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PENSCO Blog

PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

Detroit: A Real Estate Renaissance Worth Exploring

City of Detroit

  |  By Chris Shanahan, CISP®

As the US housing market rebounds from its devastating slump, many cities that were hit hardest by the housing bubble collapse of the late 2000s are now realizing a rebound in real estate investments.  One perhaps unexpected example of this rebound is Detroit, where the long-struggling city is enjoying a “tech boom” of sorts.  Some of the most powerful names in technology -- including Amazon, Twitter and Google -- have set up shop in Detroit, spurring job creation and general hope for a city that was devastated by an historic bankruptcy filing last year.

A by-product of this tech boom is that potential investors with available cash are now looking to this area to invest in a multitude of real estate projects. For instance, construction is underway on the Quicken Loan Technology Center, a 66,000-square-foot data center and office complex spearheaded by Quicken Loans that contains a huge server room that will be available for lease. In the city, hundreds of new rental apartments are being built to accommodate an anticipated influx of workers. A recent article in the Detroit Free Press heralded these investments, saying Detroit seems like it is "finally at a long-predicted watershed moment" that could dramatically transform the city in the next 10 to 20 years.

Meanwhile, property tax values have dropped at the behest of Mayor Mike Duggan, making buying residential and commercial property in the Detroit much more appealing.  Many properties were over-valued for property tax purposes in the past, partially as a way to increase tax revenue for the city.  These more accurate values could spur real estate activity within the city, as the tax burden will be less likely to drive away new investors or buyers.

What does this mean for you? If you use your self-directed IRAs to invest in buy-to-rent properties, the decrease in property taxes could be a huge boon because it cuts down on one of the largest costs associated with owning an investment property. If you couple those savings with the tax-deferred growth offered in a self-directed IRA, it might just be the right time to take a second look at the Motor City.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.