Grand rapids Market

[Lydia Bar]

Hi everyone,

We are real estate investors who reside in NJ. We own a single family in PA and a multi-family in Albany, NY. We have family in Grand Rapids and we Lately  started looking at Grand Rapids market since we have connections to the area and sorta familiar with it. I know there have been a lot of predictions regarding Grand Rapids market over the last 2 years or so. But I noticed that rent prices  are still pretty low compared to the rest of the country. Meanwhile property prices seem to have caught up. So really running numbers on any property i come across have not been working. I am looking at multifamily specifically as I doubt numbers would work for single family there ( but would do that as well if it works). My questions to those who has been investing there, how do you make the numbers work? Did you purchase a while back while purchase prices were still low? Are you purchasing in the hopes that rent prices will catch up? 

my understanding that there is rent control as well and can not increase rents more than 7% a year for the same tenant.

Just trying to see if there is a possibility to enter this market at this time

TIA

[Randy Charboneau]

Hey Lydia!  Just catching up on some older threads.  Grand Rapids has had a big bump in sale pricing due to shortage of inventory.  We were running low before COVID and when COVID hit, it really wreaked havoc on this market.  We've been historically low ever since, but I've seen some signs of recovery this year (2024).  Our absorption rate (time it takes to run out of inventory if buyers keep buying at the current pace and sellers stop selling completely) has been averaging less than 3 weeks for a couple of years, but in January we were up over 1 month.  A healthy balanced market is closer to 3-4 months of inventory so we've got a ways to go.   Rents have increased too but we aren't running the same shortage of rental units that we have housing sale units so its less pressure and the rents have increased slower than the sale prices.

Downtown GR and the immediate surrounding is going to be tough to get a single family rental that is decent cash flow due to this.   However, I have seen some duplexes and multi families come up that have positive cash flow with about 25% down conventional.   That seems to be the bar most investors draw the line on in determining if they should move forward or not.   Cash offers obviously can get better cash flow due to no debt service.  Less down and you have to be way more patient.

As mentioned we don't have rent control in Michigan so nothing to worry about there.  You're simply restricted by the free market at this point (and whatever silliness the government does).  There are markets around Grand Rapids that are cheaper and more lucrative for cash flow like Kalamazoo, Battle Creek and Muskegon.  I work those areas as well and I'd be happy to provide data for any of those markets if you're interested.