Multi-family in Detroit

[Alexander Mair]

I've been looking into c class Detroit real estate for a while now (yes I know) and am amazed by the cap rates on multi family units. 17 doors at a 10 cap, 11 doors at a 13. Admirably they aren't in the best of areas, but It almost seems too good to be true. Most of the properties cash flow all the way down to ~35% occupancy inclusive of worst case lending terms, cap ex, etc... Detroit folks, what am I missing here? Do you have any success or horror stories that might shed some light on the matter? Thanks, Alex

[Christopher M.]

The city of Detroit was build to house 2.5 million people, but only around 700,000 live inside the city limits. That means there is zero scarsity in the housing market. You may never see 100% occupancy. 

I recommend that you run your numbers based 20-30% vacancy at all the times.