In a deserted recently bankrupt city with derelict houses selling for $1, can there be any good investing opportunities? Jason Hartman visited Detroit recently as part of his Chicago property tour, and it seemed unlikely. But investor and passionate podcast listener Greg Scott says otherwise in a recent appearance on The Creating Wealth Show.
First, though, host Jason Hartman opens Episode 548 of his top rated investing podcast with a listener question and some comments on minimizing risk when investing using Self Directed IRAs.
Listener Scott McManus notes that a recent episode featured a discussion about investing with self directed IRAs. He shares a recent experience in which he used his self directed IRA to buy a multiplex. But the custodian ended up going into receivership – and Scott ended up losing money from his IRA on the deal. His warning to listeners: even after doing due diligence on an investing deal, investors should watch out for problems with custodians.
Noting that this is a very good point that makes the case for direct management of investments whenever possible, Jason points out that while it’s essential to check out all participants in an investing deal, it’s true that background checks may not be completely reliable. An individual or corporation can look completely clean on such a check – but still be bad news.
It can help to choose a larger investing group whenever possible. While that’s no guarantee of a good reputation and clean dealings, these kinds of entities have a reputation to maintain – and more to lose from bad deals.
One way to get some protection when using a self directed IRA is to create an entity within that IRA to hold investments. It’s possible to create one or many LLCs within the IRA – and the investor controls that entity, not others. That way the money and other assets aren’t held in a custodian account. The same thing can e done when dealing with other entities, such as escrow companies and lawyers.
Jason closes the segment with a reminder about the Jason Hartman University event in San Diego at the end of August, with details available on the Events page of the website.
Greg Scott: Detroit’s Surprising Side
Greg Scott is a Detroit area investor who’s been a client of Jason’s Platinum Properties Investor Network and who remains a devoted listener to the Creating Wealth Show. In fact, he says he’s listened to every episode from the very first one.
He joins Jason to comment on the recent tour to Detroit and correct some misconceptions about investing opportunities in Detroit.
According to Scott, while it’s true that Detroit’s public face – deserted, decrepit and failing – is true in some ways, there’s more to the city and its surrounding areas than meet the eye. As Jason frequently points out, all real estate is local – and what’s true in one market may not be true in another.
That observation holds true from neighborhood to neighborhood, too – and that’s the case with Detroit, where new construction and higher priced properties exist side by side with blighted, run down areas dotted with those $1 houses.
It’s as if there are two Detroits, Scott says: the urban area and the larger Detroit metro areas, where there are very different market profiles. In the suburbs and surrounding areas such as Dearborn, for example, there are reasonably priced properties offering a good ROI. While
New Directions for the Automotive Industry?
While it may be risky to invest in Detroit’s more transitional neighborhoods, or the heart of the city, Scott says that nevertheless he’s more optimistic than ever about Detroit’s future.
Of course, that future is till tied closely to the automotive industry – an industry that’s (pardon the pun) driven Detroit’s prosperity for years. The fortunes of America’s big carmakers are responsible for real estate availability and pricing and the overall economic health of the city – and probably will continue to be, although in different directions.
Self Driving Cars May Change Real Estate
One of these future oaths it’s the development of the self driving car – an innovation with the power to change not just the world of transportation, but also real estate. Scott, who’s employed by ford, notes that although brands like Audi and BMW have been publicly in the forefront of developing self-driving technology, the whole industry is looking hard at the possibilities.
A truly safe self-driving car could revolutionize real estate, notes Jason – making travel easier and, if carried to its ultimate conclusion, virtually eliminating the need for parking spaces, which occupy up to 40 percent of a city’s available land.
But that’s far in the future. What about investing in Detroit now? Scott points out that Detroit’s recent bankruptcy and legal action against corruption gave the city a virtual clean late, with good opportunities for careful – and savvy – investors hoping to build wealth and a diverse portfolio. (Featured Image: Flickr/paulbica)
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