Will You Achieve Appreciation in the Detroit Market - 2019

[Marisa R.]

This is one for the experts. What are you seeing????

I have been playing in the Detroit market, have posted some my cash cows. Sure the returns are nice, as long as you have good tenants, and good property management in place. Not necessarily the easiest thing to do. So far, so good.

However, appreciation I think is very much a mixed bag..  

I see many pockets are starting to rise and have been for a while, now will we see the ripple effect happening.

Here is some good news for Detroit

https://www.wxyz.com/news/detroit-planning-multi-m...

https://www.nationalgeographic.com/taking-back-det...

https://www.nationalgeographic.com/taking-back-det...

[Jay Hinrichs]

good luck with lower end rental appreciating.

what I have seen with that market is some pretty cool new construction infill were you can acutally build a new home and make 50 to 75k in 9 to 10 months. takes a lot of cash flow rentals to equal those numbers.

I dont have a team there but its on my radar .. rentals are not my bag to small of income and no upside.

but i liked what i saw in the new construction space.

[Bala A.]

Places like Bagley subdivision, in Detroit Northwest, were selling 30-50K just 18 - 24 months ago. 

Today it is anywhere between 100 - 150K for those same homes. 

In a very short time, the prices have moved up astronomically. 

Whilst being Cash flow positive for Investors. And getting the Capital Growth. 

Who says you can't have both!

:-)

(for e.g I have 18681 Northlawn tenanted at 1200 per month which I bought for 41,000 in 2017 and now even the conservative Zestimate has it valued at 128,000)

In fact, since some of the prices have soared so much in certain pockets, like Bagley, Rosedale Park, Uni Dist, East English Village, we are no longer buying in these "Bagleys" anymore and are sniping at the next domino effect markets which are the next in line. Like the neighborhoods of Winship, 5 Points, Berg Lahser, West Outer Dr, Castle Rouge, Malvern Hill areas etc.

[Marisa R.]

Be interesting to see how this pans out

I suspect continued growth, big players now jumping  money in this market

Time will tell, watch this space

[Shane Short]

Good morning everyone,

I actually grew up in Michigan and still have all of my family there and visit frequently. I have to say, being back in Detroit this past summer for the first time in 7 or 8 years blew my mind. It isn't even the same place downtown anymore. However, I spent most of my time in other areas like Novi and the Thumb area most of my life, so how do you go about finding the best areas to invest? 

I would love to own a home in Detroit, even if just to sit on it and find a tenant for equity buildup, while prices appreciate. My problem is, there are still a lot of bad parts of Detroit that a lot of people wouldn't live, hence 19,000 dollar or less homes. How can I tell, from Oregon, whether or not a house is in an area worth investing, or in an area that could actually appreciate in 2 - 3 years. Do I look at Crime rates in certain areas? I feel like that would take astronomical amounts of time.

[Jay Hinrichs]

Originally posted by @Bala A.:

Places like Bagley subdivision, in Detroit Northwest, were selling 30-50K just 18 - 24 months ago. 

Today it is anywhere between 100 - 150K for those same homes. 

In a very short time, the prices have moved up astronomically. 

Whilst being Cash flow positive for Investors. And getting the Capital Growth. 

Who says you can't have both!

:-)

(for e.g I have 18681 Northlawn tenanted at 1200 per month which I bought for 41,000 in 2017 and now even the conservative Zestimate has it valued at 128,000)

In fact, since some of the prices have soared so much in certain pockets, like Bagley, Rosedale Park, Uni Dist, East English Village, we are no longer buying in these "Bagleys" anymore and are sniping at the next domino effect markets which are the next in line. Like the neighborhoods of Winship, 5 Points, Berg Lahser, West Outer Dr, Castle Rouge, Malvern Hill areas etc.

if I owned in that subdivision i would be a seller and take a nice profit.. :)  my experience in Detroit was the opposite.. made loans there in 2002 to 2004. properties were appraising at 120 to 150k  and by 06 you would be lucky to get 20 to 30k for them and by 2009 under 10k so went in the wrong direction. LOL..  but happy to see it bounce back.  Stay away from anything Morris invest offers and you have a chance

[Bill F.]

@Marisa R.

Do you know what is driving the appreciation? Are more people moving to the city due to the low cost of living or other reasons? Have companies moved into the area in the past 24-36 months?

What's the proportion of investor capital to owner occupant?

The increase in price means something in the supply and demand characteristics have changed, but I wonder if it is a short term or long term change?

[Jay Hinrichs]

Originally posted by @Bill F.:

@Marisa R.

do you know what is driving the appreciation? Are more people moving to the city due to the low cost of living?

What's the proportion of investor capital to owner occupant?

The increase in price means something in the supply and demand characteristics have changed, but I wonder if it is a short term or long term change?

Bill when i was there this last fall few things.. Quicken/rocket mortgage owner has pumped tons of money into downtown.

and big auto is expanding currently..  there are still very bad areas of the city.. but like all cities there are plenty of good areas Mainly out of the city of detroit proper.

[Bill F.]

@Jay Hinrichs

Interesting, thanks for the perspective. Upfront, I know very little about Detroit, but from following Amazon HQ2 I found that Detroit didn't make the top 20 due to concerns about the availability of producing, attracting, and retaining talent. 

Since human capital is the main driver of wealth, that didn't look good for Detroit's long term prospects. Granted, a big Tech company isn't the final judge of what is "enough" talent to be a successful city so that's why I'm curious what has changed and if those changes are what will push the city to more long term prosperity.

[Jay Hinrichs]

Originally posted by @Bill F.:

@Jay Hinrichs

Interesting, thanks for the perspective. Upfront, I know very little about Detroit, but from following Amazon HQ2 I found that Detroit didn't make the top 20 due to concerns about the availability of producing, attracting, and retaining talent. 

Since human capital is the main driver of wealth, that didn't look good for Detroit's long term prospects. Granted, a big Tech company isn't the final judge of what is "enough" talent to be a successful city so that's why I'm curious what has changed and if those changes are will push the city to more long term prosperity.

its also simple supply and demand.. city went from 1.5 million to about 800k in the last 20 plus years.. so you had vast amounts of vacant homes.. not enough butts to fill them. take that and add flight to the suburbs So you see whole blocks that have been demo'd 

and or there are some really large factories still standing that look right out of an apocalypse movie.   Just need to get ahead of where those that have the credit and income to buy 300 to 500k houses and build that product.. that's what I saw. 

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

[Bala A.]

Originally posted by @Jay Hinrichs:

Originally posted by @Bala A.:

Places like Bagley subdivision, in Detroit Northwest, were selling 30-50K just 18 - 24 months ago. 

Today it is anywhere between 100 - 150K for those same homes. 

In a very short time, the prices have moved up astronomically. 

Whilst being Cash flow positive for Investors. And getting the Capital Growth. 

Who says you can't have both!

:-)

(for e.g I have 18681 Northlawn tenanted at 1200 per month which I bought for 41,000 in 2017 and now even the conservative Zestimate has it valued at 128,000)

In fact, since some of the prices have soared so much in certain pockets, like Bagley, Rosedale Park, Uni Dist, East English Village, we are no longer buying in these "Bagleys" anymore and are sniping at the next domino effect markets which are the next in line. Like the neighborhoods of Winship, 5 Points, Berg Lahser, West Outer Dr, Castle Rouge, Malvern Hill areas etc.

if I owned in that subdivision i would be a seller and take a nice profit.. :)  my experience in Detroit was the opposite.. made loans there in 2002 to 2004. properties were appraising at 120 to 150k  and by 06 you would be lucky to get 20 to 30k for them and by 2009 under 10k so went in the wrong direction. LOL..  but happy to see it bounce back.  Stay away from anything Morris invest offers and you have a chance

Way too early to exit the rising Detroit market in my humble opinion.

2006-08 was the peak and it crashed. Detroit bore the brunt with the Bankruptcy of the City itself. 

Today they are just at the 25-30% their peak values set in 2008. Still 70% Discounted.

Whilst the rest of the country has gone back to the pre-GFC levels, Detroit is climbing up there.

With the investments coming in, only some die-hard hardcore investors, see the glass half full,

As downtown 2 bed/2bath apartments selling at 350-400K a Pop, the writing is on the wall perhaps. Humbly saying.

https://www.nytimes.com/2019/02/26/business/fiat-c...

[Bill F.]

Originally posted by @Jay Hinrichs:

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

 Sage advice as usual Jay. It kinda looks like the easy 1-2% rule days in Detroit are coming to a close. 

Typing out loud, to afford a $300k home, assuming a 30 yr 5% note, a 28% front door DTI, and 20% down, the minimum someone will need to make in a year is around $55k.

Now the question is, will the people who can afford $300k-$500k house move to Detroit in significant enough numbers, given all of its issues. 

Also, check out this documentary on Netflix about a guy who wanted to buy abandoned blocks of homes from the city and start farms. Fascinating

[Jay Hinrichs]

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

 Sage advice as usual Jay. It kinda looks like the easy 1-2% rule days in Detroit are coming to a close. 

Typing out loud, to afford a $300k home, assuming a 30 yr 5% note, a 28% front door DTI, and 20% down, the minimum someone will need to make in a year is around $55k.

Now the question is, will the people who can afford $300k-$500k house move to Detroit in significant enough numbers, given all of its issues. 

Also, check out this documentary on Netflix about a guy who wanted to buy abandoned blocks of homes from the city and start farms. Fascinating

it is a continuing social experiment..  On devils night there will be hundreds of houses set on fire.. all vacant of course :)  but at one point there was 40 to 50k more homes than necessary for the population. 

[Jay Hinrichs]

Originally posted by @Shane Short:

Good morning everyone,

I actually grew up in Michigan and still have all of my family there and visit frequently. I have to say, being back in Detroit this past summer for the first time in 7 or 8 years blew my mind. It isn't even the same place downtown anymore. However, I spent most of my time in other areas like Novi and the Thumb area most of my life, so how do you go about finding the best areas to invest? 

I would love to own a home in Detroit, even if just to sit on it and find a tenant for equity buildup, while prices appreciate. My problem is, there are still a lot of bad parts of Detroit that a lot of people wouldn't live, hence 19,000 dollar or less homes. How can I tell, from Oregon, whether or not a house is in an area worth investing, or in an area that could actually appreciate in 2 - 3 years. Do I look at Crime rates in certain areas? I feel like that would take astronomical amounts of time.

find a good broker.. and be very cautious of wholesalers.. get on MLS feeds they are free and come to you daily. not that hard.

figure out the median price point for the city and buy above it.. that usually will in of itself get U in the better areas.

lets say the median is 150k then simple logic will tell you a 50k home is going to be in the roughest areas etc.

[Michael O.]

Originally posted by @Jay Hinrichs:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

 Sage advice as usual Jay. It kinda looks like the easy 1-2% rule days in Detroit are coming to a close. 

Typing out loud, to afford a $300k home, assuming a 30 yr 5% note, a 28% front door DTI, and 20% down, the minimum someone will need to make in a year is around $55k.

Now the question is, will the people who can afford $300k-$500k house move to Detroit in significant enough numbers, given all of its issues. 

Also, check out this documentary on Netflix about a guy who wanted to buy abandoned blocks of homes from the city and start farms. Fascinating

it is a continuing social experiment..  On devils night there will be hundreds of houses set on fire.. all vacant of course :)  but at one point there was 40 to 50k more homes than necessary for the population. 

 Jay,

Your numbers are way off. You need to stop using metrics from the 1980's. There was a total of 2 house fires in 2018 during Devil's Night: Free Press Story

[Jay Hinrichs]

Originally posted by @Michael O.:

Originally posted by @Jay Hinrichs:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

 Sage advice as usual Jay. It kinda looks like the easy 1-2% rule days in Detroit are coming to a close. 

Typing out loud, to afford a $300k home, assuming a 30 yr 5% note, a 28% front door DTI, and 20% down, the minimum someone will need to make in a year is around $55k.

Now the question is, will the people who can afford $300k-$500k house move to Detroit in significant enough numbers, given all of its issues. 

Also, check out this documentary on Netflix about a guy who wanted to buy abandoned blocks of homes from the city and start farms. Fascinating

it is a continuing social experiment..  On devils night there will be hundreds of houses set on fire.. all vacant of course :)  but at one point there was 40 to 50k more homes than necessary for the population. 

 Jay,

Your numbers are way off. You need to stop using metrics from the 1980's. There was a total of 2 house fires in 2018 during Devil's Night: Free Press Story

arnt you impressed I even knew about it and the name.. I can tell you in 2002 to 2004 when I was lending there.. there was far more than 2 arson fires a year  :)  but hey like said I am happy to see parts of Detroit coming back and I was really impressed with some of the infill new construction in the 300 to 500k range.. so much so if I had a team there I would be building there.. I will leave all the rentals to you folks but I like what I saw 

[Marisa R.]

Originally posted by @Michael O.:

Originally posted by @Jay Hinrichs:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

rental will always be there its just like any other big mid western city.. Redevelopment is what takes it over the top.. other than just rehashing old SFR's for rental purposes values will only go as high as rent.. or what an investor will pay for a given cash flow.. the big money happens when owner occ moves back in.. better schools better shopping pride of ownership.. less drive by's :)

 Sage advice as usual Jay. It kinda looks like the easy 1-2% rule days in Detroit are coming to a close. 

Typing out loud, to afford a $300k home, assuming a 30 yr 5% note, a 28% front door DTI, and 20% down, the minimum someone will need to make in a year is around $55k.

Now the question is, will the people who can afford $300k-$500k house move to Detroit in significant enough numbers, given all of its issues. 

Also, check out this documentary on Netflix about a guy who wanted to buy abandoned blocks of homes from the city and start farms. Fascinating

it is a continuing social experiment..  On devils night there will be hundreds of houses set on fire.. all vacant of course :)  but at one point there was 40 to 50k more homes than necessary for the population. 

 Jay,

Your numbers are way off. You need to stop using metrics from the 1980's. There was a total of 2 house fires in 2018 during Devil's Night: Free Press Story

 LOL

Sounds like a fun night

Seriously though, good stuff is happening in Detroit

google is your friend

Some big players pumping big $ into this market

I started a thread

“Detroit the come back kid”

For those interested it may give an idea on what is happening

[Marisa R.]

Hi Everyone

It appears the answer is yes, the stats don’t lie

I am happy I purchased 12 months ago

https://www.michiganradio.org/...

[Cynthia Miller]

I realize this is from 8 most ago but I was interested in this as well as I've been seriously contiplating getting out of the Detroit proper market for the last yr. Or so but the only thing keeping me holding on is the thought of the possibility of a big jump in prices, say the next 3-5yrs.

For me, the rentals just are not profitable and very time consuming as I've been managing myself and painting and cleaning etc for ea. Move out.  The low income properties just don't attract quality tenants.

Ive seen so much revitalization the last few years but its not going to matter how much the city improves if new blood doesn't move in.

i see people buying up abandoned houses left and right and fixing them up and the city is doing a good job knocking down the condemned ones. But I don't see anyone actually selling.  I don't see any new blood moving into the neighborhoods. I've seen the same house that were rehabbed sitting for the last 6 most unsold. I keep seeing sales prices dropped.

So im wondering if the market will actually go up or will it go down once the frenzy wears off and people realize they can't do a flip and sell it for any decent amount of profit.

I'm not referring to midtown, Rosedale park or the few other desirable pockets.