Detroit Real Estate Delivers Superior Rewards

By: Jared Pomranky

Every financial market has its ups and downs. Both the stock market and most real estate markets underscore that point. Remember the old adage: buy low, sell high? That's a great strategy if you're a good analyst, or simply have great luck. But both intangible securities and real estate have their slumps.

If Great Grandpa is still in good memory, he'll tell you what the stock market crash of 1929 did to end the roaring 20's and the banks. Then again, just ask anyone whose IRA was in tech stocks during the late 1990's how they feel about their intended long-term investments.

However, although real estate has its short-term fluctuations, its long-term pattern has always been of growth. Inherently, unlike stocks whose value is tied to corporations who can go into bankruptcy overnight, real estate intrinsically holds the value of the land, regardless of short-term market volatility. Indeed, there are several benefits Detroit real estate holds over stock investing, especially for an investor seeking both income and long-term growth.

The Power of Detroit Real Estate Leverage
Both stocks and real estate share a similar concept of 'margins.' With stocks, you can typically have a 4:1 margin, meaning that your purchasing power is four times the value of your brokerage account. However, the margin is typically only extended for short-term traders.

Similarly, with real estate, you also have a 'margin,' which is typically 10:1. However, the difference is that with real estate leverage, you do not have to worry about margin calls, where the brokerage firm will sell your positions and force you to pay the difference in losses, which can happen at a moment's whim. With real estate leverage, you can hold your property for decades to come, without any fear that the bank will enact a 'margin call.'

In addition, Detroit real estate leverage gives you an excellent opportunity to significantly increase your profits - especially in comparison to stocks. For example, let us say that both you and your colleague Mike have $100,000 to invest. You decide to invest in Detroit Michigan real estate, and Mike invests in stocks. Because you have the power of leverage, you place only 10% down on each home, and thus, you purchase $1,000,000 worth of Detroit real estate. On the other hand, Mike has $100,000 in his stock portfolio.

Within one year, Mike's investments have grown by 25%, leaving his portfolio at $125,000. In that same year, real estate has only grown by 5%. However, because of the power of leverage, your Detroit real estate holdings are now worth $1,050,000. Mike earned $25,000 with his 25% return, but you made $50,000 with a minimal 5% return.

In addition, whereas Mike may have dividends paid to him, you have another source of greater income: renters.

Rental Property Income: Have Renters Pay Your Mortgage

Unlike stock investments, buying Detroit investment properties offers the rewards of rent income. Not only do you enjoy monthly income, but in the long-term, your mortgage balance is decreased by payments made by the tenants - giving you 'free' equity while the value of the property appreciates. No stock portfolio can match that type of multi-faceted benefit.

Real vs. Intangible
Long-term stocks and other securities do not require much maintenance, although you may pay a load and management fees for many funds. But you can't sleep under a stock certificate. Paper investments don't have lawns to be mowed or walls to be painted, but they can certainly disappear, in part or altogether!

On the other hand, real Estate may ebb and flow in terms of its current value, but it never falls to zero value. Detroit may be a good example of a real estate market that had periodically flattened, but in nice downtown areas, the median price has held the line at a certain proverbial rock bottom.

Land deeds regain value, even where improvements (buildings) were removed to make way for new structures and progress. While another expense component of Detroit real estate is insurance, that concept bears out the fact that your investment, or its guaranteed replacement, is rock solid. New corporations will always spring up and print stock certificates, but new land cannot be created, thus inherently creating the intrinsic value of Detroit real estate.

Superior Tax Benefits
The beauty of Detroit real estate investments also stems from the value of tax benefits. Whereas stock investors can take tax write-offs for capital losses, they can only enjoy tax benefits when they lose money.

On the other hand, Detroit investment properties give you ample tax benefits, regardless if your home appreciates or depreciates in value. You can always deduct your interest costs, giving Detroit investment properties a significant edge against stock portfolios.

Detroit is Ground Level Opportunity
The best time to become a landlord is when you can take advantage of a low cost basis. Subsequently, when prices of homes and investment properties soften, you can survive and thrive while offering tenants competitive leases. For example, a two-bedroom townhouse in Harbortown on the newly developed River Walk rents for around $880. With prices at around $125,000, it doesn't take much down payment to create a break-even or positive cash flow here in downtown Detroit real estate. The high demand for rentals is a good indicator of future appreciation, so now may be the ultimate time to take an equity position in Detroit investment properties.

America Properties
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 

» More on America Properties
 



Share this article :
Click to see more related articles