in.

Found this, seems to only apply for a certificate of occupancy (meaning you could let it sit as a long-term investment hoping the rest of the city improves to the extent your property value rises enough to make renovation an easy profit) not sure if it's what you're referring to.

Re: Mystery Bidder Bids $3.2M for 6000 Detroit Homes

#40

Post by abbottry »

erok wrote: post #39

Each home = $500. There is more than $500 of materials in each home. Aveerage home has 200-300lbs worth of copper. Each home gets destroyed. I am calling it right now.

This assumes that each home has not already been stripped of copper, which is not the case. Most of these homes are bricks and wood.
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