Any insight on Detroit?

Question

Hello everyone, I was chatting with an agent two days ago and he was saying Detroit Michigan is seeing a lot of market activity lately.Does anyone buy properties in Detroit?Homes seem affordable and rent prices pretty good.Thanks in advance.

Travis Biziorek · Answer

Hey Josh, I'm the BP Detroit expert here :-)

I own 14-doors there but live in California. I used to live on-the-ground in Detroit Metro from 2017-2022 and actually grew up in Michigan as well. I get back to Detroit every few months for about a week at a time to check on projects and meet with clients.

The city has come a LONG way and is undergoing a major revitalization effort. Most people haven't figured this out yet and still think Detroit is left for dead.

That's just not the case.

Industry is also becoming increasingly diversified. It's not just the automotive space anymore.

I could go on and on. I'm extremely bullish on the city and can't wait for it to go mainstream. Just the other month Detroit edged out Miami for the highest appreciating market in the country.

I've been investing there since 2019 so it's pretty fun to watch my thesis unfold like this. We're just getting started!

Michael Smythe · Answer

@Josh Mac we agree with 100% of what @Travis Biziorek has written, but...

An OOS investor can't search for properties or learn anything about the City of Detroit market with a "block-by-block" approach:(

Yes, zip codes are too big and will lead to bad experiences.

We believe you can use Neighborhoods to narrow your search to a reasonable area and THEN use a block-by-block strategy as confirmation before signing a purchase contract.

Google Streetview can be a great tool to peruse "block-by-block", but you do have to watch the Capture Date in the bottom righthand corner. Most of Detroit keeps improving, but don't assume every area has! Worse-case you can hire us or Travis to do a video evaluation of the area of a target property.

Read below for some additional helpful info.

We think the Midwest is a GREAT place for OOS investors to consider!

Check out some of things happening in Detroit in 2024:

https://michiganchronicle.com/2024/01/03/major-developments-that-will-define-detroit-in-2024/

Your first question shouldn't be WHERE to invest (that is #2 question), but HOW you will invest!

Many OOS investors set themselves up for failure because they don't invest the time to ACTUALLY understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Let us know if we can help in any other way.😊

Josh Mac · Answer

Thanks,that makes sense!I have to develop my skill to recognize the different classes of properties.What would be the best way to go about investing remote?I've read finding a good team is key.My question is how do you put together a good team when most people are out to scam you or looking out for there best interest?

Michael Smythe · Answer

@Josh Mac use our info as a template for wherever you invest!

Travis Biziorek · Answer

Haha, yeah I get it man. Happy to chat offline if you want. There's a lot to it all for sure. I think we have a DM thread going already. Feel free to hit me there and we can talk.

Josh Mac · Answer

Thank you for the insight.I am still very curious about Detroit.I feel I should start out buying my first close to where I live though.But you cleared up a lot for me,thanks again!

Josh Mac · Answer

Thank you for the reply and all the insight.What particular areas are good for single family rentals?Is section 8 a good program to put your property under?I am wanting to buy my first rental but not sure if starting out of state is a good idea since I'm new.

Any insight on Detroit?

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