What It's Really Like to Buy One of Those Cheap $6,500 Houses in Detroit

When Justin Craig heard how much homes were selling for in Detroit, he knew he couldn't pass up the opportunity.

"It's mind-boggling what your money buys here," he says, pointing to homes with price tags of just $500. For many Americans who can barely scrape together a down payment on even a modestly priced home, the bargains in Detroit can be alluring.

But buyer beware: taking on a fixer-upper isn't for the faint of heart, and it's not for those looking to make a quick buck.

Taking the plunge

It wasn't just the crazy cheap houses that drew Justin to Detroit from Seattle. His partner Alia had grown up in the area, and she was eager to move back. Justin also planned to open RUNdetroit, a now popular running store that also coordinates running events and training.

"When we started looking, I had to cap my search at 4,000 square feet," says Justin. Most of us can hardly afford a 2,000-square-foot house in a major city, let alone something twice that size.

Justin bought their house in Detroit's West Village neighborhood after area renovators connected him with the owners of the house. Typically, homebuyers are forced to jump through multiple hoops to secure an expensive mortgage. In this case, the couple paid $6,500 directly to the homeowners, plus another $6,000 in back taxes.

"We didn't have to deal with real estate agents or a bunch of other fees," says Justin. "It seemed silly to pay someone $2,000 to process a $6,500 transaction."

This type of arrangement isn't uncommon in Detroit, where financing is tricky. Programs like Building Detroit make buying distressed properties easier, with daily auctions starting at $1,000 that include access to financing. However, properties must be up to code and occupied within six months, and bank financing also requires licensed contractors to do the work.

This can quickly drive up costs far above the home's rehabbed value, and it's why many end up buying from homeowners directly. If you want to avoid escalating costs, be prepared to do some work yourself.

"If you're not willing to roll up your sleeves, you're going to be underwater pretty quickly," Justin says.

A series of challenges

The home Justin and Alia bought is American Foursquare built in 1913. The house had been empty for seven years, needing significant infrastructure repairs that would give most buyers nightmares. In fact, the house still doesn't have a kitchen.

"We have a stove in the laundry room, and we use the master closet as a pantry with a mini-fridge," says Justin, who chronicles his work on Instagram under the hashtag #1913foursquare.

They just finished plastering the kitchen and are ready for cabinets, which will cost $20,000. Without a renovation loan, completing expensive repairs often means waiting.

"Lots of people do what we do, which is to save up for one project at a time," Justin says. "We use one credit card for repairs. We put a new roof on, that gets paid off, then we get cabinets."

Justin has renovation experience, but says anyone can learn using Google and YouTube. Just doing demolition, prep and finishing work is enough to save a ton of money.

That said, homeowners should compare the time and money involved versus hiring contractors. Projects the couple has outsourced include roof and duct work replacement. For themselves, they've opted to take on projects like restoring vintage windows and moving around walls (who wouldn't love to design their own customized floor plan?).

The couple worked on the home for almost three years, before they were able to move in last summer. Some buyers can't wait that long, or don't want to move into a construction zone. To Justin, it's worth the sacrifice.

"We bought one hell of a project, but in two more years it will be our dream home," he says.

As if construction weren't enough, Justin also found himself dealing with a thorny title issue. It turns out that his now defunct title company didn't perform an accurate title search.

"We're spending a lot of money on a lawyer to clear it up," he says.

A new day in Detroit

Despite the difficulties, Justin is inspired to be part of Detroit's renaissance. He feels a stronger sense of community there than in Seattle, where, like many Americans, he didn't know many of his neighbors.

"Everyone in our neighborhood knew who we were long before we arrived," Justin says, describing a community with more conversations among neighbors and people who look out for one another to make the area a safer place.

As for his own role, Justin harbors no illusions that he's saving the city. Instead, he sees himself as just one part of a larger community coming together.

"It's one more occupied home with the porch light on," he says. "It doesn't impact many people's lives, but it does make a small difference. Add up hundreds of small differences, and that's where you start seeing real change."

This post was written by Rachel Tracy. You can see the full story on Credit Sesame.