Deep Dive into Metro Detroit Cities: Dearborn Heights

Source: Movoto

The Metro Detroit area is bursting at the seams with opportunities for rental property investments. There’s so much potential, we’ve even written comparative reports that show how the area lines up against other investment hotspots!

However, there’s a catch. The tri-county area of Macomb, Oakland, and Wayne in Michigan are filled with many neighborhoods and cities—each with its unique personality and real estate market factors. There’s a wide variety of tenant demographics, property management requirements, general property conditions, and returns on investment, requiring investors to have insider guidance to reap the rewards.

Not to worry, this series gives you exactly what you need—in-depth, comprehensive reports that dive into every inch of Metro Detroit to analyze each area’s investment potential. You’ll know where to look, which places to avoid, and sift through your options to find the best spots that work for you.

All the information you see below comes from multiple research points and our experience as a property management company and as residents in Metro Detroit. You can also get in touch should you have more questions after the article. Our team is always ready to assist aspiring investors to get a slice of the lucrative Detroit real estate market.

Our featured area for this installment is Dearborn Heights, which is an established quality residential community of almost 60,000 people sitting right beside the City of Detroit. And you can see it here on this map:

Source: Google Maps

Dearborn Heights

Located in Wayne County, Michigan, the City of Dearborn Heights has a population of 63,292 in an area of 11.75 sq mi (30.42 km2), resulting in a population density of 5,392.52/sq mi. This is considerably higher than the City of Detroit, which only has a population density of 4,606.84/sq mi.

Given that Dearborn Heights shares a portion of its border with the City of Detroit, it’s called a “Ring City” in our terms. This is the name we give to the cities that surround the City of Detroit in a semicircle, where you can find a good investment balance of property affordability and reduced risks—those that are commonly associated with investing in Detroit real estate.

Here’s where Dearborn Heights is located in Metro Detroit:

Source: Georgetown Public Policy Review

To give you a better picture, we’ve also listed all the cities below for your reference, in case you want to know more about the surrounding cities. Any names highlighted in green are Ring Cities just like Dearborn Heights, and any names with hyperlinks will take you to previously published Deep Dives:

An Overview of Dearborn Heights

The City of Dearborn Heights was incorporated in 1960 from the two sections of Dearborn Township and a connecting strip of land from Inkster. Interestingly, residents from Inkster have filed a lawsuit before regarding the odd shape of Dearborn Heights, saying that it’s an attempt to have socio-economic separation. However, the claim has since been dismissed as there isn’t any legally cognizable harm.

Today, residents of Dearborn Heights are enjoying the beautiful city full of coffee shops and parks. Lifting from Niche surveys, locals have said, “[Dearborn Heights] is very quiet and peaceful, hardly any commotion happens. It is clean, orderly, and enjoyable.

Another local also shared, “I lived in Dearborn Heights all my life growing up and I think it is a nice place to live and grow up in. The neighbors were always friendly and I knew them well.”

Many people are drawn to living in Dearborn Heights because of its higher-than-average scores on amenities, cost of living, and housing. This mid-sized city is an excellent place to live, and perhaps an even better place to invest in real estate.

For example, real estate is 34% cheaper, and rent is 21% higher than Michigan averages, giving you good opportunities to purchase rental properties for strong cash flow. However, Dearborn Heights also has less favorable results regarding education and employment which may affect rental businesses.

This is only the tip of the iceberg. We’ll have to analyze more investment factors to see if Dearborn Heights properties are good options for you to consider. Let’s get into the details.

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

Based on Niche, the average rent in Dearborn Heights is $1,047 per month. If we were to break this figure down to specific bedroom sizes, the rent amounts are on par with Metro Detroit and slightly higher than the rest of Michigan:

Source: Bestplaces

Now, let’s check if these numbers are accurate by comparing them to actual listings on Zillow. Based on our research, we see that the rent averages provided by Bestplaces are a tad understated for 2-bedroom homes, roughly the same for 3-bedroom ones, and slightly understated for 4-bedroom properties.

All of this is good news for you as an investor, as it means you can potentially charge higher rent amounts:

Source: Listings on Zillow as of June 2022

We can also observe that 3-bedroom homes are much more popular than other property sizes, and there are few 1-bedroom or 5-bedroom homes in Dearborn Heights. There is also a difference in rent in the North and South parts. As you saw in the map above, the further North—the higher the rent.

Now, let’s use a simple calculation called the rent-to-price ratio to check if these rent amounts will result in strong cash flow for you. Remember that the industry standard is to have the rent amount be 1% or higher than the total property price (including renovations and other expenses) to generate substantial returns.

We’ve chosen this listing (see below) from Zillow’s past sales to conduct our analysis. This 3-bedroom home along S John Daly St. has a rental estimate of $1,234 and was sold for $95,100, resulting in an ideal ratio of 1.29%. 

This goes beyond the industry’s minimum and satisfyingly meets the average ratio for Ring Cities in Metro Detroit.

Source: Home sold on Zillow

In other words, you can be confident in finding investment opportunities in Dearborn Heights that can generate strong cash flow month after month.

House Value and Appreciation

According to Niche, the average house value in Dearborn Heights is $113,800. If we look at Zillow’s reports, however, we see that the overall home value in the city is much closer to $185,585, and has been skyrocketing over the years. We see this growth continue in the years to come:

Source: Zillow

We can also see further proof of the uptrend of Dearborn Heights property values from Redfin, where they reported that the median sales price is $165,000 and has been increasing by 3.8% year-over-year:

Source: Redfin

While the report also showed that the number of homes sold has been declining by 17.6% annually, it doesn’t discount the fact that Dearborn Heights is a “very competitive” real estate market based on Redfin’s Compete Score. Here, homes get multiple offers and can sell for 1-7% above their list price.

Moving on, according to NeighborhoodScout, single-family homes take up a whopping 85.5% of all the homes in Dearborn Heights. There are also apartment complexes (6.3%), small apartment buildings (4.5%), townhomes (2.3%), and mobile homes (1.4%) scattered around.

Additionally, 59.6% have three bedrooms, 17.9% have two bedrooms, 12.5% have four bedrooms, and only a handful have one or five bedrooms (7.5% and 2.3%, respectively).

Going back to Zillow listings, we see that there is a good selection of all sizes in Dearborn Heights, where 3-bedroom properties are certainly the most common. Prices range from $100,000 to $300,000, depending on the location and size of the home that you choose. It’s clear that there are many affordable properties for you to choose from:

These property prices reflect Detroit market’s affordability, where you can find many homes around the $100k mark. As mentioned earlier, Ring Cities like Dearborn Heights are where you can find the famed “cheap properties” without most of the investment risks associated with Detroit investing.

Regarding property appreciation, NeighborhoodScout also reports that Dearborn Heights properties appreciated an impressive 166.93% over the last decade, which translates to an average annual home appreciation rate of 10.32%. This puts Dearborn Heights in the top 10% nationally for real estate appreciation, having one of the best track records for long-term real estate investments for equity gains.

NeighborhoodScout also gave a heat map that shows where you can take advantage of Dearborn Heights properties’ amazing appreciation rates:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

Now that we’ve gone through the key factors that contribute to the financial viability of investing in Dearborn Heights, let’s look at the quality of tenants, properties, and lifestyle in the city. As a rental investor, these details are just as important as the numbers we’ve discussed earlier, as they determine the type of tenants you’ll manage, the property conditions you’ll deal with, and the level of attraction your rental property will likely have.

All the information you see below is sourced from a combination of research and our personal experience as a property management company in Metro Detroit for over two decades.

Average Property Class and Condition: B-

Average property age: 59 years

By the end of World War II, our soldiers returned home triumphant and looking for a place to live. With the help of the GI Bill, new homes were built on the edges of our cities, where modestly sized capes and ranches popped up to serve the growing middle-class citizens. Dearborn Heights’ properties were primarily built during this period, which explains why homes are relatively older, averaging 59 years old.

Nearly half (44.8%) of Dearborn Heights’ properties were built from 1950 to 1959. In the real estate industry, any home that is older than 50 years old is already considered “old,” which means you’ll have to deal with more maintenance works (albeit beautiful, historic homes) in Dearborn Heights:

Source: Bestplaces

Investing in an old home means preparing yourself for higher maintenance demands and major renovations to bring the home up to rental standards. It’s not necessarily a terrible way to invest, but it certainly requires experience and connections to professional inspectors to ensure that you don’t deplete your capital fund trying to repair an old home.

Plus, given that Dearborn Heights is still a popular place to live, you’ll also find well-maintained, newly refurbished homes in the area. All you need to do is to be patient in researching and pay extra attention to inspecting older homes before purchase.

Quality of Life in the Neighborhood: B+

Up next is the quality of life in Dearborn Heights. This is crucial to you as an investor, as only good locations can attract high-quality renters that’ll be responsible for paying rent, maintaining the home, and, ultimately, maximizing the investment returns you’ll gain.

The opposite, of course, is having to deal with irresponsible tenants that’ll struggle to meet payments, possibly damage your well-earned asset, and be a pain to manage.

Let’s see what the quality of life is in Dearborn Heights and see if they meet the requirements for a thriving, successful rental property business.

Local Economy

The local economy is the key contributing factor to the city’s livability, as it directly relates to the local income, employment stability, and overall development and growth of the area. Fortunately, Dearborn Heights does not disappoint regarding this factor.

Dearborn Heights is a progressive city that’s committed to enhancing the lives of its residents and workers. There is an ever-increasing number of services, excellent schools, nearby colleges and universities, state-of-the-art healthcare facilities, close-knit communities, affordable housing, and a wide selection of shopping areas—all attractive features for anybody looking for a place to live.

Most of the Dearborn Heights locals work in retail (15.8%), manufacturing (15.8%), healthcare (14.3%), and accommodation (7.7%). These industries fuel the city, where there are multiple large corporations, family-owned restaurants, coffee shops, and unique specialty shops spread out along bustling main roads to lesser-known neighborhood areas.

Dearborn Heights also ensures that they help entrepreneurs through the difficult process of opening up a new business. They will help existing businesses to ensure that they have a good relationship with the community while abiding by local ordinances, and advocate for developments aimed at supporting the local business sector.

Additionally, Dearborn Heights’ convenient, central location in Wayne County provides easy access to several recreational, cultural, and travel opportunities to the greater Detroit area. This means you can attract locals who want to live in Dearborn Heights without actually having to work for its local economy.

School Rankings

According to Greatschools, the best schools in Dearborn Heights are‌:

• - Star International Academy
• - Kinloch Elementary School
• - River Oaks Elementary School
• - Pardee School
• - Dearborn 6/7 Stem School

The quality of these schools will affect how attractive your rental is to tenants with young children, especially if you focus on the areas shown by NeighborhoodScout to have the best schools around:

Source: NeighborhoodScout

Crime and Safety

Similar to the City of Detroit, Dearborn Heights’ crime rates differ from one neighborhood to another. In fact, the difference is also prominent from one street to another, so it’s best to check the property you’re eyeing in person to see if safety is truly an issue around that block.

Remember that quality tenants will prioritize safety in the neighborhood they live in, which means you should also prioritize low crime rates when looking for a property to invest in. Here’s another heat map that shows you where the safest areas in Dearborn Heights are from a big-picture perspective:

Source: NeighborhoodScout

Livability

Areavibes deemed Dearborn Heights as an “excellent” place to live in, with a spectacular livability score of 75/100. This comes as no surprise, especially since Dearborn Heights boasts of its amenities, low cost of living, and affordable housing options—earning it good public user reviews as well.

Here’s a breakdown from Bestplaces that summarizes the livability in Dearborn Heights:

Source: Bestplaces

Tenant Class and Demographics: B-

Finally, we’ll evaluate the potential tenant pool you’ll have in Dearborn Heights to see if the demographics support your goal of securing responsible and financially capable tenants. After all, they’re the ones who’ll be using your asset and are the bloodline of your investment.

So, here are some of the key factors that contribute the most to your investment success:

• Income: The average income of residents in Dearborn Heights is lower than in the greater areas of Metro Detroit, Michigan, and the United States. This isn’t good news for you, as it means you won’t be able to maximize the potential rent you could’ve charged.

Source: Bestplaces

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• Unemployment: The unemployment rate and future job growth in Dearborn Heights are slightly better than Metro Detroit and significantly better than Michigan and the United States. These numbers show great promise, especially since we’re still recovering from the pandemic. Your tenant pool will probably secure better-paying jobs soon and be able to afford to rent better homes

Source: Bestplaces

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• Education: The educational attainment of locals in Dearborn Heights generally reflects that of Metro Detroit and Michigan. Although there are slightly fewer people who have completed a college degree here than in the greater areas, which may mean that your tenant pool might have fewer opportunities to secure good-paying jobs than in other nearby cities.

Source: Bestplaces

• Diversity: Here’s the racial diversity breakdown from Niche for Dearborn Heights:

Source: Niche

So, based on the average income, unemployment rate, and educational attainment, you’ll still have to conduct thorough tenant screening to ensure that you sift through your options and only accept quality tenants.

And if you end up with tenants that require a higher level of management, consider hiring a property management company to help you with receiving (and chasing up!) payments, maintaining your assets, and ensuring that all tenants stick to what’s dictated in the lease agreements.

Source: Google Maps

Overall Score: A

Now that we’ve completed a thorough evaluation, we’re giving Dearborn Heights a score of A for rental property investment. However, in the southern part of the neighborhoods, we’d have to give it a B. After all, its housing stock might require more maintenance and its tenant pool might have fewer college graduates than other Metro Detroit cities.

The following reasons are strong enough to make Dearborn Heights a great place for you to grab a slice of the Detroit market:

• * Dearborn Heights’ rent-to-price ratio is 1.29%, which means your investments here will likely generate strong cash flow, making it easy to pay off the initial acquisition cost.
• * Dearborn Heights’ house value and appreciation rates are skyrocketing, and most of its properties are affordable for the average investor to purchase and garner significant equity gains.
• * Dearborn Heights’ economy, schools, safety, and livability are excellent, which means you’ll be able to attract quality tenants seeking a place to live and work at.

If you’re looking to purchase rental properties around the City of Detroit, Dearborn Heights offers spectacular opportunities for you to grow your investment portfolio. In fact, you might even consider investing in multiple homes and hiring a property management company to do the daily grind for you, so you reap as much of the famed Detroit returns as possible.

Our team here in Logical Property Management has in-depth knowledge and decades of experience handling rentals and tenants in Metro Detroit. We have everything you need to succeed in the well-known tri-county area of Michigan, so you can sit back, relax, and watch your investments soar to great heights.

Get in touch with our team today to begin your journey into Metro Detroit!

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Are you interested in other areas in Metro Detroit? We got you.

This article is part of our ongoing series that evaluates all the cities and neighborhoods within Metro Detroit, so head on over to our previous installments or comment down below for any requests. We’re not stopping this series until we’ve covered every nook and cranny of Metro Detroit!