Foreclosure King: Best Thing for Distressed Neighborhoods Is Homeowners

With hundreds of houses sitting empty, in danger of falling apart or being stripped of anything salable, Michigan and Detroit have become ground zero in the nation's housing crisis. But now it's not just the inner cities -- houses in middle-class suburbs are being hit.

Odell Barnes, right, and business partner, Abner McWhorter, left, are trying to revitalize distressed neighborhoods by getting homeowners into previously foreclosed properties.

(ABC News)

"Two years ago, you bought 100, 200 houses a month, now you buy 2,000 to 3,000 houses a month and it's going to be more," Barnes said. "They don't know what to do with them, the mortgage companies, and they're just dumping them."

The problem is that nice houses can easily be turned into bad ones. And one vacant, neglected house can quickly destroy a block, that block can bring down the neighborhood, and so on.

To Barnes, the solution is simple -- get people into houses. Barnes does that by buying packages of houses from lenders, then selling in smaller packages to investors. Either he or his investors then find out the going rate for rent in the neighborhood and offer to sell the house for slightly less than that.

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The day "Nightline" stopped by Barnes' and McWhorter's shared office in Detroit, Edward Moody was closing on his second house, on the same block as his first. He fixed up the house he's living in now and plans major repairs on the one he just picked up.

"This is bringing back up the neighborhood. It's making the houses better and easier for people to get 'em before they tear 'em up," Moody said. "I want somebody to get them before they strip 'em all out. It's much easier."

Moody said this will provide housing for his family and his in-laws.

"This way is better. Just like I can go in and fix the house any way I want," Moody said. "The other house, I made the whole house into one. Took out the kitchen and converted it. I put my kids upstairs and me and my wife had downstairs. I took out one room. You do what you want to do at the price that you're getting it for. To me, it's winning."

To Barnes, winning is simple changes that can keep houses from falling into disrepair. He wonders why Fannie Mae and the banks aren't -- or can't -- do what he's doing.