Metro Detroit Cities Deep Dive: Hamtramck

If you’ve been interested in real estate for a while, you’ve most likely already heard of the famous rental market scene and affordable housing stock in Metro Detroit—encompassing Detroit, Warren, and Dearborn.

However, Metro Detroit is also notorious for being overwhelming and confusing even to the most well-versed investors. With 185 cities and 290 neighborhoods, the investment opportunities within the metropolitan area vary wildly from each other. As a result, many investors want a straightforward guide to advise them on which areas to invest in… and which to steer clear from.

Because of this, we’ve decided to combine our lifetime experience as residents and property managers in Metro Detroit to create this ongoing series called “Deep Dive into Metro Detroit Cities,” covering all the key factors of a successful investment across every city and neighborhood in the area. In these articles, you’ll find a wealth of information to help you evaluate the strengths and weaknesses of each Metro Detroit area—one city at a time.

The criteria we've used emphasize each city's rental investment potential, paying extra attention to the factors that influence your ROI and the type of property management required.

Without further ado, let’s get to our featured area for today—the City of Hamtramck.

Hamtramck

Hamtramck is a city within the City of Detroit in Wayne County, Michigan. With a population of 21,822 in a 2.09 square miles (5.41 km2) area, Hamtramck is the most densely populated municipality in the state. It has a population density of 10,441 people per square mile.

Hamtramck is one of the many cities in the Metro Detroit area, which covers Oakland, Macomb, and Wayne Counties.:

Here’s a breakdown of all the cities in the area. The cities with hyperlinks are the ones we’ve already done a Deep Dive on, and those highlighted in green are “Ring Cities” - the ones which border Detroit itself:

The World in Two Square Miles

A large part of Hamtramck’s population used to consist of Polish immigrants. Hamtramck was incorporated as a city in 1922 in an attempt to protect its unique identity and prevent annexation by the City of Detroit, so it maintained this strong community feeling over the years.

It’s now nicknamed "The World in Two Square Miles,” thanks to its vibrant mix of Polish-American and immigrant culture. More recently, Hamtramck has been attracting immigrants from Yemen, Bangladesh, Vietnam, and Southeastern Europe, making it much more diverse, but still with a close-knit community.

Because of this strong sense of neighborhood, Hamtrack’s residents have maintained the area well over the years, even when the City of Detroit faced challenges. In the 1990s and 2000s, widespread closures of auto companies due to overseas outsourcing and the rise of automation affected the City of Detroit, amongst other things.

Soon after, the infamous housing crash in 2007 and 2008 followed. Nevertheless, Hamtramck stood strong, especially when you compare it to another similar city—Highland Park. Because Highland Park didn’t have a strong community foundation like Hamtramck, it faced a decline far worse than the City of Detroit did overall. So, in our view, a lot of Hamtramck is a better place to live (and a better investment) than some of the surrounding neighborhoods in Detroit.

The Hidden Gem “Inside” of Detroit

The city is also called the "Hidden Gem Inside of Detroit" for interested real estate investors, as Hamtramck is full of multifamily homes, which make for ideal entry-level properties for new landlords. Most of them have been well-maintained over the years, making Hamtramck an attractive place to live.

The vibrant spirit in Hamtramck attracts residents, while opportunities in the housing market attract real estate investors. The insurance comparison website, Insurify, even awarded Hamtramck as Michigan’s “Best Up and Coming Housing Market” for 2020, based on relative change and forecast for home value and sales.

Does this mean you should start investing in rental properties in Hamtramck as well? Let’s take a look.

Rent & Rent-To-Price Ratio (The 1% Rule)

According to Niche, the average rent across all property types in Hamtramck is $729. Looking at larger homes, a 3-bedroom house in the area rents for an average of $1,120 per month, according to BestPlaces.

Similar to Detroit, the rent amounts in Hamtramck tend to be lower than in the Detroit-Warren-Dearborn MSA. Here is an overview from BestPlaces that breaks down average rent by bedroom size, in comparison to the state and the country:

While Bestplaces reports the average rent of 2-bedroom homes in Hamtramck is about $850. This data is somewhat outdated, though as when looking at a few actual listings on Zillow, we can see that the 2-bedroom Hamtramck homes listed right now average $1100:

Based on listings on Zillow as of July 2021

The average rent alone doesn’t give much insight into the rental investment potential. Therefore, we’ll use the rent-to-price ratio to evaluate the potential cash flow you can earn with Hamtramck properties. Ideally, you want the percentage of your monthly rent versus house price to be 1% or higher.

Let’s look at current two-bedroom listings for homes for sale on Zillow to calculate the rent-to-price ratio in Hamtramck. With a rent estimate of $950 per month and a purchase price of $99,900, the ratio comes in at 0.9%. This number is close to most rates in the Ring Cities and is a bit lower than the City of Detroit itself. Based on the ratio alone, homes in Hamtramck show positive cash flow potential.

Listings on Zillow as of July 2021

While cash flow is a crucial factor for rental investments, there’s also the other side of the coin—gaining equity from real estate investments. Let’s look at the house value and appreciation rates of Hamtramck properties and how much equity you can gain from them.

House Value and Appreciation

Zillow shows that the average house value in Hamtramck is $137,832.

Their home value forecast for Hamtramck is 4.1%, where their chart also shows an upward trend:

Zillow

Redfin’s data from July 2021 also shows increasing numbers, as the home prices in Hamtramck have grown by 33.3% since last year and sold for a median price of $140k. On average, the homes sell after a month in the market, making Hamtramck a "Somewhat Competitive" real estate market, based on Redfin's Compete Score.

Based on NeighborhoodScout’s data, most of these homes are single-family detached houses, accounting for more than half (55.32%) of the city's homes. Duplexes are also prevalent in the housing market, as well as small two-, three-, and four-unit apartment complexes (22.97%), row houses or attached homes (16.24%), and high-rise apartment complexes (4.83%).

City data gives us a closer look at the number of bedrooms, where most owner-occupied homes in Hamtramck are between the sizes of two (31%) and three (34%) bedrooms. However, renter-occupied ones are more skewed towards two-bedroom units (53%) with three-bedroom ones (30%) trailing behind.

Looking at listings on Zillow once more, we can see that Hamtramck properties are priced fairly evenly across the city:

Based on listings on Zillow as of July 2021

Hamtramck listings get multiple offers, with the average home selling for 3% below list price. Still, “Hot Homes” or homes deemed competitive by Redfin can sell higher (5% above list price) and faster (go pending in 9 days), indicating a healthy housing market.

In terms of appreciation, NeighborhoodScout reports that properties in Hamtramck have appreciated 22.99% in the past two decades (since 2000) at an average annual increase rate of 0.98%. Zillow reports a similar number, where the home value has increased 22.4% over the past year. The website adjusts this value seasonally and only includes mid-priced homes.

Specific areas, such as Conant St / Trowbridge St and Commor St / Joseph Campau St, are two of the highest appreciating Hamtramck neighborhoods, according to this appreciation heat map:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

While financial viability is important, you also need to consider the tenants your rental will attract, the general property conditions in the area, and the attractiveness of the neighborhood you’ll invest in. Therefore, we’ve scored Hamtramck based on these three factors that heavily contribute to the overall success of your rental investment in the city. The information you see comes from our local knowledge of the area and other research data points.

Average Property Class and Condition: B

Average property age: 78 years

Data from Bestplaces shows that more than half (54%) homes in Hamtramck were built in 1939 or earlier. Compared to the greater Metro Detroit area, where the property ages are quite evenly spread out, Hamtramck’s housing market is heavily skewed towards older homes. This may be due to the large stock of pre-World War 2 architecture in the city.

Source: Bestplaces

While age may be subjective when it comes to homes, any property that is older than 50 years is generally considered “old.” Nevertheless, with careful budgeting and analysis before property acquisition, you will find profitable investments within Hamtramck’s older housing stock.

Besides, unlike the City of Detroit where only 5% need inspections, local authorities are more strict in Hamtramck. This means if you buy an existing rental in Hamtramck, you can be pretty sure that it’ll already be up to city inspection standards.

Quality of Life in the Neighborhood: B

As a rental investor, you want to buy properties in neighborhoods that are in high demand among high-quality tenants. These tenants will significantly affect your investment, as good ones will be responsible for paying rent and taking care of the property. In other words, neighborhood livability and class directly impact your profitability more than any other factors.

Let’s take a quick look at how life is in Hamtramck:

Local Economy

Hamtramck's leadership has not only kept the city better than the surrounding Detroit area but is aggressively always improving the city.

According to Hamtramck’s Economic Development Strategy, the city is “recognizing the need to evolve, grow, and expand its identity,” especially with the challenges brought by today’s urban landscape, global economy, and the COVID-19 pandemic.

Hamtramck has been making strides in developing the city into a “prosperous, sustainable, walkable, and vibrant destination community for its residents and businesses.” They focus on economic development, workforce training, and promotion of the city's commercial activity—supporting small businesses and leveraging their local arts and culture.

From a report by The Review Hamtramck, Hamtramck is already looking at the following projects:

• 1. Using their massive $15 million HUD grant to build and rehab homes
• 2. Bringing the old Shopper’s World site back to life by adding residential stories and a commercial space
• 3. Placing a state-of-the-art recycling plant in the former factory site on Hamtramck Drive
• 4. Turning the dormer Missant site around the corner on Conant into another recycling center
• 5. Expansion of the charter school Bridge Academy on the former North Detroit General Hospital
• 6. Opening of a new school on Denton St. by Hanley International charter school

Entrepreneurship is also prevalent in the city, with Hamtramck "gaining a reputation where entrepreneurs can experiment." The local underground music scene even has experimental bars and restaurants already on their way, such as the Belmont Bar's transformation into a coffee bar, photo studio, and gallery.

As Hamtramck develops its local economy, the city is creating new opportunities to grow its workforce and attract new residents.

School Rankings

Hamtramck may attract families with younger children who are still studying. According to GreatSchools, top-rated public schools in Hamtramck are Hamtramck Academy, Bridge Academy East, Hanley International Academy, Caniff Liberty Academy, and Hamtramck High School.

Hamtramck High School was a College Success Awards (CSA) winner in 2019—showing that the school does an excellent job at “getting students to enroll in and stick with college, including those that beat the odds by better serving low-income students.”

Crime and Safety

According to Niche, more than half (56%) of locals said they feel safe in Hamtramck, as the crimes present in the city don't impact them much. A third of the residents (31%) also said the police are highly visible in the area as well as responsive to their needs.

As with any diverse city, Hamtramck’s crime rates will vary from one block to another. Being an investor, you should evaluate the specific crime and safety rates at a smaller scale, depending on where your property is situated.

Livability

In terms of overall livability, Areavibes gives Hamtramck a score of 56 out of 100, and ranks the city #603 in Michigan and #26,472 in the US. It’s a lower-than-average score; however, Bestplaces show that the cost of living in Hamtramck might be attractive to people seeking a more affordable lifestyle in Michigan:

Source: Bestplaces

Moreover, Hamtramck is super walkable, and people are attracted to places where they can walk to different shops and run errands on foot.

Tenant Class and Demographics: B

Compared to other real estate investments, rental properties need to evaluate their tenant pool carefully. You can have responsible tenants that pay rent on time and maintain your property or problematic ones who don’t take the lease agreements seriously.

Because of this, we’ve assessed the potential tenants you’ll have in Hamtramck based on key factors that contribute the most to tenant class and demographics. Some of these factors (e.g., average income and unemployment rates) might still be affected by the recent COVID-19 pandemic.

The data you see below are from Niche, NeighborhoodScout, and Bestplaces:

• 1. Income: The average income in Hamtramck is relatively lower than the greater Metro Detroit area, Michigan, and the nation. Locals in Hamtramck earn $10,472 to $17,987 per year, equating to a median household income of $25,183 to $27,166.
• 2. Unemployment: Hamtramck has an unemployment rate of 5.6%—higher than Metro Detroit (4.5%) and Michigan (4.9%) but better than the nation (11.1%). The job market is also expected to reach 35% growth in the next decade—higher than the national average forecast of 33.5%.
• 3. Education: Hamtramck has more high school graduates (36% of the population) compared to Michigan (29%) and the nation (27%). Census.gov even reports that 70.4% of Hamtramck locals have graduated high school or higher (considering only people aged 25 years old and above).
• 4. Diversity: Hamtramck is an extremely ethnically diverse city, where many have ancestries from Arab, Polish, Yugoslavian, German, and Irish families. See below for the full breakdown of diversity in the area:

Source: Niche

Hamtramck has a better tenant pool than the surrounding neighborhoods in the City of Detroit. In fact, it’s pretty similar to what you’ll find in Hazel Park, another top-notch rental market in the area. With thorough tenant screening, you can acquire good quality tenants that won't be too difficult to manage—making Hamtramck a relatively low-risk area for rental investors.

Overall Score: B+

We gave Hamtramck an overall score of B+ based on the following factors:

• 1. Excellent cash flow potential above the standard 1% benchmark for rent-to-price ratios
• 2. Increasing home values and appreciation, especially in some areas of the city
• 3. Good quality of tenants and a continuously developing community—resilient even to the worst of economic downturns and housing market crashes

Hamtramck is truly a “hidden gem” for rental investors to strongly consider.

You may have noticed that we put more emphasis on the financial viability of Hamtramck properties—after all, money is still the root of every investment. As you continue your search for good investment opportunities, we advise you to visit Hamtramck yourself to see which properties can give you a good balance of cash flow and appreciation. Based on our research and experience in the area, Hamtramck offers many investment opportunities that can give you both.

If you’re looking to invest in the Metro Detroit area, Hamtramck is a great place to start.

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This isn’t our last article!

We’ll continue to cover all the other Metro Detroit cities and neighborhoods in the weeks to come—and we won’t stop until we’ve covered them all. If you have a specific area you’d like us to prioritize, leave a comment below, and we’ll get back to you.

Image courtesy of Daria Obymaha