Wealth & Poverty from Marketplace APM

When your landlord is on the other side of the world


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This is the first in a three-part series on the Detroit housing market. Read part two, on why mortgages have all but disappeared from the city, and part three, on the riskier alternative for people who want to buy without a mortgage.
The median price for an existing home in the United States right now is around $240,000 and rising. But there are some markets, like Detroit, where it’s still far below that — in the city of Detroit the median value is below $40,000.
The prospect of buying low and selling it at a decent profit or renting it to tenants has drawn a lot of international investors to Detroit. But that can create problems.
“There are a lot of people competing for these houses,” said Rob Funk, a realtor who says his business is hot right now. On a way to a house on Detroit’s east side, which he’d shown earlier in the day to a German investor, he said he sees more and more people from overseas: the U.K., China, Indonesia. The one he showed to the German guy is two stories, solid brick, with a lot of detail work inside.
“I personally love this house,” he said. But like a lot of homes that have sat vacant for years in the city, it’s missing a furnace, and needs a new roof — the repairs could add up to tens of thousands of dollars. On the other hand, he’s marketing the house at for just $9,900.
A buyer might fix it up and flip it, but local investors also buy up homes in foreclosure auctions and resell them to overseas investors as rental properties. Websites advertise a return on investment of up to 20 percent.
“That seems like a very attractive return when government bonds give you 1.5 percent,” said Stijn Van Nieuwerburgh, a professor of real estate finance at New York University’s Stern School. He says investors are drawn to the U.S. because of its relatively stable economy and to Detroit for its rock-bottom real-estate prices.
Still, it’s no secret that this is all speculation on the likelihood that home prices will continue to rise in the city. Also, ca...
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Wealth & Poverty from Marketplace APMBy American Public Media

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