Deep Dive into Detroit Neighborhoods: Sherwood Forest

Source: Sherwood Forest, Davison, MI Facebook

If you've been in the industry for a while, you've undoubtedly heard of the wildly affordable real estate market in the City of Detroit—Michigan's very own "Motor City."

Here, you can snag properties for less than $100k easily—shocking most investors from New York, Boston, or California. So yes, it's possible to buy a single-family or multifamily unit for a fraction of the national average purchase price ($341,600) here in the City of Detroit!

Couple these low prices with the booming demand for single-family homes in the area, and it's no surprise that the City of Detroit is one of America's top destinations for rental investors seeking solid cash flow.

All that being said—there is a catch. The city is exceptionally diverse. There are a total of 105 neighborhoods that have varying sub-areas, tenant demographics, and property conditions. As a result, newbie investors and moguls alike can undoubtedly benefit from expert knowledge and guidance to navigate the risks within the city. Only with the right information can they reap the best returns from the Detroit rental market.

Given that, we've created this "Deep Dive into Detroit Neighborhoods" series to give local and out-of-state investors an in-depth view of the housing market in the city we call home. Our team uses our experience as locals and property managers in the greater Metro Detroit to create these comprehensive guides. Our goal is to provide you with everything necessary to begin investing in one of the country's hottest rental estate markets!

The key factors we'll focus on contributing the most to your rental investment success:

• - The expected returns from rental properties
• - The types of tenants to expect
• - The kind of property management required

So, are you ready to dive into the City of Detroit? Our featured neighborhood for this article is one of the most impressive historic districts in the city—Sherwood Fore

Sherwood Forest is one of the many neighborhoods in the City of Detroit:

Here’s a list of all the neighborhoods in Detroit, with hyperlinks to the other Deep Dives we’ve published:

Sherwood Forest

Sherwood Forest is a neighborhood within the City of Detroit in Wayne County, Michigan. Parkside, Pembroke, Livernois, and Seven Mile Road enclose the area. Within Sherwood Forest there are two subdivisions: Sherwood Forest Manor and Sherwood Forest.

With a total population of 2,214 in 0.232 square miles (0.6 km2), the population density of Sherwood Forest is 8,709 per square mile, which is 80.35% higher than the 4,829 people per square mile for the city in general. The popularity of Sherwood Forest is the cause of this density as there are few, if any, abandoned homes or vacant lots compared to the general city.

The Often-Overlooked Grandeur in the City of Detroit

In 1837, the area now known as Sherwood Forest was a tract of farmland known as "the Grosse Pointe of North Woodward." Eighty years later, the land became the Sherwood Forest neighborhood we know today—​​one of the most appealing residential neighborhoods in the greater Metro Detroit area.

Sherwood Forest was an attractive piece of land, to begin with, described by a Detroit Free Press Advertisement as "hill- and dale-covered with the magnificent natural forest through which winding drives are laid out." Developers of the new neighborhood envisioned it to resemble the Sherwood Forest in Nottinghamshire, England, and even designed the area to resemble an English village.

By 2002, Sherwood Forest officially became a Detroit Historic District—have contributed to the city's heritage since its establishment. The neighborhood is widely known for architecturally distinctive homes, winding streets, friendly residents, and convenient location. Just minutes away from Downtown Detroit, the neighborhood has access to the Avenue of Fashion—filled with local eateries, shops, and beautiful art galleries. It’s also home to the Detroit Golf Club, a private, 6-hole golf course that adds a lot of greenery to the area and contributes to its appeal for a luxury buyers’ market.

While there is a strip of businesses along its west side, Sherwood Forest is mainly residential. The homes are reflective of 1920’s “Golden Age” architecture, with many old, large, and stately single-family homes. Just take a quick stroll and you’ll soon come across more mansions built in the 1920s with six bedrooms, hardwood floors, and bay windows in Sherwood Forest than you will in almost any other neighborhood in the City of Detroit. The area is full of grand Tudor and Georgian Colonial-style homes: 

Source: SherwoodForestDetroit.org

An article by Black Life, Arts & Culture even called Sherwood Forest a “quiet cousin” to more well-known neighborhoods, like Indian Village, Boston-Edison, and Palmer Woods—but it has the architecture and history that speak to the city’s glory over the years.

In fact, Niche ranks Sherwood Forest as the #1 Best Neighborhood to Buy a House in Detroit, based on the following factors:

• - Home values
• - Property taxes
• - Homeownership costs
• - Housing costs
• - Real estate trends

But how do these factors actually look in Sherwood Forest? What do they mean to a rental property investor, such as yourself?

Let’s dive deeper into the numbers to find out.

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

Based on Niche’s data, the median monthly rent across property types in Sherwood Forest is $921. This amount is 11.77% higher than the City of Detroit’s median rent of $824.

Additionally, Weichert reports on Fair Market Rents for rentals in Sherwood Forest compared to the City of Detroit, using data from the US Department of Housing and Urban Development (HUD). Here is the average gross rent they reported, broken down by the number of bedrooms:

Data based on Weichert

We don’t agree with the data above, as there’s no way one could rent a 3 or 4 bedroom home in a desirable area like Sherwood Forest for less than Detroit in general! This just shows you shouldn’t blindly follow data without understanding it.

Most Sherwood Forest residents are homeowners (92%), while the remaining 8% are renters. Because of this, it's rare to find a property for rent on websites like Zillow and Trulia.

Just look at the current properties listed on Zillow for Sherwood Forest:

Source: Zillow as of August 2021

See what we mean? There are no homes, apartments, or anything for rent right now (on Zillow) in Sherwood Forest. The neighborhood is far from a renter’s market.

Nevertheless, let's use the rent-to-price ratio to evaluate the cash flow you can potentially earn should you find an opportunity to invest in Sherwood Forest rentals. There is an industry benchmark called the 1% Rule, where the ratio needs to be at least 1% for good cash flow generation.

You can buy this four-bedroom home listed on Zillow for $314,900 (see photo below) and rent it out for roughly $2,100, per month (our best estimate). Using the rent-to-price formula, the ratio you’ll get is 0.34%—short of what you can usually find in the City of Detroit and greater Metro Detroit. Amazingly enough, Sherwood Forest is such a solid Class A Detroit neighborhood that it's hard to find properties here that meet the 1% Rule! It just goes to show that Detroit actually is home to some extremely solid neighborhoods (despite what people from out of state might think from the stereotypes).

Source: Listing on Zillow as of August 2021

Nevertheless, we’ve only made this quick calculation based on current figures. There’s still a chance of finding other properties in Sherwood Forest that could have better rent-to-price ratios if you hunt for them.

If you’re not too impressed with Sherwood Forest’s cash flow potential, perhaps gaining equity from its properties would be a better investment route in this neighborhood.

Let’s take a look at its house values and appreciation rates.

House Value and Appreciation

Zillow shows that the average house value in Sherwood Forest is $381,708. While they still don't have a forecast, their data indicate that Sherwood Forest homes have gone up in value by 20.8% in the past year.

Data from Redfin also shows an increasing number, where home prices in Sherwood Forest have grown 18% since last year and sold for a median price of $416,000. On average, these homes sell 4% over list price after 27 days—indicating a healthy housing market.

Source: Redfin

Based on City-data, homes in Sherwood Forest tend to be bigger and have more bedrooms than the City of Detroit. While most owner-occupied homes in the city are three-bedroom ones, those in Sherwood Forest neighborhood can easily reach up to four- and five bedrooms.

Source: City-data

When you browse current homes for sale in the neighborhood, there aren't many options to choose from. However, these two listings on Zillow give you an idea of just how pricey homes in this area are:

Source: Listings on Zillow as of August 2021

Redfin also shows the following recent sale in Sherwood Forest at a similar price:

Source: Redfin as of August 2021

In terms of appreciation, NeighborhoodScout's heat map shows that Sherwood Forest falls on the higher end of the spectrum, especially in comparison to the surrounding areas. In other words, the neighborhood offers a lot of potentials for investors to gain equity over time:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

Now that we’ve discussed the financial viability of properties in Sherwood Forest, let’s get into the other side of the rental investment coin: the tenant quality, property condition, and general livability of the area. These factors are important, as they contribute heavily to the overall success of your rental investment.

The information you’ll see comes from our local knowledge of the area and multiple research data points.

Average Property Class and Condition: A+

Average property age: 82 years

City data gives us a chart that shows the year Sherwood Forest properties were built in the City of Detroit. While the two areas have roughly the same percentage of properties built between 1940 to 1959, Sherwood Forest has significantly more properties built in 1939 and earlier:

Source: City-data

We can see that the majority (41.9%) of homes in Sherwood Forest are aged 82 and above

While property age is subjective, anything older than 50 years is generally considered "old." Still, you can indeed find beautiful mansions that are impeccably well-maintained in Sherwood Forest. (Just take a look at this charming Tudor home with stunning renovations!)

Sherwood Forest also has very stringent regulations for its homes. They want to preserve their English ambiance and sustain property values, so the Sherwood Forest Association has these rules in place:

• - Flat roofs are not allowed for Sherwood Forest properties.
• - The exterior of every home must be brick, stone, or concrete over tile.
• - Properties must follow a list of strict garage regulations.

These are mere glimpses of the long list of stringent rules the neighborhood has to preserve its unique personality and heritage.

Quality of Life in the Neighborhood: A+

As a rental investor, two factors will affect your profitability more than anything else: neighborhood livability and tenant class. A high-quality neighborhood gives you a high-quality tenant pool that will pay rent on time and maintain the property well—while the opposite might not even follow your lease agreements. As an investor, you want to invest in neighborhoods that attract the kind of tenants you want.

Let’s look at how life in Sherwood Forest is:

Local Economy

While Sherwood Forest is mainly a residential area, its loyal residents support a robust local economy within the neighborhood. Quoting Ronda Morrison, whose dad established the House of Morrison Professional Shoes Repair back in 1968, “One of the best things is that they are very conscientious consumers. They like patronizing a business in the community where they live.”

Nevertheless, Sherwood Forest residents mostly work in nearby business areas. According to City-data, their average travel time to work (in 2019) is around 20 to 24 minutes, and 87.6% of all workers drive to their place of employment.

School Rankings

Sherwood Forest is within the Detroit Public Schools district, where residents are zoned to Palmer Park Preparatory Academy for elementary and middle school and Mumford High School for older students.

According to GreatSchools, Mumford High School is rated four out of five stars.

Crime and Safety

Based on Niche’s data, Sherwood Forest is significantly safer than the rest of the City of Detroit.

As with any neighborhood in the City of Detroit, Sherwood Forest’s crime rates will vary from one block to another. Being a real estate investor, you should research crime and safety rates at a smaller scale, depending on where your property is situated.

Livability

Areavibes ranked Sherwood Forest as the third most livable neighborhood in the City of Detroit and the 23rd most livable neighborhood in Michigan. This means Sherwood Forest ranks better than 79% of all areas in the US.

Sherwood Forest attracts residents looking for a gorgeous place to call home—not necessarily an affordable or budget-friendly one. Areavibes shows us their cost of living index chart, where we can see that living in Sherwood Forest tends to be more expensive than other areas in the city:

Source: Areavibes

Sherwood Forest is relatively walkable. Pedestrians can easily navigate their way around the neighborhood, and most people can run errands on foot. Nevertheless, using a car is still the best approach to get around the neighborhood, especially since public transportation is quite limited in Sherwood Forest.

Tenant Class and Demographics: A+

Compared to other real estate investments, rental properties need to evaluate an area’s potential tenant pool thoroughly. You don’t want to invest in a property only to find out that locals won’t have the income or employment stability to pay rent every month!

Here are the key factors that contribute to tenant class and demographics. Keep in mind that some of these factors (e.g., average income and unemployment rates) might still be recovering from the recent COVID-19 pandemic:

• - Income: Niche reports that the median household income of Sherwood Forest residents is $125,302. This number is a whopping 302.59% greater than the City of Detroit’s median of $30,894 per household.

A high income means renters can afford to pay higher rent, as long as it follows the industry standard of rent being not more than 30% of the tenant’s income.

• - Unemployment: Based on Areavibes, the unemployment rate for Sherwood Forest is 7.6%—significantly lower than the City of Detroit’s 11.9% rate. You can expect Sherwood Forest residents to have a stable job to pay rent and help maintain the property.
• - Education: Niche also shows that nearly half (47%) of Sherwood Residents have achieved a master’s degree or higher, while the other half (46%) have reached a bachelor’s or associate’s degree. Only 7% of Sherwood Forest residents stopped at their high school diploma.

In contrast to the City of Detroit, a third (33%) achieved a high school diploma, while another third (33%) holds a college or associate’s degree.

    - Diversity: According to City-data, the racial diversity in Sherwood Forest is as follows:

Source: City-data

The tenants you might find in Sherwood Forest fall on the higher end of the spectrum, having higher income averages, higher education attainment, and more stable jobs. However, let's not forget that the percentage of renters in Sherwood Forest is only 8%, which means the tenant pool won't be significant.

Sherwood Forest may not be the most accessible area for rental investors, primarily because the place is just too expensive and well-developed to attract renters

Source: Google Maps

Overall Score: A+

Although Sherwood Forest is one of the most upscale neighborhoods in the City of Detroit and gets a solid Class A rating, we wouldn’t recommend it to rental investors.

Why not?

Well, rental investing is more than finding a great neighborhood in the City of Detroit. Instead, it’s mainly about the rental viability of the area—including the average rent, rent-to-price ratio, house value, appreciation, and the size and quality of the tenant pool.

Here are the factors that drove our recommendation for Sherwood Forest:

• - While rent is higher than the rest of the city, the rent-to-price ratio isn’t favorable for cash flow due to the expensive purchase prices in Sherwood Forest.
• 
  
• - Sherwood Forest is one of the city’s fastest appreciating neighborhoods—making the area more suitable for buy-and-hold investments than a rental business.
• 
  
• - The quality of tenants and general livability is better than most of the City of Detroit. However, the tenant pool is also small. Tenants will be of higher quality—but that's if you find any renters at all.

Given these outcomes, we see Sherwood Forest as pretty much “too good” for rental investors. It’s a great example of how other solid neighborhoods can develop into strong Class A neighborhoods, but in reality, you’d be better off buying in one of the bordering areas, where tenants who are priced out of Sherwood Forest end up.

This includes areas like Grandmont or Green Acres. Even there, you might need to hunt to find a good rental investment, but it’ll be more possible than in Sherwood Forest.

As you continue your search for good rental investment opportunities, we advise you to visit the City of Detroit yourself to see which properties offer you a balance of cash flow and appreciation. Based on our research and experience, Sherwood Forest is more suitable for the latter investment strategy.

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Have you checked out our other Deep-Dives? We’ve covered a lot of them already—you’re bound to find the Metro Detroit city or City of Detroit neighborhood that’s perfect for your investment goals.

We’ll continue to write these guides until we’ve covered every area in Metro Detroit. So if you have a particular city or neighborhood you’d like us to prioritize, leave a comment below! We’ll get back to you ASAP.