Metro Detroit Cities Deep Dive: Eastpointe

Metro Detroit is known as a strong rental real estate market. With its affordable housing stock and good rental cashflow opportunities, it attracts investors from all over the country (and the world).

There are lots of investors who want to buy in Metro Detroit, but the wide variety of neighborhoods in the area often makes it confusing for newcomers to decide where to invest.

With 25+ years of experience as local residents and property managers, we’ve decided to put together a “Deep Dive into Metro Detroit Neighborhoods” series. Through these articles, you’ll see the strengths and weaknesses of each Metro Detroit area, giving you an ultimate guide when deciding where to buy.

We developed our own list of criteria that will help you evaluate the rental investment potential of each city, looking at the factors which most influence the expected returns you’ll get from your properties, and what type of management they’ll require.

The rise of the city of Eastpointe is known as the “Gateway to Macomb County” (due to its location on the border of Macomb and Wayne Counties).

Eastpointe is a suburb of Detroit in Macomb County, Michigan, with a population of 32,576. According to NeighborhoodScout.com, homeownership rates are: 60% renters, 40% owners.

Living in Eastpointe is like living in a small town, but with all the benefits of a city. It’s less densely built up, giving it a sparse suburban feel, but still with plenty of bars and coffee shops. Detroit is also just a quick drive away, making for a nice little commuter town for those who work in the big city.

It may sound like a great place so far, but does Eastpointe have opportunities for good rental investments? Let’s start with the most important factor: money.

RENT PRICES

According to Zumper, as of October 2020, the average monthly rents:

• For a studio apartment, average rent increased by 11% to $690
• 1-bedroom apartment $840 (a 12% decrease from last year)
• 2-bedroom apartment, average rent decreased by -5% to $915
• For 3 bedroom houses, the average rent in Eastpointe is $1,333 per month.

Here’s an overview of the average rent price for each type of housing in Eastpointe:

HOUSE VALUE AND APPRECIATION

According to Zillow, the average value of homes in Eastpointe is $104,414. This represents an increase of 8.5% over the past year, and prices are projected to rise by 8.6% in the next year:

Meanwhile, according to Redfin’s figures, with a median sale price of $114,900, the YOY home value growth of Eastpointe is +10.5%. This makes the area very competitive as a real estate market:

Because of this, many of Eastpointe’s properties get multiple offers, sometimes with waived contingencies. Good deals (or “Hot Houses”) can sell for 4% above list price (pending in around 4 days), while the majority of homes sell for 1% above list price (pending in around 14 days).

In terms of appreciation, the future of Eastpointe’s real estate market has great potential. Both home values and average rents will continue to increase, making properties here ideal for investing for both equity gains and cashflow.

RENT-TO-PRICE RATIO (The 1% Rule)

At $1,333 per month for the average rent, and an average purchase price of $104,414 (according to Zillow), Eastpointe has an average rent-to-price ratio of 1.27%, which is similar to most Ring Cities in Metro Detroit. 

The ratio is a quick indicator of the cashflow you’ll get from a rental. For cashflow, you want the percentage of your monthly rent/house price to be at least 1%, if not higher (hence, the 1% rule). In most Ring Cities (the cities touching Detroit), the average rent-to-price ratio is in the 1-1.5% range, making them strong cashflow generating properties.

QUALITY OF TENANTS, PROPERTIES, AND LIVING

We’ve developed some quantitative scores (from grades A through F) for the type of tenants, properties, and quality of living you’ll expect to find in Metro Detroit areas - all factors which heavily influence the success of a rental investment. These scores are based on a variety of data points, and our own local knowledge, but they’re just meant to provide a rough guide for helping newcomers assess and understand individual Metro Detroit neighborhoods.

Average Property Class and Condition: B-

According to Niche, more than half (57%) of residents say the exterior quality of homes is either good or excellent, while almost half (48%) of residents say the interior quality of homes is good or excellent. Around a third (38%) of them say there is a good variety of homes, and the majority (59%) say there are only a few abandoned properties where they are.

Based on Neighborhoodscout, the majority of Eastpointe homes have 2-3 bedrooms and were built around 1940-1969. This means you can expect housing that may require more rigorous maintenance and potentially costly fixes. Some common problems are:

● Lack of cosmetic updates
● Lack of energy efficiency and insulation
● Underground clay or cast iron pipes that have deteriorated
● Galvanized plumbing that has corroded
● Low number of electrical outlets and outdated electrical panels
● Structural problems (i.e., sagging roofs, rotted support beams, or leaking foundations)

These are what investors need to account for when analyzing the financials of a deal. Some houses may have been recently updated, and only require minimal (or no) work, while others may need a total refurb.

Your neighborhood class will also determine the types of tenants you get (check out this article for a more detailed explanation).

That’s why understanding the type of area you’re buying in is so important - because the quality of tenants you get will impact your rental’s profitability more than any other single factor.

Quality of Life in the Neighborhood: B

Get to know the neighborhood where your property is located before you buy to know what types of tenants you’re likely to attract. You ideally want to be in neighborhoods that are in demand with high-quality applicants.

Eastpointe is a dense suburb with most lots around 40-50 feet wide, making it an easily-walkable area, since you’re never too far away from a main street with shops and amenities.

Here’s a summary of life in Eastpointe:

Local Economy - Eastpointe is a solid, blue-collar area. The job market has grown over the last year, and future job growth is predicted to be higher than the US average in the next decade

School Rankings - According to Niche, notable schools in Eastpointe are Avalon Elementary School and South Lake High School.

Crime and Safety - Niche tells us that more than half of the residents say they feel “pretty safe” in Eastpointe, most probably due to responsive local police, and that they are “not impacted as much” by crime.

Liveability - In reviews from Niche, people describe Eastpointe as a good place to start and expand a business, and a family town that offers comfortable living. With the two major routes I-94 and I-696 nearby, Eastpointe also makes for an easy commute to and from any destination in Metro Detroit. According to Walk Score, Eastpointe is somewhat walkable, as some errands can be accomplished on foot. The city has wide streets, a great public library, recreation facilities, and a quality water system - but it’s also still near Detroit. Eastpointe, therefore, attracts tenants that are quite diverse.

Tenant Demographics: B

The quality of tenants in a rental plays a big part in the performance of any investment property. So it’s important to know what kind of tenants live in an area before buying.

We’ve assessed the tenant pool of Eastpointe based on these key factors - keep in mind that some factors (like poverty and unemployment) might be affected by the pandemic situation:

Income - NeighborhoodScout shows that the median household income in Eastpointe ($46k) is lower than the average of Michigan ($54k) and the Detroit-Warren-Dearborn Metropolitan Statistical Area (MSA) average of $63k. According to Areavibes, the debt-to-income ratio is also higher than the national average.

Unemployment - Niche shows us that the unemployment rate in Eastpointe is lower than the national average. This is due to the strong jobs market here.

Education - Compared to the rest of the Metro Detroit MSA, Eastpointe has fewer high school and college graduates. However, Eastpointe has more residents with a college or associate’s degree than the national average, reflecting the slightly higher demographic that lives in the areas further north (away from the City of Detroit).

Diversity - (see below)

Based on these details, the tenant class of Eastpointe is around the middle of the spectrum. This means you can expect a mix of both lower and higher-quality tenants, requiring you to be more thorough with tenant screening.

OVERALL SCORE: B+

Taking all of these factors into account, we can confidently say that Eastpointe’s overall rental investment score is a B. Financially, the growth and forecast of Eastpointe’s home values, as well the rent trends and rent-to-price ratio, are all very positive.

However, in terms of the age of the properties, the quality of life in most of the neighborhoods, and tenant demographics, Eastpointe can’t guarantee each investor smooth sailing. Every investment will require thorough tenant screenings, property evaluations, and financial calculations.

It’s all about the money at the root of every investment - that’s why we put more emphasis on the financials when calculating our overall scores, but it should be said that every property scoring system is somewhat subjective. Purely based on our research and experience in the area, Eastpointe is a good blend of risk and return.

In the end, rental investing is all about finding the balance between cash flow and appreciation. A Class A property is something with both, while Class D is something with no appreciation and no cash flow. Eastpointe sits somewhere towards the high end of the spectrum on both counts.

This is the second installment in our deep-dive series on Metro Detroit neighborhoods, but we’ll be updating you with a closer look at other areas in the weeks to come until we’ve covered them all. So check back to find the next deep dive soon!

Any specific areas that you’d like to know about? Leave a comment below, and we’ll be sure to cover it in one of our next installments.

All references used in this article are credible sources. This includes Niche, Areavibes, Zumper, Redfin, NeighborhoodScout, Zillow, and plenty more.