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Investing In Detroit

By Elizabeth R. Elstien

A recently announced $20 million partnership with billionaire investor Warren Buffet and Goldman Sachs investment firm CEO Lloyd Blankfein will aid small businesses in struggling Detroit, Michigan. The 10,000 Small Business Initiative of Goldman Sachs will support small business in Detroit with capital, education and business support.

Quicken Loans founder/Chairman Dan Gilbert has already invested $1.3 billion in downtown Detroit. Through his Rock Ventures firm, Gilbert has purchased 40 buildings and has employed 11,500 people. Investing in education, Gilbert co-found (with Damien Rocchi) Grand Circus, a technology training institute, also in downtown, teaching mobile and web development, entrepreneurship, innovation and design.

Buffet and Gilbert firmly believe in Detroit's comeback as an economic powerhouse of the U.S. Is this belief warranted? While the old Detroit employed many with little education, the new Detroit will demand more high-tech skills. Already there are not enough software engineers in Detroit to meet the need. Employees will either come from elsewhere or residents will be trained in Detroit. Detroit's art and culture are drawing future employees to thriving areas such as downtown and Midtown, where housing is at a high occupancy rate.

While not everyone can afford a million-dollar real estate investment, single- or multifamily housing is more doable for most. Certain inner-city areas would draw a quicker return while other areas may take longer to reap the benefits. Would you invest in Detroit housing? We'll take a look at the pros and cons of several factors affecting Detroit investments to help you decide.

Pros of Investing

  • Large selection of housing in a variety of areas.
  • Housing prices are quite low.
  • Rate of return can be high in sought-after areas.
  • Rental rates increasing in desirable neighborhoods.
  • Many affordable, sturdy brick homes for sale.
  • Cash investments have higher rate of return with little cash needed.

Cons of Investing

  • May take time to see return on investment.
  • May take a long time to remodel to current code.
  • Longterm vacant properties may need to be torn down and rebuilt.
  • Rental rates low in many areas.
  • High crime rate and few city services.
  • High insurance rates and property taxes.

Those who decide that investing in Detroit is promising should still do their homework. Research inner-city areas and consult with an expert before making any real estate investment purchase.

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