Bad Bets on Detroit Housing Speculation
Expecting a quicker and easier Detroit comeback, foreign investors have been buying up properties. John Gallagher writes, "Danny Kwanten, a factory manager in Hoeselt, Belgium, is one of dozens, perhaps hundreds, of Belgian citizens who bought single-family houses in Detroit over the last few years with expectations of 10% to 15% annual returns renting out the houses to Detroit residents."
"Only after [Kwanten] had plunged more than $80,000 into his two houses did the problems start to crop up — tenants who didn't pay the rent, costly repairs to bring the supposedly perfect houses up to code and, of course, high property taxes."
The investors' mistake stems from breathless coverage of Detroit's fall, as well as its long-anticipated recovery. On the ground, those simple narratives don't always hold. Gallagher concludes with a word of warning. "And at some point investors need to take responsibility for their own naivete and mistakes. Speculating in property thousands of miles from home is never a good idea."