A Tale of Two Rental Markets: Metro Detroit vs. Raleigh, NC

Detroit Metro Times and ThisisRaleigh.

You want to expand your rental property portfolio.

And with so many housing markets in the US, you figured finding a great location would be easy.

Sadly, it’s not. Just in our local Metro Detroit area alone, we routinely look to expert knowledge to navigate and reap famed returns. And it’s not any different with nationwide real estate hotspots.

So, if you’re unsure where to focus your search for new investment properties, look to us—we have over two decades' worth of wisdom as a property management company, and we’ve studied all the best spots to get strong cash flow and impressive equity gains in the US.

We operate in Metro Detroit, but we also know other prospective markets like the City of Raleigh in North Carolina. Between the two, we’ve concluded that both are well-known markets for aspiring rental property investors, but there are major differences you should consider before you choose where to land.

This report is part of our ongoing series that compares Metro Detroit to other real estate hunting grounds. We list the strengths and weaknesses of each area in terms of expected returns, tenant pool, and property management required for you to make wise decisions.

In this in-depth article, we go through all the investment details you must know about the two markets. We’ve presented all information as factual and unbiased as possible. But we have to admit that whenever there’s a close call, we unashamedly favor Metro Detroit, given that it’s our home base.

Overview of Metro Detroit

From the 1960s to 1970s, Metro Detroit saw most of its wealth flee the city to the suburbs, resulting in a unique price spread where real estate prices decrease closer to the city. The following map shows this trend, where property values are below $30,000 in the City of Detroit and above $80,000 just outside the limits:

Source: Proximity One.

Fortunately, since the Great Recession in 2008, the city’s jobs and population have bounced back, and property values and rent prices skyrocketed compared to its surrounding suburbs. Metro Detroit’s population left only because of the casual appreciation in nearby areas, so to include today’s investors in the area’s original market, we included opportunities you’ll find all over Metro Detroit.

Further reading: We go into the details of each city and neighborhood in Metro Detroit in our Deep Dive series, should you want to examine the real estate potential of each area. Check it out!

To stay up to speed, here’s a quick summary:

• - Metropolitan Statistical Area (MSA) of Detroit-Warren-Dearborn includes the 6 counties of Lapeer, Livingston, Macomb, Oakland, St. Clair, and Wayne.
• - Metro Detroit is the Detroit tri-county area that only includes Macomb, Oakland, and Wayne counties. They cover 3,888.4 sq mi (10,071 km2) and a population of over 4 million—the most populous metro area in Michigan.
• - The City of Detroit is the biggest city in the Metro Detroit metropolitan area and in Michigan. It’s 142.89 square miles (370.1 km²).

Today, Metro Detroit is still the most populous Michigan metropolitan area. Within this massive real estate hotspot, there is a total of 72 cities, laid out like so:

Source: Georgetown Public Policy Review.

We coined the term “Ring Cities” to refer to the suburban cities surrounding the City of Detroit in a semicircle. You’ll find an excellent balance of cash flow and buy-and-hold potential in these cities, plus the properties are affordable and do not have the risks commonly associated with Detroit investing.

The following list includes all the cities in Metro Detroit, and we’ve highlighted the Ring Cities highlighted in for beginner investors and investors who are new to the area. The hyperlinks will take you to our Deep Dive of that area for you to learn more about its real estate market:

You might be asking, What about investing in the City of Detroit itself? Let’s take a look. Metro Detroit’s major city is split into 11 regions, all with distinctive qualities and features:

Source: Wikipedia.com

Metro Detroit’s regions are further divided into 105 neighborhoods, which you can see on the map below. As always, the following hyperlinks will bring you to a published Deep Dive for more information about the neighborhood:

Source: Loveland’s Detroit Neighborhoods Map

In terms of population, the City of Detroit had roughly two million people in the 1950s. Less than half of that population still lives in the city, which means there are thousands of homes sitting vacant. However, some Detroit neighborhoods better retained their populations, and the areas are in high demand today.

Property and rent values in The City of Detroit have been consistent for the past several years, and the local government has been demolishing and rehabilitating as many structures as possible to minimize the oversupply. As you can imagine, this leads to increasing property and rent values.

Here’s a snapshot of the Metro Detroit real estate market and demographics:

Source: Home Area.

The differences between investing in the City of Detroit and the rest of Metro Detroit are significant. So if you’re new to the area or are an out-of-state (OOS) investor, set your expectations correctly and seek professional help.

For example, property classes can vary widely from one street to another—we’ve seen too many investors purchase what they thought was a Class A property, only to realize that it’s nothing but a Class C home in need of desperate renovations.

Don’t invest in Metro Detroit based on a zip code or random area someone recommended. Instead, partner with trustworthy and experienced experts to conduct a boots-on-the-ground evaluation of the area you have your eyes on.

Due to the area’s peculiar situation, we compare the entire metropolitan area (Metro Detroit) versus a city (Raleigh, NC) in this comparative report. We’ll keep reminding you of this seemingly unequal evaluation as we go through the investment details.

And, if there’s one thing to remember, it’s this: Always consider the Ring Cities!

Overview of Raleigh, NC

The City of Raleigh is the capital city of North Carolina. It’s the second most populous city in the state (after Charlotte), with roughly 474,069 residents covering a land area of 147.6 square miles (382 km2). Interestingly, it’s also nicknamed the “City of Oaks” because of the many oak trees that line its streets.

The majority of the city is located within Wake County, with a small portion of it extending into Durham County. Some of the city’s primary suburbs and satellite towns include Rolesville, Zebulon, Wendell, Knightdale, Fuquay-Varina, Holly Springs, Apex, Wake Forest, Clayton, Garner, Morrisville, and Cary.

Here’s a map that shows the entire Raleigh MSA, where you can see the city within Wake County:

Source: Proximity One.

Similar to Metro Detroit, Raleigh properties seem to become more affordable the closer they are to the city’s center. Assuming income relates to property prices, you can see the price increase from the map below:

Source: Proximity One.

From the map, we can also see that most Raleigh locals are wealthier than we might expect, so the property values in the area are likely at the higher end of the spectrum. We’ll go into the details later.

Here’s a snapshot of the real estate market and demographics in the City of Raleigh:

Source: Home Area.

Comparing Real Estate in Metro Detroit vs. Raleigh, NC

The key contributing factors to the financial viability of investments are rent, house value, property appreciation, quality of tenants, quality of life, and condition of properties.

Here’s an overview of the rental properties listed on Zillow for the two areas, Metro Detroit and Raleigh:

Source: Zillow.

Home Value

Based on Zillow data, the median home price in Metro Detroit is $238,433. The figure is from a 7% growth over the past 12 months and will likely continue to rise in the future, according to Zillow:

Source: Zillow.

In Raleigh, NC, homes are valued at $435,554, an increase of 9.4% over the past 12 months. The growth also implies a future increase:

Source: Zillow.

Most available homes for sale are in the City of Detroit or one of the many Ring Cities surrounding it. In these places, you’ll find the famous less-than-$100k properties the Detroit market is famous for. You’ll also notice that the housing density here is much higher compared to other markets in the US, which is due to Raleigh’s smaller lots:

Source: Zillow.

Regarding appreciation, the following heat map below shows the affordability of Metro Detroit properties, with lower property prices in and around the City of Detroit. Remember, the variation and diversity of the area mean there are scattered sweet spots everywhere—you’ll easily spot affordable houses around up-and-coming neighborhoods, which means these places will gain equity.

Source: NeighborhoodScout.

In contrast, current Zillow listings in Raleigh, NC, show that property prices are equally spread across the entire city. You’ll find properties that cost millions and properties below the average $400k price from one end of the city to the other:

Source: Zillow.

In terms of appreciation, you’ll see that most of Raleigh has an impressive property appreciation rate. There are a few exceptions, of course, as the rate may vary from one sub-area to another. Generalizing the price spread is challenging, but most areas are priced relatively high:

Source: NeighborhoodScout.

Appreciation

These are the appreciation rates of Metro Detroit and Raleigh in a nutshell, according to Sperling’s Best Places:

• - Metro Detroit home appreciation in the past decade is 143.9%, and is up 16.4%.
• - Raleigh home appreciation in the past decade is 70.5% and is up 17.3%.

You’ll generally find affordable homes in Metro Detroit and more expensive ones in Raleigh, but both come with excellent appreciation rates. Compared to the national rates last year, home values in both areas increased by 11% to $416,000 in November 2022.

The rate is lower compared to the 16% annual growth back in July 2022, which may indicate a slowdown in the market. But 2023 will likely be a growth year, especially since millennials (the largest segment of the population) are now purchasing homes—bringing in other forms of housing and adding competitive pressure on property prices.

Average Rent

Moving forward to average rent, both Metro Detroit and Raleigh have higher rent prices than their respective states, Michigan and North Carolina. Regarding absolute numbers, Raleigh’s average rent is higher than Metro Detroit's. You can see it in the breakdown below:

Source: Best Places.

Comparing these averages to the homes found on Zillow, we see that the numbers are accurate and understated, even, especially for Raleigh rental properties. This means you can likely charge higher than the average rent as a rental estate investor, which is great news.

The tenant pool sizes for both areas are 27.7% of Metro Detroit’s population and 42.6% of the population in Raleigh. The latter has more renters, but don’t forget it’s also a city, not an entire metropolitan area. In the City of Detroit, for example, the tenant pool is 34.5% of the population.

Still, based on these figures, you’ll have a larger tenant pool to choose renters from in Raleigh than in Metro Detroit. Later on, we’ll see the details of the areas’ demographics and the financial ability of residents.

Rent-to-Price Ratio

Given the many properties you’d have to sort through, we use the rent-to-price ratio as a quick indicator of a property’s likelihood to generate solid, positive cash flow. The industry standard is the “1% Rule,” where the minimum is that the rent price should be 1% of the total purchase cost plus rehab.

Monthly Rent / (Purchase Price + Rehab ) ≧ 1%

With the many varied properties you’ll find in Metro Detroit and Raleigh, this easy formula can help you estimate the return on investment (ROI) within a matter of seconds.

Side by Side Chart

So, let’s grab some Zillow listings to see the data in action. This is also what you’ll do once you get serious about investing in either Metro Detroit or Raleigh.

Here are examples of three-bedroom properties in the two areas. See how they stack up against each other in terms of property values and rent amount:

Source: Zillow.

The Metro Detroit listing shows a ratio above the industry minimum, while the one in Raleigh falls short. This means that if you want to prioritize cash flow, Metro Detroit is your best bet—throw in health appreciation rates, and you’re looking at an excellent balance of cash flow and equity gains.

Quality of Tenants, Properties, and Living

The quality of tenants, properties, and neighborhoods determines your success as a rental investor. Tenants, after all, are the bloodline of your business. They influence the following aspects:

• - The stability of your rental income.
• - The property maintenance needs to protect your assets.
• - The necessary and possible home renovations and rehabilitations.
• - The kind of property management required to handle the tenants.

The information we’ve gathered below comes from our local knowledge of the area and multiple research points. You can use them as a definitive metrics guide.

Let’s start with this heatmap from Roofstock that shows the quality of life in the City of Detroit (and its surrounding areas) and Raleigh, NC. These ratings are based on factors such as property values, employment, schools, income levels, and other investment criteria:

Source: Roofstock Raleigh and Detroit surrounding areas.

As you can see, most Detroit properties are Class C, so they come with more tenant issues and property maintenance requirements—not ideal for beginner investors. In contrast, most of Raleigh shows an excellent quality of life regardless of the subarea.

Tenant Quality

The quality of tenants you can find in these areas depend on local income and unemployment rates as well as education attainment.

Average Income

The income and unemployment rates in Metro Detroit and Raleigh are nearly identical. Still, the latter is slightly better in all aspects—except recent job growth. Either way, both areas have opportunities for locals to earn a steady living like the rest of the nation.

Source: Best Places

We understand that you want to charge as high of a rent amount as possible. But what’s more crucial is to secure tenants that are financially capable of keeping up with payments, which is what stable income and employment can provide.

In general, a growing job market helps increase the population and strengthen the local economy, expanding your tenant pool and generating quality renters in the process. The growth will also positively affect property values and rent prices. Thankfully, both areas will see job growth in the future.

Educational Attainment

In terms of education, more residents in Raleigh have attained a college degree than in Metro Detroit. Still, both areas have relatively the same percentage of high school graduates, which means potential renters have better chances of getting well-paying jobs.

Source: Best places.

Property Condition

The conditions of properties you’ll find in Metro Detroit and Raleigh depend on the age of the properties and whether the homes are owned or rented.

Property Age

The median home age in Metro Detroit is 53 years, while in Raleigh, it’s 25. That’s a significant difference, but being old isn’t always bad news for homes—it merely means that you’ll have more renovations and maintenance to handle throughout your ownership.

Source: Best Places.

Home Ownership and Rental

There are more homes owned in Metro Detroit and more homes rented in Raleigh. The good thing is that properties are typically maintained best by their owners, so the better-maintained homes are probably those in Metro Detroit. But, yes, you’ll have a bigger tenant pool in Raleigh to secure renters from in terms of percentage.

Source: Best Places.

Quality of Life

The quality of life in Metro Detroit and Raleigh is shaped by the local economy, safety and crime data, demographic diversity, and liveability factors.

Local Economy

Like the rest of the world, Metro Detroit’s economy was affected by the pandemic. Its automotive and manufacturing sectors stayed strong, but smaller businesses and the leisure and hospitality industry couldn’t hold on as much.

Still, things are turning around in 2023. In fact, the number of new business applications in Michigan increased by 42.2% in 2020 from 2019, and the median sales price of single-family homes increased by 23.3% to $236,300 in 2020. Plus, new construction permits continue to reflect pre-pandemic levels, which is excellent news for you.

Moreover, job growth in Metro Detroit is on an uptrend in 2023:

• - Ford Motor Co. has a multi-year plan for a 30-acre “mobility innovation district” in Downtown Detroit, creating 5,000 new job opportunities for locals. Google also joined as a founding member and commits to training locals to work in the up-and-coming district.
• - Michigan’s economy is ranked #1 by Bloomberg among 37 other states with populations of more than 2 million, thanks to the state’s impressive recovery from the pandemic. The announcement made headlines worldwide and certainly shone a positive light on the state.
• - General Motors announced its plan to create an all-electric future with 5,000 manufacturing job openings in Michigan. The state also said it’ll align a minimum of $126 million in resources to support the district and expand local job growth in the sector it’s known for—automobiles.
• - New Center will be redeveloped to include state-of-the-art residential, retail, commercial, recreational, and healthcare facilities over the next decade, thanks to a $2.5 billion investment from Henry Ford Health, Michigan State University, and Tom Gores and the Detroit Pistons.
• - Real estate billionaire Stephen Ross and the Ilitch organization are collaborating on the University of Michigan’s plan for a $250 million Detroit Center of Innovation. There’ll be new retail, residential, hotels, and commercial developments in and near the downtown area.

Raleigh, NC, wasn’t spared from COVID-19. But the city is also showing strong growth in the post-pandemic landscape. It’s still one of the most highly sought-after cities in the nation and has some of the biggest businesses and most education professionals worldwide. Raleigh (and Durham) even ranked 4th among the fastest-growing cities for 2022 based on the American Growth Project.

The city’s highest contributing sectors are life sciences, cleantech, and advanced manufacturing, where companies are constantly looking for fresh, new talent. Glassdoor even ranked the city as the best in the nation for job-seekers.

Here are a few updates on Raleigh’s job opportunities this 2023:

• - The Raleigh Airport (a.k.a. Raleigh Durham International Airport) underwent major renovations in the past years, where new airlines are bringing new flight paths in and out of the area.
• - Raleigh, with more than 24,000 job openings and some of the best base salaries in the nation, has no shortage of opportunities in the workforce. It also has a job satisfaction rating of 3.3, where most of its employees are very happy with their jobs.
• - The Research Triangle Park plays a significant part in what makes the city a great place to work. Executives move to Raleigh just to work in the park, where many larger businesses have their headquarters in the area. Outside of the park, locals will also find companies like MetLife, RedHat, and Citrix that all provide six-figure salaries.

To summarize, here is a snapshot of the post-pandemic economy of Metro Detroit and Raleigh. Keep in mind that the figures for Raleigh refer to its metropolitan area (not just the city):

Source: Brookings.edu.

Metro Detroit and Raleigh show impressive growth after the unpredictable pandemic that shook the world. This is excellent news for you as an investor because both areas will attract new residents and retain their current locals, thanks to the cities’ economies, job growth, and livability.

Safety and Crime

In terms of safety, both regions generally have higher crime rates than their respective larger areas (Michigan and the Durham-Chapel Hill Metro). Still, Raleigh does have less violent crimes, which makes it a bit more attractive to prospective locals moving to the city.

Source: Best Places.

Still, remember that the areas we’re exploring have varied cities and neighborhoods, so it’s quite difficult to generalize their level of safety. Your best bet is to visit the specific area you’re looking to invest in, and ask local real estate experts if it’s a safe block to live in. You might find a house that’s in a completely safe neighborhood just a stone’s throw away from an area that’s deemed unsafe.

These two maps show just how much crime rates can vary:

Source: NeighborhoodScout.

Crime rates will vary from one street to another. So conduct boots-on-ground research before purchasing any rental property. Quality tenants will prioritize safety, so you should as well.

Diversity

Regardless of race, your goal is to invest in properties that attract responsible, reliable, and communicative tenants. They should have minimal to zero problems handling payments, maintaining the home, and following your lease agreement.

Source: Best Places.

The racial diversity in both Metro Detroit and Raleigh is similar, but you should evaluate what kind of tenants you want before committing to a property. Ultimately, it’s up to you to decide.

Liveability

In a nutshell, here is the life one can expect from either Metro Detroit or Raleigh:

*Density isn’t always a con! Density also means more potential tenants.

Both Metro Detroit and Raleigh show strong economic growth for people seeking to better their careers, and there are several schools for families with younger kids. Of course, remember to be careful when choosing your real estate market. Prioritize those that are in high demand by high-quality tenants so you only attract responsible renters who’ll boost your success.

Moreover, if you’re a beginner or out-of-state investor, we recommend you work with an experienced local agent or property management company to review the key investment factors in detail before pursuing a property.

Conclusion

Conduct a rigorous evaluation of both Metro Detroit and Raleigh before choosing to invest in them. These markets are enormous and have varied subareas with unique strengths and weaknesses—all dependent on your goals as a rental property investor.

Here’s a recap of everything we’ve presented in this comparative report:

If you ask us, Metro Detroit and Raleigh are somewhat similar, and they’re both evolving. Still, based on our two decades of experience and understanding in our home market, our bias is definitely for Metro Detroit—it’s in this real estate market where you’ll find the most lucrative opportunities.

That said, we know that money is the root of all investments. So we advise that you focus on finding investment opportunities that align with your priorities and goals. Find that sweet spot of cash flow and equity gains, so you’re covered for both the short- and long-term.

Plus, you’re already reading this article—which means you’re just one click away from getting in touch with experts in Metro Detroit (and yes, we’re referring to our team!).

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today! We’ll answer any questions you have. And if you’re a bit shy, just leave a comment below or send me a message. I’m more than willing to guide you in your investment journey into the famous Detroit market.

If you still want to explore, we have an ongoing that unpacks the investment details of every city in Metro Detroit and neighborhoods in the City of Detroit. You can also request a specific area for us to cover if your eyes are set on a particular city or neighborhood.