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Faced with sky-rocketing real estate costs in China, a recent CCTV report about the availability of houses in my birthplace, Detroit, for as little as one dollar has generated frenzied interest among Chinese investors and wannabe real estate moguls. Let me offer two Latin words of caution: caveat emptor, let the buyer beware. In other words, if it sounds too good to be true, it probably is.
The CCTV broadcast generated more than a million Weibo postings. And as a result, thousands of would-be Chinese Donald Trumps have expressed an interest in going on a property buying tour of the Motor City.
Making money in Detroit real estate could indeed be possible but requires the patience of a Warren Buffet or the biblical Job, not to mention the personality and trappings of Rambo. It's not for the thin-skinned or the faint of heart.
Even though Detroit has recently been declared bankrupt, it's been a basket case for decades. I was there last month and it's like a patient on life-support. Surrounded by pleasant suburbs, the city of Detroit is the prototypical decayed American urban area: a doughnut (suburbs) with a hole (Detroit) in the middle.
When I was growing up, Detroit was a prosperous place and had the country's largest per-capita income. Back then it was the fourth largest US city but nearly two-thirds of the population has fled, making it 18th. It was the center of the Michigan universe but has ceded the center to more dynamic cities like nearby Ann Arbor.
According to Forbes magazine Detroit is the most dangerous city in America. The murder rate is 11 times that of New York. Not too long ago, the rate of self-defense killings in Detroit was 2,200 percent above the national average. Last year the FBI found that Detroit had the highest rate of violent crime of any US city with more than 200,000 people. And because of its severe financial problems, the number of police in Detroit has decreased by 50 percent in the last decade. It's gotten so bad that last year the Detroit Police Officers Association warned: "Enter Detroit at your own risk".
Still interested in investing?
Owning property anywhere is no picnic; it's not like buying a stock or bond and following the price in the newspaper or online. It's very hands-on and a 24/7/365 responsibility.
In Detroit, being a landlord, or dare I say "slumlord", is even more challenging. Add to the cost of the house hundreds or thousands of dollars a year in taxes and that's after doing renovations as most of the houses are naked and stripped shells devoid of anything valuable. And those are the lucky properties that weren't set alight by gangs, drug dealers and other miscreants, especially on Detroit's infamous Devil's Night, a time around Halloween, when the local sport is burning down abandoned houses. Since the police force is stretched so thin, add another few hundred dollars or more for private security. We call them "rent-a-cops!"
To be honest, there are a few positive signs. I have a high school friend, now a successful lawyer, who swears that Detroit is on the verge of a comeback and he is not completely alone.
While prices are below the level of the year 2000, last year there was a 13.6% annual increase. Some hearty souls are indeed renovating blighted areas and establishing art galleries, boutiques and even some major service businesses. And in an ironic twist, because Detroit has more vacant land than it had a century ago, urban farming, with an emphasis on organic vegetables, is a major business category in the city.
Chinese people might actually like some aspects of Detroit area living. Outside the city there are beautiful beaches and parks. Canada is a few minutes drive away.
Detroit is the Las Vegas of the Great Lakes region. While lacking the glitz of its famous cousin, the area sports four new casinos.
I worry, however, about Chinese investing in places like Detroit if they behave like slumlords and segregate themselves into an hermetically-sealed Chinese enclave. Detroit has a sad history of racial tension that has boiled over into large-scale civil insurrections.
This will not only harm individuals but further weaken China's image. Only a few months ago President Barack Obama and would-be President Mitt Romney were bashing China for sucking jobs out of the local economy. Insensitive and insular Chinese investors could further weaken what remains of China's positive soft power as has recently been the case in nearby Toledo, Ohio, another Chinese investment target.
Still want to invest? Good luck!
The author Harvey Dzodin is a senior adviser to Tsinghua University and former director and vice-president of ABC Television in New York.