Posted over 3 years ago

Deep Dive into Detroit Neighborhoods: East English Village

The City of Detroit is well-known for its affordable housing market.

Investors can snag properties below $100k and immediately serve the increasing demand for single-family homes in the area. This makes Michigan's "Motor City" a hotspot for investors to yield solid cash flow from rental properties.

However, to reap these high rewards requires the knowledge to navigate the potentially high risks of dealing in the Detroit market.

Is all of Detroit risky? No.

The City of Detroit is divided into 84 diverse neighborhoods, each with its own sub-areas, tenant demographics, and property conditions. Investors (especially those from out of state or another country) therefore need to be aware of these differences to make intelligent choices when choosing where to invest in this market. As long as they do, there are still extremely strong rental investments to be found here.

With our experience as local residents and property managers in the greater Metro Detroit, we've created this "Deep Dive into Detroit Neighborhoods" series to help investors find areas where they can invest with confidence.

In each article, we assess the real estate potential and risk of a different Detroit neighborhood, evaluating factors such as:

1. The expected returns from rental properties
2. The types of tenants to expect
3. The kind of management required

This way, you're able to make informed decisions to successfully invest in this varied rental market.

For this article, we'll be tackling East English Village—a charming neighborhood with an up-and-coming rental market scene.

City of Detroit

Before we dive into our neighborhood highlight, let's start from a broader perspective and take a look at how the City of Detroit is divided regionally:

There are a total of 11 regions, each with its own distinct personality. New Center is known to be a historical district, Midtown is a mix of business, university, and cultural areas, and Downtown Detroit is the central business and residential space.

Each of these regions also has its own sub-sections, such as the East Side being divided into Upper, Center, and Lower East. East English Village is one of the neighborhoods in the Upper East corner of the East Side (that’s a lot of Easts, we know).

East English Village Neighborhood

According to Areavibes.com, East English Village has a population of 4,473 people. The population density is 3,349 people per square mile, which is 32% lower than the average population density in the City of Detroit overall. This may sound sparse, but the lower density in this area is down to the fact that the majority of the housing stock here is single-family units, as opposed to the apartment buildings and sky rises which have been built in Downtown Detroit over the past decade.

East English Village is bordered by Harper Avenue on the north, Cadieux Road on the east, Mack Avenue on the south, and East Outer Drive on the west. It’s a quaint neighborhood, located near downtown Detroit with easy access to neighboring cities like Grosse Pointe, a largely affluent, Class A neighborhood along the lake which borders East English Village to the south.

There are shopping areas, some of Detroit’s better schools, and a tight-knit community. The neighborhood association actively hosts events all year round, including different types of contests, tours, clubs, and garage sales.

The mutual support among locals is the heart of the neighborhood, and residents here pride themselves on their diversity. East English Village is home to civil servants, blue-collar workers, up-and-coming white-collar professionals, and retirees from different demographic groups, all of whom live alongside each other in this small-town-type community.

Walking through East English Village, you'll see many distinctive brick homes that were built in the early 1930s through to the 1950s, boasting high-quality finishes and period architectural features. Residents who like the charm and character of older homes will find therefore likely East English Village homes to their liking.

It's been considered one of the most solid neighborhoods to live in within the City of Detroit for many years.

So should investors grab the opportunity to acquire rental properties in East English Village before prices rise?

Investment Opportunity

Evaluating investment opportunities entails considering multiple factors. But among the long list, the most critical factors boil down to the financial viability of the investment.

We'll help you assess the rental investment potential in East English Village by identifying the average property condition, rent amount, and home value of the opportunities. These are the factors that will determine the financial success of your investment, in addition to the quality of tenants you'll eventually attract.

Property Condition

Compared to the City of Detroit as a whole, homes are somewhat newer in East English Village. The average property age in the area is 66 years old (whereas other areas in the city average 70-100 years).

The area was divided into residential parcels back in 1925. Years later, there was a boom in housing developments, with the majority of the buildings being built in the early 1930s. Interestingly enough, it was the owners—not developers—who hired professional builders to erect their homes. They often designed the houses themselves too, which resulted in a neighborhood of unique houses and architectural interest, rather than a cookie-cutter development. You’ll see a variety of styles here, including Colonial, bungalows, Cape Cod, and Tudor houses.

Since then, many of the houses in East English Village have only changed hands a few times, because locals tend to spend their entire lives in this neighborhood and pass their homes on to their children. Detached houses are also the most popular housing type in the area—comprising 78.8% of all units.

As with many areas in the City of Detroit, you'll find some properties that are in need of repairs and modernization, although much of the property stock in East English Village has been well-maintained or completely refurbished already.

However, should you come across these older homes, be ready to deal with some underlying issues, such as:

Cast-iron drain lines that are sloped and rusty
Asbestos around heating components and the ceiling as texture
Led-based paint used around the house
Damaged or deteriorated posts and piers
No insulation of exterior walls in the house
Outdated roofing, plumbing fixtures, HVAC systems, electrical, etc.

All of this is somewhat to be expected when buying homes built in the 50s. What you can do as an investor is spot them early on with a professional inspector prior to your purchase. Identifying the issues ahead of time will let you budget for the repairs and accurately factor them into your investment decision.

Average Rent and Rent-to-Income Ratio

There are slightly more owner-occupied houses in East English Village than in the rest of Detroit. This means you can expect homes to be in better condition, as owners tend to maintain their place of residence more diligently than renters.

The average rent in East English Village is $824 per month. This is 9.1% higher than the average rent in the City of Detroit and 3.1% higher than the rest of Michigan state:

According to Niche.com, residents in East English Village have an average household income of $4,560 per month. This means the rent-to-income ratio is at a very favorable 18%, where most renters need to set aside only 1/5 of their income for rent.

The general rule of thumb is only that "income = 3x rent," which East English Village surpasses. You can therefore be relatively well-assured that your tenants in this neighborhood will pay their rent with minimal difficulty each month.

Home Value, Price, and Appreciation

As early as 1999, The Detroit News had already reported East English Village to have "emerged as one of Detroit's most desirable neighborhoods" due to the affordable homes on offer here.

Today, according to City-data.com's data from 2019, the estimated average value of detached houses in East English Village is just $46,995. This price is 50% lower than the average in the City of Detroit, which is $94,140 - however, it also doesn’t reflect the current market. As of the time of writing, you’d be lucky to find a 3-bedroom house for $80k here or to rent one for less than $1,000 per month.

But, aside from the sales price, you also want a favorable rent-to-price ratio in choosing your rental property.

As an industry standard, the ratio of your monthly rent/house value (includes the purchase price and repairs) needs to be at least 1%. This is known as the 1% Rule and gives you an initial indication of whether or not an investment opportunity will yield positive cash flow.

The City of Detroit is known to have one of the lowest rent-to-price ratios compared to 50 of the biggest cities in the US. Rental properties in the city are thus ideal for investors who are looking to invest in cashflow.

It's a similar situation in the East English Village, with an average rent of $824 and average home value of $46k, resulting in a rent-to-price ratio of 1.8%, which is almost double the 1% minimum. It's not every day that you come across neighborhoods in the US with rent-to-price ratios this high.

Potential Tenant Pool

Tenants are the bloodline of every rental investment. They contribute largely to the success of your rental business, because good tenants will cost you less in repairs, missed rents, and disputes - while bad tenants will do just the opposite.

With the neighborhoods in the City of Detroit varying wildly from each other, it also means that you'll have a wide variety of tenant quality and types in each area. So the area you choose to invest in could very well make the difference between having problematic tenants who miss rent payments and damage your property, or reliable and communicative tenants who take care of your rental and make payments on time every month.

Let's assess the tenant pool in East English Village based on critical factors to see which you can expect when buying here. All of this information is taken from multiple research points, including our own knowledge and experience as a property management company in Metro Detroit. These evaluations are not "official," but are meant to help you budget for possible tenant issues and guide you in your decision to invest in East English Village.

Tenant Demographic: A-

Average income: According to Areavibes.com, the median household income of the residents in East English Village is $44,385 per month. This is 69% higher than the average of the City of Detroit.

Unemployment rate: East English Village has an unemployment rate of 11.6%, which is slightly below the City of Detroit's overall average of 11.9%. It should also be mentioned that the poverty level in East English Village is equal to the national average, according to Areavibes.com:

Educational attainment: In terms of percentage, residents in East English Village have achieved higher levels of education than the rest of the City of Detroit:

Normal 1616871574 Educational Attainment

Neighborhood Livability: A

As property investors, you want to choose neighborhoods that are in high-demand with high-quality tenants. That way, the tenants that you're likely to attract are those who will keep up with rent, abide by your agreements, and take care of your properties.

Here are some details on what life in East English Village looks like. This overview serves as an indication of the kind of tenants the area will attract:

Diversity: Here’s a breakdown of East English Village residents in terms of diversity:

School rankings: According to Niche.com, the top public schools nearby are Cass Technical High School, Renaissance High School, Keidan Special Education School, Moses Field School, and Bates Academy. There are no public schools within East English Village itself, but all of these schools rank highly in the Detroit public school system.

Transportation and walkability: The majority (78.7%) of the workforce in East English Village drive to their place of employment, so properties located close to major highways will be an added bonus for prospective tenants.

Overall score: A

Based on our research and experience as a property management company in the local area, we've rated East English Village with an A for rental investing.

The score is mainly driven by the following factors:

1. Houses are affordable and ideal for cashflow investments
2. The rent amount is high, and most tenants will pay their rent consistently
3. Homes are newer than the rest of the city, and most won't need expensive renovations

Overall, we see East English Village as an up-and-coming neighborhood for rental property investors to strongly consider investing in. A local investor even referred to the area as a "rare gem" on the far east side of the city.

We've put more emphasis on the financial viability of investing in East English Village, as money is still the root of all investments. However, as every property scoring system is inevitably subjective, we encourage you to use this informative guide as a kickstart to scout the area out for yourself.

Anything else you need to start investing in the City of Detroit? Get in touch with us, and we’ll be happy to help you out!

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This is the third installment of our deep dive series on City of Detroit neighborhoods. We'll continue to write these reviews until we've covered the whole city, so leave a comment below if there's a specific neighborhood you'd like us to prioritize.