Thinking about moving to Detroit for a good job.

[Eric Neal]

Hello, Fellow BPers,

I am reaching because I am pursuing a pretty exciting oportunity with a major US Bank in Detroit.  I worked for this company before and have faith in their payscale, corporate leadership, etc.  My "investing" question comes to anyone who might be living in the area.  The following are neighborhood we're looking at buying in (primary resident) in the $180,000 - $240,000 range:

University District, Pembrooke, North Rosedale Park, Old Redford, Greenfield, Ferndale, Boston-Edison West, Grosse Pointe Park, East English Village, Morningside, Rosa Parks, Jefferson Chalmers

Does anyone have any thoughts or insights on those areas?  Also, in our research, it looks like car insurance, city/state tax, and heating an older home in the winter are costs that we really have to consider when making the move.  I anticipate the job to pay in the $85,000 to $100,000 range plus semi-annual bonuses in the $5k - $10k range each.  It looks like city/state tax will run us about $7k/year on that income.  We drive paid for 2007 vehicles but I've heard horror stories about car insurance being $10k/year! 

While there we'd also like to look at putting an old $73k IRA into action investing in the city via sf and mf rentals. To me, when you invest in the real estate of a market, you are investing in the infrastructure of the city to keep gaining value and growing for the long haul. I've read enough conflicting evidence about Detroit that investing there feels like speculating. For people investing AND/OR living there, what are your thoughts on this topic?

Thank for reading through this long post.  I look forward to reading responses!

[Christian Hutchinson]

Do you have school aged children?

Your car insurance will be double in Detroit versus outside of it. So for a 2007 paid for vehicle PLPD will run $120/mo you would pay about that price for full coverage outside the City however. Full coverage in the city will be about $250/mo per vehicle.

My Wife, myself, and 2 sons (under 3 years old) live in Brush Park. We have rentals in Detroit, and outside the City.

There are so many ways to play this it just depends on your tolerance for risks, your work location, and desired moves.
We both work in Downtown and Midtown so I ride my bike to work (my son rides with me to his school at GM HQ), and my wife walks (we have 4 cars but we register and insure them at house in Grosse Pointe Farms).

Option one:

If it was me I would buy a Duplex in the North End which is the Woodward Corridor.  Some places there are nice size need some rehab though.  I can think of two places where you could get 2 units at about 4000 Sq Ft, and they would be side by side so no one lives above you.  You could probably finance it using the special mortgage program for Owner-Occupied homes. Daycare will run you $255-$275/week per kid no matter if you live in the City or Suburbs at any reputable Daycare, so the school factor isn't in play until your child is 5. I would do the work, and live in that property until your child hits school age. So basically house hack for 2-4 years. Then I would simply buy the home you wish in the neighborhood and school district you desire.  If your spouse is working even say a $40K a year job, 120-$150K household income gets you into numerous exclusive neighborhoods in Metro Detroit with little to no problem.

Option two:

Buy in the neighborhood you wish OUTSIDE the City and target areas to invest in Detroit or the surrounding suburbs. I like to invest Downtown because the type of tenant you can draw, the property taxes are lower, and its more stable because the land has been devalued for 20+ years. If I could spend $60K in Bagely or $100K in the "7.2" or just outside of it I spend it in the "7.2" because your return on investment, demand for housing, and rents are just so much higher.

Option three:

Rent for a year in a neighborhood/city you are interested in then set your plan in motion.

My break down of the neighborhoods you listed (I'm not a realtor I just been in Metro Detroit my whole life):

University District - If its actually the University District and not what people are trying to say is University District and its not, buying here locks you in long-term. Between the cost of the home, the footprint you get it will be hard to replace.  Also, it will be difficult to sell to someone else because of the high taxes, insurance, and the pure mess Detroit Schools are. If you buy here realize you have committed your child to Private School Education basically until HS where they can then test into Cass Tech, Renaissance, or King where they will get a quality education. But it would step down possibly depending on what private school they were attending.

Pembrooke - I would never live there, and I would hesitate investing there. Its not a bad neighborhood, but your tenant pool will be very small, and the quality will be questionable. On top of that high taxes, high insurance, and low rent.

North Rosedale Park - I wouldn't live there except to take advantage of a special mortgage program, could be a decent rental depending on how much your into for.

Old Redford - I wouldn't live here or invest here see Pembrooke.

Greenfield - I wouldn't live or or invest here.  Unless its like 3-4 bedroom homes going for $20K-30K and I would still probably pass.

Ferndale - Solid returns, will be a nice renta,l prices are getting so high you can't flip it to a rental. Great for a young family through elementary school, I wouldn't have my kids in the district after that however.

Boston-Edison West - Similar to University District.

Grosse Pointe Park - Great schools, services, and parks.  Be careful paying too much for some of the properties, lots of properties sit on the market for a long-time in the Park.  Because lots of people buy homes in Pointes and never move, most of the homes are very well maintained infrastructure wise (roofs, HVAC, windows, plumbing) but often times haven't been updated cosmetically in 20-40 years. GPP best deals are the large duplexes and triplexes. Like a 9 bed 6 bath 7000 sq ft, duplex that lasted 4 days last year that sold for $625K.  The 4b/3ba unit would rent for $2200-$2500

East English Village - Cheap option to live in Detroit, will be a great rental once you move, tons of Private Schools in the Pointes, and SCS If you decided to stay there. The Hood is literally right on top of you though. Get as close to Mack as possible. I wouldn't live there.

Morningside - Same as EEV, I wouldn't live there.

Rosa Parks - That's not a neighborhood its a street. But based on what I think you mean, its an interesting idea. It would highly depend on the property and the street for investment or living.

Jefferson Chalmers - This was a neighborhood I was saying no way just 6 months ago for investment.  I spent a few days the last 2 months looking at several properties, and I would definitely invest, and I would live there if it was the right street(s).