DETROIT good area for investment for cash flow due to high price to rent ratio??

Question

I saw a recent BP blog post about best rent to price ratio cities with Detroit as the top spot, thoughts on that particular market?

What are some of the best cities to invest in now with properties not requiring significant improvements that can provide decent positive cash flow, but not in terrible neighborhoods?

Is Detroit too low of a neighborhood grade to have a comfortable return?

Nader Shariff · Answer

Detroit is a great place to invest so long as you understand what you are getting, all the pros and cons associated, WHERE you are investing (as detroit is a very block by block city in which values and things change very rapidly - block by block), and a solid team on the ground.

But a quick answer is: yes it is a great place to invest, if done correctly.

Happy to chat about my experiences with you in the city.

Scott Mac · Answer

What I'd like to see the city of Detroit do is make a handful of neighborhoods into re-hab zones.

Drop those big cement barricades down the middle of the streets of a 12 square block area, with chain link fences on top 10 feet tall.

A sort of theft prevention fort, with only one way in and out.

Then put a temporary Police substation inside the forts on empty lots, just a trailer or two and a handful of Patrol Officers, and a Desk Sargent.

Then for the structures inside the forts, give out City grants for new windows (that fit the exiting openings) New doors, new roofs, and tuck pointing matching color mortar.Also grants for new PEX water piping, and up to date electrical code wiring.Give each quasi-fort a name and a 7 year lifespan, then the fences come down.This would give added protection to the workers, and the construction material, as well as provide several oasis of re-development in the city.Just doing a random building here and there, is not going to stabilize an area or make it feel more safe (for the workers as well as the residents.)Call them things like Fort Corktown 1, Fort Bricktown 3, Fort Greektown 2,etc...Basically make the taxpayers fund a big re-hab effort for their city via grants, add $100 to each residential property tax bill to pay for these grants.https://www.biggerpockets.com/forums/44/topics/1106515-larger-apartment-building-rehabs-for-cheap-prices-in-detroitJust my 2 cents

Eliott Elias · Answer

I don't invest in Detroit, but I can imagine areas with high price to rent ratios fall within the C/D class neighborhoods. Your return may be strong on paper, but that does not account for the headache you are going to take on investing in lower income areas.

Nathan Gesner · Answer

You have to be careful. Properties often pencil out on paper, but then reality is something different. For example, a property may cash flow $400 a month on paper, but in reality it's a loser because it's in a rough neighborhood where Tenants stop paying rent, trash the place, move out early, and take the appliances with them. Or it's a crack house. Or it sits vacant for a long time because it's in a sketchy neighborhood and applicants won't bite.

I know some people that are doing well in that market, but I think you have to study the market harder than you would an ordinary market to make it work.

Travis Biziorek · Answer

Samuel, I am the resident expert on Detroit here.

Man will tell you the numbers on paper don't work in real life. They've either jumped into Detroit without doing proper due diligence or simply haven't ever touched investments there themselves.

I know. I have 12-doors in Detroit and I can tell you the numbers you do on paper 100% can translate to real world returns. I have real cash flow statements to back it up and blog about it all the time.

Don't let others' opinions dissuade you.

If you want to talk Detroit feel free to hit me up. I live in California and, outside my own investing, I help others get started there all the time.

Paul Pratt · Answer

"What are some of the best cities to invest in now with properties not requiring significant improvements that can provide decent positive cash flow, but not in terrible neighborhoods?"

This question gets asked a lot. They are RARE. If they weren't everyone you knew would be a real estate investor. Chances are if you find a great house with no work needed it will not cash flow after your debt servicing. Just keeping it real, but unless someone (seller) has no idea of the current market you will need to put in some serious work/research. OR hope rates fall and you re-finance and play the appreciation game. But out of the gate cash flow with minimal improvements would be as rare as they come.

Joe Villeneuve · Answer

Not all areas.  Although the percent returns may be high, the actual returns in dollars is very low.