Investing in the Detroit Area

[Ben Osran]

Hey BP!

I am looking to do out of state investing in the Detroit Area. I have a friend who lives in Detroit and we will be partnering up on our first deal so that we have boots on the ground in the area. We are looking to purchase a duplex in the 100-200k range and want a CoC return of around 8-12%. We will be financing our first deal and will be looking for a PM has well. A property that needs little or no renovations would be ideal for our first property.

I am wondering if you guys have any more insight into specific areas that are good to invest in? I ran the numbers on some properties and they meet well above the 1% rule, but that sort of worries me... It seems some of these numbers are too good to be true. I also notice a lot of the school systems are not rated that well. What is your experience investing in these areas? Are you meeting the 1% rule with good cash flow?

Any thoughts or insight would be much appreciated. Thank you!

[Audrey Scott]

Congrats on taking the first steps toward investing in Detroit! Having a partner on the ground is a big plus, and it's great that you're being thoughtful about the numbers and the market. A duplex in the $100-200k range with a target CoC return of 8-12% is definitely within reach, especially in some of the emerging neighborhoods.

In terms of areas, you might want to explore neighborhoods like Bagley, East English Village, and parts of Grandmont-Rosedale. These spots have been getting more attention from investors and can offer solid cash flow while still being in communities that are seeing improvements. Midtown and Corktown are also seeing growth, though prices are creeping higher.

As for the 1% rule, I completely understand your concerns. Sometimes properties that exceed the 1% rule can come with risks, like higher tenant turnover or hidden repair costs. Make sure to have thorough inspections done and factor in extra reserves just in case. Your local partner can help verify if the area really supports those rents long-term.

Regarding school ratings, they’re important for single-family homes but may not be as critical for duplexes, which tend to attract a more diverse renter pool (young professionals, retirees, etc.). Still, it’s something to be mindful of if you’re planning to hold the property long-term.

Overall, it sounds like you’re on the right track. With careful research, a strong property manager, and your local partner, you’ll be well-positioned to succeed. Wishing you the best on your first deal, and feel free to keep us posted!