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August 19, 2009

What a time for cash-rich companies to invest in real estate! Prices are down, interest is cheap, and we have seen monster buildings sold for cents on the dollar.

So, what is Time Inc. doing investing in a house in Detroit? According to the Detroit Free Press, Time Inc. has placed a corporate gag order on its Detroit plans and is “not ready to share details.”

What is known is that Time has purchased a 95-year-old house in Detroit’s historic West Village neighbourhood, next to Indian Village. The gray, three-story stucco home “will serve as a base of operations for months — and perhaps a couple of years — as Time’s various publications cast a unique spotlight on Detroit and chronicle its increasingly desperate struggle to reinvent itself..”

How much did this investment cost? $99,000 (cash-money) for the property and house.

Using PadMapper (my newly discovered awesome residential rental search website), I learned that West Village bedrooms can be rented for $475 per month. So, let’s estimate a four bedroom rental, $1,900 per month… at two years…would cost roughly $45,600. I should mention that Time’s new home sold for $252,000 in 2007, but had been vacant for more than two years. So, taking into account property taxes and up-keep of the house, maybe there is a little profit to be made when the house is sold, assuming the market recovers in two years. Seems like an odd investment choice for Time Inc.

In any event, I am sure we will begin seeing more stories out of of Time Inc. on Detroit’s distressed auto-industry, its distressed real estate market, and potentially a story or two on fixing up an old house?

Matthew Slutsky
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