The housing slump in Detroit has attracted many potential buyers. They see great potential in the city for many reasons. Detroit is the 11th largest metropolis and the heart of the American automotive industry. New industries have made Detroit their home. Even Hollywood has found a home in the city with many production companies headquartered and shooting films in Michigan. With many new programs, advances, and initiatives Detroit is destined for significant rebirth and growth. This in turn will have a domino effect on Detroit’s economy and property values will again increase.

With many homes being repossessed by lenders, homes in Detroit can be purchased for pennies on the dollar. Solid brick homes in great neighborhoods are readily available on the open market. Because these properties are being sold so inexpensively, the potential for positive cash flow is inevitable. Single family home values will also experience long-term capital growth over the course of the next 5 to 10 years. A prospective investor can recoup his initial investment within the first years of owning a property.

Property values are low and investors can afford to purchase a fully refurbished, income producing property without financing. Most investors have a savings account, an investment fund or a retirement account and retrieve funds from their reserve. Property taxes in the city on average work out to roughly 3,500 USD annually. After acquisition costs, fees, property taxes, and property management fees ROI’s can range from 11% to 18%. While many US banks have tightened the reigns on lending on non-primary residential properties, foreign banks are continuing to lend. According to the BBC, “In 2010, buy-to-let (BTL) lending rebounded, with lenders granting 102,400 new BTL loans, 10% more than in the year before. In 2009 the number of new BTL mortgages had fallen by nearly 60% from 2008.”

Property will only serve as a good investment when it helps you achieve your financial goals. Therefore, when considering property as an investment you must be practical and maximise the financial advantages of your 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 neighbourhoods for cashflow 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. 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, 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 neighbourhoods and good neighbourhoods. 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.

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 is paramount that you select the right neighbourhood in Detroit. The difference with Detroit compared to many cities in the UK is that Detroit neighbourhoods can dramatically change block by block. Tax benefits are an important factor when it comes to USA property investment. By ensuring you can deduct all expenses you can maximise your cashflow 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.