Deep Dive Into Detroit Neighborhoods: Warrendale

Photo from Unsplash.

Investors’ eyes light up when they hear about booming places like Houston, Los Angeles, and Nevada. However, the real estate market in some areas of the US has been pretty lackluster—that is, until recently.

After years of decline, Motor City is seeing a resurgence in investment and development—an opportunity you wouldn’t want to miss out on. Plenty of affordable residential properties are below the $100,000 mark, and the demand for single-family homes is rising.

Detroit has become a hotspot for rental investors who want to capitalize on the city’s newfound prosperity and generate steady cash flow. But investing in the City of Detroit isn’t a walk in the park. With 84 neighborhoods, each with its own unique features, property conditions, and tenant demographics, even seasoned investors find it challenging to navigate the market and take advantage of its potential rewards while managing the inevitable risks.

To help real estate investors, our team at Logical Property Management has created these Deep Dive reports on Detroit neighborhoods so you can make informed decisions for real estate investments. This installment focuses on Warrendale, one of the city’s most westerly neighborhoods.

The City of Detroit

Before anything else, let’s see the big picture. The City of Detroit has 11 regions:

Source: Wikipedia.com

These regions have unique features and personalities. For example, Southwest Detroit is a vibrant business area, and Midtown is a cultural center with business hubs and a university.

The far West Side Detroit peninsula called Warrendale is bordered in the north by Joy Road, stair-steps lazily by West Outer Drive to Ford Road, then squares up snuggly to Southfield Freeway.

Warrendale Neighborhood

In the old days, Warrendale was just the Village of Warrendale. Then, in the early 90s, the residents of Warrendale voted for annexation so they could be part of the city’s water system. Since then, the neighborhood expanded to its current community, with a population of 22,383. According to city data, Warrendale’s population density is roughly 4x that of the City of Detroit.

The map below shows Warrendale, tucked between Dearborn Heights and Dearborn. The following chart includes the complete list of neighborhoods in the City of Detroit, with hyperlinks to our previously published Deep Dives:

Source: Loveland’s Detroit Neighborhoods Map

Warrendale Homes Then and Now

Just like in any big city, Warrendale has its own tale of transformation. The residents proudly share stories of progress, recounting the hardships of the past and the journey to recovery. As you stroll through the streets, you’ll notice beautifully renovated single-story bungalows from the 1940s and 1960s, bringing a charming touch to the neighborhood. Even the notorious “Copper Canyon,” once plagued by crime and decay, is making a comeback as property values skyrocket.

But let’s not sugarcoat it—Warrendale still has a long way to go.

Back in 1999, when the state Legislature lifted the residency requirements for municipal employees, Detroit police officers left Warrendale for the suburbs. This resulted in an increase in crime within the neighborhood, creating a challenging environment.

However, things are changing for the better in Warrendale today. Property values are on the rise, and the community is making significant progress. Hundreds of abandoned homes have been demolished to make room for new ones, breathing new life into the area. Reflecting on the past, a Warrendale resident shared, "When the police lived here, it was a more stable neighborhood. But that was a bygone era. Things went way down after the police moved out, but we're now starting to see things get better."

The community in Warrendale is close-knit and steadily finding its footing. Commander Arnold William, overseeing the 6th precinct, highlighted the strength of the community, saying, "The good thing about our communities, including Warrendale, is they are very vocal. They're very open about talking about the issues that affect them, and that helps us address those issues. There are also a number of radio patrols in the Warrendale area.”

Source: Google Maps

Warrendale neighborhood is part of the City of Detroit’s Strategic Neighborhood Fund, which uses taxpayer money along with contributions from corporations and philanthropic groups to finance local improvements. The plan includes a streetscape, park developments, and a mixed-income residential building in Warrendale’s commercial district.

Now, you might be wondering if any investment opportunities exist in Warrendale. Is it a good place for rental property investors who want to take advantage of Motor City’s financial comeback?

Investment Opportunity

Money is the most important thing in all investments. So let’s start with the crucial factor of monetary returns. After all, financial viability will always be the ultimate goal for all investors. Read on to know the average property condition, rent amount, and home values in Warrendale to determine the market’s profitability.

Property Condition

Most properties in Warrendale were built in 1960 and earlier. You can see the breakdown below:

Source: City-data

Some Warrendale properties are well-maintained, while others require more attention and care. Overall though, the condition of Warrendale homes is above average compared to other Detroit neighborhoods.

Here are some tips to estimate the renovations needed on Warrendale’s homes:

• * Inspect the structure: See if there are any structural rot, foundation cracks, pest infestations, water infiltrations, or undersized beams and posts that don’t meet current building codes.
• * Check for outdated wiring: Old homes tend to have old electrical systems, so it’s best to watch out for outdated wiring. For example, you can check for the old “knob and tube” wiring, as those aren’t adequate for what our electrical devices require today.
• * Deal with possible old pipes: Plumbing and HVAC boiler systems might be greatly outdated or dangerously close to breaking down. You should also check the underground sewers for any potential bursts or clogs.

As always, it’s essential that you thoroughly inspect the property before moving forward with your investments. If you believe you lack the experience and knowledge, opt to work with professionals—work with a highly experienced and credible inspector to ensure that you accurately estimate the renovations needed to avoid going over budget and never underestimate the task, or you’ll spend more than you expect to overhaul the old home.

Average Rent and Rent-to-Income Ratio

According to Niche, the median rent in Warrendale is $1,001 monthly. However, if we look at actual listings on Zillow, this “average monthly rate” seems to fall on the lower end of the spectrum, as we see rents ranging from $900 to $1,800 a month. This is good news for you because that means you can charge more:

Source: Zillow

But just looking at the average rent in a place isn’t enough to determine its financial viability. We must also consider the average neighborhood income and calculate the rent-to-income ratio. This helps us find out how much the potential tenants can afford so we don’t overcharge them and constantly chase them up on payments.

Niche reports that the median household income in Warrendale is $34,567 per year, or $2,880 per month. That means that the lowest rent of $967 per month takes up nearly 50% of the income for most Warrendale residents—significantly higher than the industry’s role of 30%. The discrepancy only increases if you charge higher rent (like Zillow listings seem to be doing now).

Therefore, to ensure consistent and positive cash flow, you’ll need to search for tenants who earn at least three times the rent you plan to charge. This way, you can be confident that they have the financial means to afford the rent.

Home Value, Price, and Appreciation

Moving on to property values, Niche says the median home value in Warrendale is $41,852. This figure might be understated, however, as Redfin reports at the time of this writing that the median sale price for Warrendale properties is closer to $52,000—and increasing, too:

Source: Redfin

It seems that Niche’s figures reflect the lower end of the spectrum, while Redfin’s estimate shows the higher end. We can compare these averages to Zillow listings as of July 2023, which have a range of homes selling for anywhere from under $40,000 to nearly $100,000:

Source: Zillow

Sure, property value is vital when considering rental properties. But it’s also crucial to look at the bigger picture and calculate the rent-to-price ratio. With this ratio, you can determine if the potential cash flow from renting the property makes it worth the investment. While it’s not foolproof, it’s a quick and easy way to narrow down your options.

The general rule of thumb for the rent-to-price ratio is to ensure that the monthly rent is at least 1% of the total property value, including the purchase price and renovation costs. Since we’re doing a quick calculation, let’s consider the purchase as the conclusive property value for now. To maintain consistency, we’ll use the figures provided by Niche.

Based on the data, with an average rent of $1,001 and a median property value of $41,852, the rent-to-price ratio comes out to a whopping 3.1%—significantly higher than the industry standard for excellent cash flow. It suggests that the potential rental income could generate a strong return on investment.

Now, in terms of appreciation, here’s a heatmap that shows Warrendale's middle-of-the-road ranking. Basically, it’s not the highest-appreciating neighborhood in the city, but it’s also not the lowest. Investing in Warrendale properties is likely to provide some equity growth over time, although it may not be as significant as other areas in the City of Detroit:

Source: NeighborhoodScout

So, even though you won’t find the equity in Warrendale homes like you could in the big city, you will find above-average rates right along with the City of Detroit. For the last decade, the city’s been in the top 30% nationwide for best property appreciation, so you can bet that Warrendale will consistently appreciate alongside it in the future.

Add those equity gains to your monthly cash flow, and you’re set for short- and long-term returns.

Potential Tenant Pool

Tenants are the lifeline of every rental property investor’s venture. So you’ll want to acquire homes that attract high-quality tenants—those who’ll take care of your property, keep up with payments, and abide by your lease agreement clauses. Doing so protects your overall investment asset.

Below is an evaluation of the tenant pool in Warrendale so you know what tenant management to expect. We’ve based our data on income, employment, and racial diversity, as these are the key factors.

Tenant Demographic: C

Based on our experience, the best way to evaluate tenant demographics is by understanding their classes. For instance, Class C and D tenant pools require intensive property management, while Classes A and B renters won’t need as much supervision or attention.

In this particular case, Warrendale tenants are mostly Class C tenants. But you have to be diligent when screening potential tenants, so you can only accept those with stable employment, relatively high income, and a sense of responsibility to be good renters to work with.

Average Income

According to Niche, the median household income in Warrendale is $34,567 annually. Looking at the breakdown, nearly 50% of all residents earn less than $25,000. This means that you might not be able to charge higher rents.

Source: Niche

Unemployment Rate

The unemployment rate in Warrendale is 14%, higher than the City of Detroit’s 11.9%. As it’s higher in Warrendale, you can expect to run into more applicants with unstable jobs there. The financial instability is bad news for landlords, but don’t forget to consider the pandemic—many of these neighborhoods might still be recovering from its effects, and things could improve.

Diversity

Here’s the racial diversity breakdown for Warrendale residents:

Source: Niche

Neighborhood Livability: B-

Aside from the tenant pool, you also have to check Warrendale’s livability. After all, only responsible and capable tenants can afford to live in a beautiful place—and vice versa. Plus, the property will increase in value if it’s an up-and-coming neighborhood, which is always an excellent bonus for you.

So, here’s Warrendale in a snapshot:

Crime and Safety

Unfortunately, Warrendale isn’t the safest place in the city. In fact, it’s considered to be one of the most dangerous areas based on the heatmap below.

Source: NeighborhoodScout

It's important to keep in mind that the crime rates in the City of Detroit can differ significantly from one neighborhood to another. You might come across a perfectly safe property on one street, only to find another street nearby that's considered "unsafe." That's why we strongly recommend visiting the area in person to get a feel for the localized crime rates before disregarding a property based solely on general perceptions.

By exploring the neighborhood firsthand, you'll gain a better understanding of the safety situation and make a more informed decision. It's worth taking the time to assess the specific area where the property is located, as it can greatly impact the overall desirability and potential risks associated with your investment.

Walkability

Warrendale is extremely walkable, with nearly everybody saying that there are sidewalks to use. And even if you need a car to get around, parking isn’t a problem.

Source: Trulia

Schools

The best schools that serve Warrendale include Plymouth Scholars Charter Academy (A+), Farmington Steam Academy (A), Niji-Iro Japanese Immersion Elementary School (A-), and Hamtramck Academy (A-). Investing in properties near these schools can attract families with younger children to the neighborhood.

Overall, livability in Warrendale isn’t too shabby. Niche even ranks the neighborhood out of 142 as the 17th most diverse and 26th best neighborhood for young professionals:

Source: Niche

Moreover, Areavibes reports that Warrendale has excellent amenities, cost of living, and relatively good housing options. As long as you do your due diligence, you’ll find good tenants in Warrendale and see young professionals entering the neighborhood.

Source: Google Maps

Overall Score: B

Based on the information we’ve shared and our experience as a property management company in the area, we give Warrendale a rental property investment score of B.

Factors like crime rates and tenant demographics pulled down the overall rating. However, when it comes to financial viability, investing in this neighborhood looks excellent. The rent-to-price ratio is above the industry standard at 3.1%.

Now, it’s important to remember that property scoring systems are subjective. It’s impossible to eliminate all subjectivity. Suppose you genuinely want to understand what Warrendale and the City of Detroit have to offer. In that case, we encourage you to visit the area yourself and evaluate the potential investment returns in this real estate hotspot.

If you need further assistance, our team is here to help. We have a team of expert property managers with over two decades of experience working in Metro Detroit. We can guide you through entering, navigating, and succeeding in the Detroit real estate market in no time. Don’t hesitate to reach out to us for any support you may need.

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This guide is part of our ongoing series that aims to evaluate the rental investment potential of every neighborhood and city in Metro Detroit. If there’s a specific area that you want us to prioritize next, let us know in the comments below. We’re not stopping until we’ve uncovered every nook and cranny!