As recently as January this year, houses in Detroit, Michigan, were being touted for as little as US$1. This month, the stakes were raised - on behalf of an overseas owner, an agent was offering to trade a Detroit property for an iPhone 6. When houses in what is possibly the United States' most beleaguered property market are dirt-cheap, you have to wonder why. Nevertheless, bargain hunters have swooped on what has been called "toxic property" in subprime markets, often in multiple numbers. Bloomberg reported last year that one investor bagged 29 Detroit homes for US$90,000, expecting to turn a profit in 10 years. For many who have taken a punt on markets which collapsed during or since the financial crisis, the pot of gold has yet to materialise. Tales abound of promised returns which aren't there, much like the tenants who were supposed to provide them. Patrick O'Neill has heard his share. "An experienced investor told of his third-tier city purchase in the US that went from bad to worse," says the CEO of the international property firm ONEILL Group. The buyer had purchased a package of 10 housing units, sight unseen, priced under US$30,000 each. Unbeknown to him, one of the units had burned down prior to settlement, and another was burned down by the tenant a few weeks later. "He was then fined daily civil penalties for owning an abandoned property in violation of the city's blight ordinances," O'Neill says. "He has had no luck in reselling the properties." The point of the story, O'Neill says, is that second- and third-tier cities do offer opportunities, but buyers need to exercise extreme caution. Larry Else, the Detroit real estate broker at Realtyflo who offered the iPhone swap - which was snapped up within 24 hours - agrees that buyers need to take care. The "iPhone house" neighbourhood is unstable, with low home value and high vacancy, he explains, and the house had been extensively vandalised. "Also, the buyer has to assume over US$6,000 in back taxes and handle the rehab in excess of US$10,000." But this does not reflect the city's overall market, Else says. "Detroit's real estate market is actually thriving, and there is over US$1.2 billion in redevelopment under way. In fact, Wayne County, where Detroit is located, has had 18 months of consecutive property value gains." According to the online real estate marketplace Zillow, the median value of homes in the Detroit metro area has risen 15.4 per cent in the past year to US$113,900, and a further rise of 6.8 per cent is predicted within the next year. Else points out that Detroit is a large city and, outside of the metro area, homes with clean titles and no back taxes in stable communities, with tenants in place, sell for US$20,000 to US$50,000. He also says Detroit has the highest average rent rate versus purchase price out of any real estate market in the US, "which translates to the highest returns on investment for rental homes in the country". The important thing, Else says, is picking the right neighbourhoods to invest in and working with a representative who will protect your interests. Philip Button, managing director of Brookes & Co, property investment specialists in Britain, says Detroit is a market which should be approached with caution and thorough due diligence before any money is invested. "A market like Detroit is one you can enter easily and at a low price point, but it is not quite so easy to exit. If you are looking to invest in the US, it is safer to consider more stable local economic areas such as Florida, where there is clear demand for investment opportunities and a clear exit strategy." Across the US, where many homeowners, hit by the subprime crisis, are getting back on their feet, Florida remains one of the exceptions. According to data from the Mortgage Bankers Association, some of the hardest-hit states, such as California and Arizona, now have foreclosure inventory rates that are back to pre-crisis levels. And Florida is one of the most attractive destinations for overseas property buyers, who invested US$8 billion across the state during the 12 months ended in June, according to data collated by the National Association of Realtors. International sales accounted for about 10 per cent of Florida's residential market over the period, compared to 9 per cent a year earlier and, of these, around 10 per cent were Asian buyers, primarily from China, the research found. On average, international buyers also paid more for properties than domestic buyers, with agents reporting that they still found Florida properties less expensive than similar properties in their home countries. Andrew Taylor, co-CEO of Juwai.com a Chinese international property website, has noticed this trend. "Orlando and Miami are bringing Chinese buyers to Florida," he says. "They are attracted by the relatively low prices, the great lifestyle, promising yields and capital gains, tax advantages and the quality building stock, especially in new construction." Taylor says there are 47 condominium projects under construction along Miami's beachfront area. Prices are dramatically down from the pre-crisis period, he adds. "Buyers want to be sure the market is not going to go through another shock like it did after the financial crisis. Chinese buying is up from near-zero levels to about 5 per cent of transactions, and we expect that to continue to increase." The cranes visible around Florida signify ramped-up construction activity across the US, despite a slowing housing market overall, Taylor says. "The US real estate recovery has been uneven, creating pockets of opportunity amid an overall picture of growth." Over the past 18 months, Juwai.com has seen Chinese investor-interest soar in previously undiscovered markets, even though prime cities still get the biggest numbers of buyers. "The big markets like New York, Boston and Los Angeles get most of the attention, but the real momentum is in the secondary and tertiary markets that have not seen a lot of Chinese-origin investment in the past," Taylor says. "These areas are where Chinese investors are increasingly looking for opportunities that will provide attractive entry prices, stability and long-term growth."