Open Letter to the Detroit Community

Detroiters,

We are all aware that our neighborhoods are physically challenged, and some in more serious trouble than others.  We have thousands of beautiful, vacant, brick homes on the east and west side and with a little loving care and investment these homes can be put back into service.

The question is, Who will do it…?  Will it be: The CDC’s…?  The Block Clubs…?  The Churches…?  The Realtors…?  The Developers…?  The Retirees…?  The young Entrepreneurs...?  The Community members…?  The City of Detroit redevelopment agencies…?  OR will it be the outsiders…?  How about, the answer is US!  There is no one coming to save our community.  We will have to do this ourselves or the outsiders will take over and reap the upside.  The Mayor has done great setting up wonderful redevelopment programs, but we have to do the work.  So, will we get involved in redeveloping and taking back the “D” or will we sleep through this great metamorphosis?  By the year 2020, Detroit’s housing values will more than double and that community demographics will change dramatically.  How will existing Detroiters benefit from this tsunami?  The future is in our hands.  

Consider this:

  1. Detroit has the most attractive investment opportunities in the world.  We are now post-bankruptcy with a $100 million surplus on our balance sheet.

  2. We have a “Can Do” Mayor that has already demonstrated that he can deliver quality services and create attractive redevelopment programs.

  3. We have more than 20,000 young people clamoring to move Downtown, Midtown, Jefferson East and certain Detroit neighborhoods. 

  4. Rental rates are strong, but homes values are still depressed by at least 70%.  

  5. There is a huge demand for good quality housing stock and there are thousands of vacant houses in almost every neighborhood selling for huge discounts.

  6. There are an abundance of available unemployed laborers in every community.

  7. There are dozens of churches and CDC’s in every community.

  8. There are Detroiters with money in every community.  Detroiters has more millionaires than all the Grosse Pointes combined in addition to retired managers and executives with substantial retirement accounts.

  9. Detroit has about a dozen serious developers.

The developers could not possibly do this alone, so the Block Clubs, CDC’s and Churches have to step up, and not to mention, the Pastors should be developers by definition.  This is our inventory of community power.  The good news is that it is enough to make things happen.   After all, if one man can change downtown, the rest of us 500,000 adult citizens of Detroit can take care of the neighborhoods.

If we join together, we can overcome our challenges that will enable us to successfully develop our communities.

Ok, now some of you critics will say, “Herb, how about the problems?” So to that , I admit there are challenges of course and listed are a few obvious ones along with solutions that WE together can resolve:

  1. We have to put a stop to the scrappers and thieves who are destroying our communities.  Let us support Take Back the “D” at http://takebackthed.com ….or any other program available to our city with a mission to fight crime in Detroit.   Take back the “D” is a non-profit organization developed for the purpose of Community Advocacy, wherein which we currently have an opportunity for the community to get involved via the Scrapper Reward Fund.  By this fund,  we the community will help Scrappers turn in dealers who do illegal business with scrappers and thieves.  

  2. There are the several lenders and appraisal management companies that have helped suppress our values.  We have an obligation to our children and the future of our community to sue them. Take back the “D” will address this matter as well.

  3. The high cost of insurance, which can be partially resolved by communities purchasing group or blanket policies or becoming self-insured with re-insurance for catastrophic losses. Block clubs can do this on their own communities now.

  4. The educational system is daunting but collectively we can resolve this. I believe it is a marketing issue because the quality is there; however, most parents believe Charter Schools are better.  Perhaps making all schools a Charter School is a beginning, even if DPS is the sponsor until they  can find a corporate sponsor to help teach and inspire students. The sponsors could even have sub-titles under the school name (i.e. CODY High School SPONSORED BY FORD MOTOR COMPANY).  I am sure many corporations would step up and help because they want better schools and a pipeline of good students (...and loyalty to them won’t hurt).

 

The question is:  Are you going to help restore the “D” by advocating or investing your time and resources; or observe the restoration of the “D”, or relocate?

My primary interest is the redevelopment of Detroit’s neighborhoods.  Therefore, those that are willing to help are in high demand, and it doesn’t matter where you live.   Those that live outside of Detroit (and drive foreign cars) can still help us.  

Many people are fully committed to Detroit and would not move under any circumstances.  But a commitment to live in the City without helping is not enough.  Everybody needs to help in some manner.

For those motivated by economics consider this.   Where else can you buy real estate for $15,000, invest $5,000 and sell for $50,000 or collect $850.00 monthly rent?  Where else can you acquire an apartment building fully leveraged for $1M that is worth $1.8M? or, purchase a mortgage from a homeowner approved to short their house and receive a 100% return legally.  These scenarios should be exciting to everybody, regardless of where in the world you live.

The bottom line:  Would you consider helping to redevelop Detroit regardless of your age, where you reside, or how much money you have?  If the answer is yes, then welcome to the “Good Fight”.  Please join me at http://takebackthed.com.

 

Herb Strather, Developer and Coach

http://Stratheracademy.com

 

Do you know how to close on a property worth MILLIONS with NO MONEY DOWN? Ever heard of a Gift Sale?

If the answer is no, then the good news is that you can learn about it.  There is great buoyancy in the real estate market that allows for transactions to be leveraged at 100 % without exceeding normal debt coverage ratios or stretching loan-to-value ratios.  

How is this possible?  

  1. Interest rates are 4-5% and cap rates are at 9-10%.  If you know how to structure deals properly, they can be leveraged at 100 % and still enjoy a great cash flow.

  2. Rents are equal to the pre-recession numbers, yet prices are at a fraction of the previous sale prices.

Many people have lost substantial equity during the last recession, while others have watched on the sidelines afraid to jump in.  Either way, now is the time to recoup or accumulate wealth.

It is not just about the money.   Detroit needs you, and you need Detroit!

If you compare the housing market to the rebound of the auto companies, Detroit real estate is positioned for a significant rebound.   The demand for housing is greater than the existing supply.  

There are perhaps, thousands of people seeking a middle class home at an affordable price in the $75,000 range.  The problem is that there are not enough $75,000 houses on the market to buy.  Yet, there are thousands of homes selling for $25-30k that with some moderate improvements would appraise and sale for $75-90k.  Which means a couple of things for you and your community:

  1. You are in the position to buy low and sale high in the current market for a great profit!

  2. You may easily create a cash flow for yourself.

  3. You can buy a beautiful home with a monthly obligation substantially lower than you would have to pay for rent!

  4. You can become the landlord on your block, and decide who becomes your neighbors

There is so… much more!  Whether you are interested in leveraging, flipping or just investing in the “D”, you are invited to join the Strather Academy class and get involved.  Just Go to www.stratheracademy.com or call (313) 999-4446 to register.  Any interested parties can come sit in on our first class for FREE!

 

Lifetime Detroiters - We MUST get involved in developing our own Communities!

Let’s be honest, it is February 2015, and  there are no grass root movements to redevelop our neighborhoods.  If you are fortunate enough to live in the Greater Downtown, New Center, East English Village or perhaps Marygrove areas, there are numerous signs of redevelopment projects.  These few pockets of the city have experienced exponential growth and the rents have almost doubled.  However, the facts are simple:  There is a big-time demand for Downtown and its surrounding areas, yet, the average Detroit neighborhood is still devastated.   New families would not consider moving onto the average Detroit block.  To make matters worse, the banks have red-lined these neighborhoods and made it impossible to get a mortgage due to the minimum value to finance under FHA rules.

The Mayor has produced some great tools and programs through the Land Bank and DPDD, but what good is it if we are not going to jump in and find out how these programs work?

The $64 million dollar question is:  How do we redevelop our communities?   The answer?  Let’s start by looking in the mirror!  This is where you we realize that it’s up to YOU!  No one is going to do it for us.

It is hard to believe that we actually have a city with over 700,000 people in America that:

  1. Do not have a nationally recognized sit-down restaurant that you can enjoy dinner and an alcoholic beverage.

 

  1. Has deteriorating communities without a communicated game plan to improve them.

 

  1. Has over two thousand churches that operate amongst the devastation

 

  1. Has allowed the banks to depreciate our real estate values without suing them

 

Wake up Detroiters!  No one is going to save us but us.  If we do not get involved in the redevelopment of our communities, then they will not get redeveloped.  It is a disgrace to ask others to do for us what we haven’t done for ourselves.  Others provide gas stations, restaurants (Coney Islands), liquor stores and tons of automotive shops in our community.  We provide hair salons and soul food.   How long should we put up with this!

At Strather Academy we are creating the next generation of urban developers that will see to it that Detroit takes back its proper place in the world.  We are looking for interested people, churches, and Community Development Corporations that want to make it happen.

If you have a burning desire to get involved and help your community get redeveloped or if you want to purchase one of the thousands of vacant houses in Detroit and put it back into service, then you are invited to join Strather Academy . Just Go to www.stratheracademy.com or call (313) 999-4446 to register.  Any interested parties can come sit in on our first class for FREE!

10 Major Mistakes Bidders Make

Bidding without running a Proforma – There are several types of Proformas. Proformas are projections of profits and losses that are used when buying real estate.  They force investors to do market research and cost underwriting to determine the highest and best value.

Bidding without checking property taxes and uncapped assessments – Property taxes are uncapped (i.e., the taxable value of the property is increased to the SEV “State Equalized Value”) after a purchase.  In order to determine what the assessment will be after the property is bought, it is crucial for the current tax bill to be examined.

Bidding without checking special assessments – Special assessments survive all auctions and sales.  For example, investors who buy vacant, boarded up houses may be subject to having their new purchase demolished after acquisition.  Once demolition starts, there is nothing you can do to stop it.   Always check Special Assessments.

Bidding without checking sewer lines – Many older homes may have some sewer line issues after being unattended for a period of time.  If you are a serious bidder, have the sewer lines checked or assume that you will have to replace them ($3,500 – $5,000).

Bidding without checking Building Safety & Engineering – Building violation fees continue with the property after a sale.  The purchaser assumes full responsibility.

Using unqualified contractors without obtaining a permit – There is no excuse for doing major renovations without pulling a permit.  To ensure the job is done correctly and safely, insist on a licensed, qualified contractor who will pull a permit.  The inspectors will see if the job is done correctly.  Finally, make it a practice to get three estimates for a job. The more information you have the better.

Underestimating rehab costs – This is where the three estimates pay off.   Always add a 10-20% contingency for the unknown.

Underestimating carrying and soft costs – Utilities, cutting grass, security, taxes, and insurance are some of the major costs that buyers ignore.

Bidding without checking title – Quieting title is big business in Wayne County.  It appears as if the title agencies decided not to ensure any foreclosures from the Wayne County Auction unless they were judicial.  The cost to quiet title (i.e., clearing title to ensure that there are no liens or levies against the title, nor disputes over the property’s ownership) is about $1,500. At a minimum, always search the title. It’s very affordable here.

Emotional bidding – When bidding emotionally, you bid for all the wrong reasons (i.e., getting carried away because of personal attachment, revenge purposes, trying to rescue someone, and/or sending good money after bad money).   These reasons will cause you to bid, or even overbid, when you should not.  Do your homework.  Get rid of the emotions.   Run your proforma(s) and know the maximum you should pay before the bidding even starts.

There are at least two more serious mistakes bidders make, and one of them is the most notorious.  If you are interested in finding out more about avoiding mistakes, successful bidding strategies, great research/underwriting techniques, and how to win before you bid, continue by clicking here.

10 Reasons Why Detroit Will Succeed

  1. Detroit now has excellent, cooperative political leadership with the mayor and City Council president working together for the first time that I can remember. Mayor Mike Duggan has certified turnaround skills that have already begun to show progress. He garnered a $53,000,000 demolition grant, in addition to a transportation grant, to repair buses.

  2. Detroit has a clean future balance sheet. Post-bankruptcy promises to be a booming time for Detroit.

  3. Detroit has great entrepreneurs. For example, Dan Gilbert has bought more than 50 buildings downtown. Dan, and others like him, are fully committed to turning downtown Detroit into a vibrant place to work, shop, and play.

  4. Detroit’s philanthropic community response to the bankruptcy is unheard of. Members demonstrated the depth of their commitment by pledging an unprecedented $366 million to help out pensioners and keep Detroit’s artwork out of creditors’ hands.

  5. Detroit has 25 percent of the world’s fresh water — a resource that is in short supply. Sooner or later, people will have to come to where the water is. Just ask the Pepsi Co. bottling plant, which last year sold more than $4 billion of Detroit’s water to the rest of the world.

  6. The automotive industry is back on top of its game with a pent-up demand for new cars, engineers, and computer experts that rival Silicon Valley.

  7. Enter a new generation of optimists: Young, energetic intellectuals who are occupying office space, living in lofts, and cramming into bars. The change is happening before our eyes.

  8. Detroit has the best real estate values in the country, and probably, the world. Where else can you get a cap rate of 15 percent or better? Real estate is still selling for a mere fraction of its value against a pent-up demand for quality housing. The availability of move-in ready real estate is now becoming an issue. Evidence surfaced when Detroit Land Bank Authority auctioned off five houses last week starting at $1,000 each. The houses, which needed repairs, sold between $30,000 and $42,000.

  9. Bordering Canada, Detroit is a major international city and expanding transportation hub.

  10. Detroit has a great international airport with connections all over the world. With plans to include a new airport rail system, additional runways and terminal expansions will be added.

I believe Detroit is headed for a future brighter than anyone can imagine. These are exciting times; it is just the beginning.

Real Life Stories From The Wayne County Auction

$700 Invested Fetches $9801 Return

This was the last house our students purchased in the 2011 auction. The property was identified by a member of our staff, who was participating in the Wayne County auction for the first time. It was a great looking house located on a tough block and we snagged it for $500 dollars. Early indications suggested that this deal was going to be a loss, as the tenants missed several appointments and wouldn’t answer our phone calls. We placed the property on the back burner and after months of non-payment we moved forward with eviction proceedings (which cost use about $200 dollars). Once we received a judgment in our favor, the tenant chased us down asking for a meeting. We ended up negotiating a lease option for 28 payments of $350/month, for a total of $9800 dollars. Once 28 on time payments have been made we’ll sell them the property for $1 dollar. They haven’t missed a payment since.