This Is For Everyone Who's Thinking Of Buying One Of Those $500 Homes In Detroit

We recently reported that in theory, you can buy a bunch of houses in Detroit for $500 or less. We've already seen people talking about scooping some up, just as a speculative investment,

But it's a bit more complicated than that.

We turned to a couple of the subjects from our earlier profile on young professionals moving to Detroit, to provide some color about this phenomenon.

They said it's not quite so simple as just plunking down a week's salary.

In many cases, if you want to purchase one of the bargain properties, you will also have to pay all the back taxes the property owes.

Tifani Sadek, a lawyer who with her husband just purchased a home in the Woodbridge neighborhood for $94,000, pointed us to a site called Why Don't We Own This, which compiles data on distressed properties in metro areas, that can help people figure out what else they're going to owe.

The site is practically a real life version of the Matrix — endless blocks of foreclosed and bank-owned homes. Here's a screenshot for Detroit:

A typical example is the property at 13858 Fleming.

It's assessed at $7,073.

But it's also behind an additional $7,603 in taxes and fees (and not including your realtor's fee).

Plus, as soon as you buy it, it's likely going to be reassessed, meaning you'll start paying even more in property taxes.

Just up the street, 13545 fleming is listed on Zillow for $70.

But Zillow puts its actual market value at $32,000.

There is one way to get around the initial back taxes, Sadek says: every fall, Wayne County (in which Detroit sits) hosts a two-day property auction. Bidding starts at $500. Any properties that don't go on the second day — the worst of the worst — are voided of their back dues, she said.

The money is only half of this story. It also appears buying the cheapest properties in Detroit can take a toll on your psyche.

Jeremy Brown, who works in real estate in the city, emailed us to say that many of the cheapest houses have to be completely rebuilt, not least because thieves have stripped them of basic infrastructure.

Nearly all of them have mold, require all new electrical, plumbing, ductwork, drywall, many times a roof, all new windows, doors, cabinets. Basically everything. Anything that can be taken and sold, has been.

It's impossible to understate how aggressive the cities thieves have become in some of these neighborhoods, Brown said.

You almost need to pay someone to sleep on an air mattress in the house while you are working and move in immediately upon completion," he said. "If these houses sit, people WILL break into them. You put in a new toilet, bathtub, and vanity...that night people come in and rip it all out. A business partner of mine had a house broken into 5 times over the last couple of months, and it is in a much better area than the stuff [that appeared in our article]. It is hard out there, and people are trying to survive.

Despite all that, it may seem tempting to plow into a market that probably will not get any worse.

But Sadek warns local won't take kindly to property vultures:

I am happy people want to invest in Detroit but it is extremely detrimental when they do so from afar and don't fix the house up and rent it out. People that sit on houses often do more harm than good. There are lots of "investors" sitting on blighted houses waiting for their value to rise, which will never happen when tons of people do it. If people buy homes, I really hope they'll treat it the way they would any other home.

If you're on the market for the ultimate fixer-upper, and are willing to put in the effort, it sounds like you can get a decent deal.