Buy2Rent Investment Property in Detroit?

[Bo Edmond]

All, I'm an investor living in Florida. I'm looking for a great investment property anywhere in the US where I can rent the property out immediately and expect capital appreciation over the next 10-20 years. I'm looking in the $15-55K realm and have seen what appear to be some great options in the Detroit area just west of the University District and east of Hwy 10. This will be my third investment property but my first time buying in a city I don't know (currently own in Edmond, OK (rented) and Panama City Beach, FL (living in)).

Questions:

Not knowing Detroit, is this a good area? I've seen several listings with Section 8 tenants currently living in the home and the price to rent ratio seems favorable ($25-55K house with $750-900/mo rental income).

Should I be looking at a different city other than Detroit? At the right price, I could be in the market for 2 properties. It just seems like there are still many great investment opportunities in Detroit but I've also seen Pittsburgh recommended.

Any good realtor/property management company recommendations?

[Dan D.]

Hi Bo,

Best thing you can do is spend the $500 for a plain ticket, and $200 for a rental car to drive through the areas of Detroit.  Detroit is coming back, and it's wonderful to see, but having spent a fair amount of time there, there are a couple things really unique about it.

1.  The good areas and the not so good areas are a block away from each other.  So yes, the area you are describing might be a nice area, but you could literally be walking distance from a bad area as well which will affect your long term potential for appreciation.

2.  You need to be aware of what you're buying seeing it in person.

I think you can make some decent money in Detroit because it's becoming revitalized, but you will likely be looking at more of a cash flow play than an appreciation play.

The best investors in Detroit are the ones who have the ability to buy into the area because they have the influence to change the area.

Dan Gilbert has invested in Detroit, and it's smart for him to do it, because he's literally buying blocks of downtown area, and actually buying his own security force (basically to double a police force) to monitor and control the crime in the areas he buys.

If you are just buying one house in an area, you better go check it out.  Otherwise be ready to deal with possible break-ins, tools being stolen daily, while you try to rehab in the wrong areas.