Help me decide if I should invest in Alpena (Northeast MI)

[Kurt Hines]

Hi Everyone.  I'm trying to decide on what market to invest in for buy and hold residential rentals. My closest city is Alpena, MI, in northeast Michigan. From all the numbers I have pulled, I don't think it fits my needs. I'm hoping for some more experienced eyes (especially anyone familiar with small town investing) to look at these numbers, and let me know if I am missing anything. (I'll be analyzing vacation rentals separately, since that might fit here.) 

According to a Rentometer Pro report, the Average Rent is $692, with the Median at $650. When I look at the numbers, it looks like rent is $500-$600 for a 1 bed, $600-$700 for a 2 bed, and $700-$800 for a 3 bed. (I realize I'm running numbers in Winter, so it might be better come summer). With those rents, even looking at duplex or triplexes, I'm not generating a lot of cash flow. (A lot of duplexes I look at seem to be a 2/1 and a 1/1) The best case I've seen so far is on a 55k triplex (listed for 80k) with a cash purchase is about $150 a door.  There are just too many costs to make much money with these low rents, especially considering it seems that heat (Natural gas) is generally not separately metered.

When it comes to the real estate market, the average time on market in the summer is 2+ months, in the winter is 4+ months. This seems long. The average home price is $70k or so. I'm interested in multifamily, and there are duplexes on the market for 40k-70k (that I think need a lot of work). 

I used (https://www.neighborhoodscout.com/mi/alpena/rates/...) to look at appreciation, and in the last 5 years, it is 2.48% total ( .49% annualized). So accounting for inflation, it is actually a negative appreciation rate. This compares to 25% growth at markets I've looked at in the Metro Detroit area.  There is also a 10% vacant home rate, which seems rather high. This makes sense to me, as the population seems to be on a long, slow decline (currently about 10k).

With the cash flow it looks like I would get, and little or negative appreciation, it looks like a market to skip. Have I missed anything?

Thanks for the help!

[Jason D.]

Understand your reasoning. Hard part is everyone wants CF, little rehab, high rents, decent property AND appreciation to top it off. In my opinion very hard to find all of those in one deal but not impossible. 

I do not invest in Detroit so can't speak to that but if your looking for high rents, growing population with a higher chance of appreciation I would suggest west Michigan. I invest in Grand Rapids but severa of the sourounding communities also offer great buy and hold options. I'm sure you've seen all the Forbes reports and such stating the same, and even with my bias I think it's the best area in the state to look. 

Best of luck!