A couple of years after Detroit declared bankruptcy, speculators and investors are now flocking to Michigan's largest city. Amidst the financial crisis, investors have seen an opportunity in Detroit's high return rates.
"As values continue to bounce back, there is a great opportunity to capitalize on higher return rates," said Albert Benaderet, co-founder and CEO of Crystal Homes Inc. "When compared to major markets like New York City and Los Angeles, investors expect capitalization rates of 4 percent to 7 percent. In Detroit, if you have a prime location, you can receive capitalization rates of 10 percent to 15 percent."
Home prices in Detroit have fallen to such a low level that opportunity now exists for investors to purchase homes at reasonable prices and see the highest rate of return in the whole of US, considering average rent level.
Morevoer, opportunity is not found in only one area of the city. Benaderet suggested that Metro Detroit also offers good investment opportunities. He added, "While many investors are focused on downtown Detroit, there are opportunities to receive great returns in the Metro Detroit area as well. Property in Oakland country, for example, continues to rise, with some properties expecting to increase 30 percent to 40 percent over the next few years."
Detroit declared Chapter 9 bankruptcy last July 18, 2013. This move protected the state's municipalities from creditors and also made Detroit as the largest city ever to declare bankruptcy. The bankruptcy severely affected real estate prices. As people became unemployed and fled the city, Detroit's real estate market suffered a severe slump. Fortunately, the bankruptcy was only short-lived. Detroit overcame it in December 2014.
One of the causes of the said bankruptcy was Detroit's reliance to only one sector, the auto industry. Studies also reveal that poverty plagued the city, with 36 percent of its residents living below the poverty line.
