A Win-Win Investment In Detroit - The City Of Champions

Detroit

Detroit, like the proverbial phoenix rising from the flames, heralds good news all round and a win-win situation for Buy To Let investors. With President Obama declaring a particular fondness for Detroit and the US Government pumping billions of dollars into the auto industry, Detroit is definitely a city on the up.

The US housing market, in general, remains ideal for investment opportunities. House prices remain low due to foreclosures and rental demand is high. Now, as Detroit enjoys an economic recovery, investors can benefit from Government-subsidised rents, capital growth over time and re-selling back into the local market.

So, let's have a look at the facts and figures behind the upturn in Detroit - the 11^th most populous city in the US, with 1 million residents.

Multi-billion Volt shocks auto industry back to life

Detroit Motor Show The auto industry, in particular and thanks to Government assistance, is blooming. Companies such as Ford and General Motors (GM) are reporting second quarter profits in the $billions. The Government's command to build better, more fuel efficient cars is working to plan.

GM's Chevy Volt is about to go into production, with the electric car to be sold worldwide. Mass public interest in the Volt's production has led to GM announcing a 50% increase in the manufacturing of the vehicle. Chrysler is also going into production, in Detroit, with the first Fiat 500 electric car (planned for 2012).

Porsche is also returning to the Detroit Motor Show in 2011 - for the first time in three years.

Thousands of new jobs quicken marathon regeneration

This is all great news for the Detroit jobs market. Approximately 230,000 workers were laid off when the motor industry crashed a few years ago. Now, in September 2010, the industry has already taken on around 15,000 new employees so far this year. Reports indicate 100,000 new auto workers will be required, per year, from 2011 to 2013.

Detroit used to be solely dependent on the auto industry, but this is also changing. Quicken Loans Inc., a collective of US mortgage financiers which processed $19 billion in 2007, is creating 4,000 new jobs in Detroit. Marathon Oil Corporation, one of the world's leading integrated energy companies, is also expanding its oil refinery in Detroit and creating an additional 2,000 jobs.

A city nursed back to health

One of the biggest employers in Detroit, however, is healthcare. The healthcare sector employs 60,000 people, with the St. John's Hospital employing 15,000 alone. Detroit is now seen as a centre of excellence for healthcare in the US, with people travelling to Detroit, from all over the States, for surgical procedures and healthcare.

The Barbara Ann Karmanos Cancer Institute in Detroit is the only hospital in Michigan which focuses solely on cancer treatments. The specialist and successful Institute cares for more than 6,000 new patients per year, on a budget of $216 million. It employs around 1,000 staff members.

From the streets to the silver screen

Detroit is also a major player in the film industry. Already popular as a location destination, Detroit has been a movie hot spot since the Michigan film incentive package was passed in 2008. The package is aimed at attracting motion picture, television and other digital media productions to the area. It provides refundable business tax credits up to 42% (of all production and post-production costs), alongside a number of other tax breaks and financial incentives.

In 2009 alone, parts of 470 movies were filmed in Detroit and 2010 sees a number of blockbusters in production for release in 2011. These include: horror sequel 'Scream 4'; 'LOL: Laughing Out Loud' (with Demi Moore); 'Real Steel' (with Hugh Jackman); 'Machine Gun Preacher' (with Gerard Butler); and 'The Mechanic' (with Donald Sutherland) to name but a few.

More importantly, for Detroit, the film incentive package ensures the production companies directly employ a number of local people on each film set.

Result = a rising, robust recovery

So, what does all this mean for you - the investor? Well, we can see how the economy is recovering in Detroit, alongside a significant upturn in employment and work opportunities. Detroit is a rising market and this provides two strategies in one for the investor.

1. Robust Cash Flow - low purchase cost, refurb and rent
2. Recovery Play - capital growth over time

Yes, Detroit was in a terrible state when we and our Detroit partners first looked at investment opportunities. However, this worked in our favour. Our partners approached the City and offered to assist with the housing and economic regeneration by bringing in international investment.

In addition, we were able to provide employment through the refurbishment of the properties. Today, this has led to the City endorsing our product and enabling a significant reduction in taxes for investors.

The other major factor in Detroit investment is the Section 8 Federal assistance programme from the US Government. Section 8 was introduced in the 1930s and works in the same way today, providing financial assistance to working families. Typically, this is between 60% and 100% of costs towards monthly rental payments.

Our due diligence for you

One last, crucial, point of note for Detroit investment is due diligence in the specific area. We cover this in our Detroit video and recommend that you watch it to receive the full impact. Some streets may present beautiful properties on one side, but if you pan around and view the other side of the street, you could be in for an unpleasant surprise.

However, investing through Axis, you can be assured our Detroit partners conduct this due diligence on your behalf. We only accept properties in good, well kept, residential areas - typically family homes in great demand. Remember, also, Detroit investment is an 'armchair' investment. We do it all for you and our Detroit deals come with our 'Four Star Guarantee' too!

To find out more about investing in Detroit, you can watch the video here; view available properties and download the decision pack here; or call our US portfolio manager Greg Glagow on our USA Hotline: 0333 444 1440.

Live with Abundance

Rod Thomas sig