Deep Dive into Metro Detroit Cities: Allen Park

Source: Zillow.

If you've been searching for real estate markets to invest in, you've undoubtedly heard of Metro Detroit.

The tri-county area of Macomb, Oakland, and Wayne is filled with lucrative opportunities with an affordable housing stock—but the location can confuse even experienced investors. The market is overwhelmingly complex and large (185 cities and 290 neighborhoods), making it challenging to sift through and find good deals.

What do you need? Expert guidance in real estate investing. And we're providing that—lifted from two decades of experience operating as a local property management company in Metro Detroit.

Below, you'll find an ultimate guide to investing in rental properties, specifically in Allen Park, a Metro Detroit city near the City of Detroit.

You'll find crucial investment factors, evaluations, and more to make wise decisions before investing money. We focus on the featured area's strengths, weaknesses, and other information contributing to your success (e.g., property management type required and expected return on investment).

Source: Google Maps.

Allen Park

Allen Park is a city in Wayne County, Michigan. Its population is roughly 28,638 in a total area of 7.05 square miles (18.26 km²), where 0.05 square miles (0.13 km²) are water. Its population density is 4,094.07 per square mile (1,580.82/km²).

The city was recognized by CNN Money in 2011 as one of America’s Best Small Cities. Moreover, Ford Motor Company has several offices and facilities in Allen Park, the Detroit Lions football team has its headquarters and practice areas in the city, and The Uniroyal Giant Tire—one of the world’s largest roadside attractions—is also in the city. Overall, Allen Park is an integral part of the local community.

Allen Park isn’t a Ring City in our books because it doesn’t directly border the City of Detroit (although it’s only a stone’s throw away). Still, it's close enough to have similar features, such as high rental demand and affordable housing stock. As a result, you won't find many of the investment risks in Allen typically associated with the City of Detroit.

Here’s a map to see where Allen Park is located:

Source: Georgetown Public Policy Review.

And if the map isn’t clear enough, here’s a list of all Metro Detroit cities for your review. The ones highlighted in green are Ring Cities (best spots for rental properties), while those with hyperlinks take you to other Deep Dives we’ve published before:

Allen Park in a Nutshell

Located just 19 miles southwest of Detroit, Allen Park is in the perfect location, with close proximity to the big city while retaining its own unique neighborhood lifestyle.

Named after former governor Ethan A. Allen, this city has a rich history dating back to as early as 1834. Allen Park offers a quiet suburban atmosphere with plenty of green space and activities for residents to enjoy. The city hosts several parks and recreational facilities like the Allen Park Ice Arena and Splash Pad. It also features multiple shopping centers, restaurants, and entertainment venues.

Allen Park also has a bustling economy, supported to a large extent by leading automotive parts supplier Automotive Components Holdings LLC (headquartered in the city), the Ford Motor Company’s product development center, and several other major employers that provide job opportunities for locals across industries in manufacturing, technology, and healthcare.

For rental property investors, Allen Park is known for its convenient location and quality of suburban living. The city sits about an hour away from the DTW international airport and is home to several high-quality schools. Tree-lined streets and beautiful brick properties stylize its neighborhoods, and competitive rental prices for both single-family homes and apartments make the city an attractive place to invest in real estate.

Allen Park offers a great combination of convenience, suburban living, and economic opportunities that make it an excellent choice for rental property investors. With plenty of activities to enjoy and businesses to support, it’s no wonder why so many people flock to this city every year. But should you follow them? Let's look at the details, starting with average rents.

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

According to Niche, Allen Park’s average rent across property types is $1,063. Broken down into specific bedroom sizes, we come up with the following chart by Best Places:

Source: Best Places.

As we can see, Allen Park generally charges slightly higher than its greater areas of Metro Detroit and Michigan, although it’s still lower than the nationwide average.

Let’s compare the numbers to actual Zillow listings. Unfortunately, there aren’t a lot of listings to evaluate. But based on what is available, it seems like rent averages for one-bedroom and two-bedroom properties are both understated by Best Places, most likely because its data are historical.

Source: Zillow.

With this information on hand, we’ll now use the rent-to-price ratio to see if Allen Park properties meet the industry standard for generating good cash flow. The 1% rule states that the monthly rent should be equal to or higher than 1% of the property’s total purchase price including necessary repairs.

Here’s the formula:

(Anticipated Monthly Rent) / [(Property purchase price) + (Rehab and repair costs)] >= 1%

We’ll use the following Zillow listing as an example: A recently-upgraded three-bedroom bungalow along Cicotte Ave., Allen Park. With a rent estimate of $1,393 and a purchase price of $147,999, the resulting ratio is 0.9%—just 0.1% short of the usual 1% ratio of Ring City properties.

Zillow.

House Value and Appreciation

Niche tells us that the average property value in Allen Park is $142,300. This figure may be understated, though, because Zillow shows that the values are around $180,078, indicating a 5.7% increase over the past 12 months. Zillow adjusts this value seasonally and only includes mid-priced properties.

Source: Zillow.

The numbers don’t lie: Redfin shows that Allen Park properties are “Somewhat Competitive” based on its Compete Score, where some properties get multiple offers and sell 3% above the list price.

Source: Redfin.

According to NeighborhoodScout, the most common property type in Allen Park is single-family homes, taking up 90.8% of all properties in the city. Next are apartment complexes, which take up 5.6%. The rest are a mix of small apartment buildings (2.3%), townhomes (0.9%), and mobile homes (0.3%).

Allen Park properties are generally more affordable the closer they are to the City of Detroit (upper part of Allen Park), and vice versa. The city is an excellent place to benefit from the affordable Detroit housing stock while avoiding the common risks associated with the area.

You can see the spread in the map of current for-sale Zillow listings below:

Source: Zillow.

Allen Park properties have also experienced impressive property appreciation rates, appreciating 117.8% over the past decade, with an average annual property appreciation rate of 8.09%. It’s certainly sealed its spot in the top 20% nationally for real estate appreciation. Here’s a heat map from NeighborhoodScout for you to know where to prioritize for long-term equity gains:

Source: NeighborhoodScout.

Quality of Tenants, Properties, and Living

Investment in Allen Park requires you to consider the following elements: quality of tenants, conditions of the property, and appeal of the neighborhood. These three factors alone will determine the type of tenants you’ll manage, the property maintenance you’ll deal with, and the overall appeal of the location you’ll invest in.

Average Property Class and Condition: B+

Average property age: 62 years

Bestplaces reports that the majority of Allen Park properties were built sometime between 1950 and 1959. The average property age is 62 years, 12 years above what our industry considers the threshold for “old homes” or aged properties. Allen Park certainly has older homes compared to other nearby cities.

Source: Best Places

Yes, you’ll find older properties in Allen Park. But that news isn’t all bad. You’ll just have to be ready to deal with the common problems of aged properties. Here’s a simple list of the usual issues that you’ll have to double-check prior to purchase:

• Foundational issues
• Hazardous building materials (e.g., lead-based paint)
• Deteriorating roof and structures
• Underpowered electrical systems
• Plumbing problems, like pipes that need to be replaced

Take the time to inspect and budget property for possible renovations, bring the property up to rental standards without depleting your capital, and create an excellent investment opportunity within Allen Park’s older housing stock.

Quality of Life in the Neighborhood: A-

The better the quality of life in a neighborhood, the more people will move into the area and—you know it—rent properties to live in. So, you want to ensure that Allen Park can potentially attract quality tenants who’ll stick to your lease agreement and maintain your property, which are two factors that’ll directly impact your returns and bottom-line profits.

Local Economy

Allen Park is nicknamed the “Jewel of Downriver” because of its pedestrian-friendly streets, unique retro-style vibe, and more than a handful of downtown movie theaters. Not only that, but the city is also home to more than 450 businesses, allowing locals to reach their entrepreneurial dreams.

The Allen Park Downtown Development Authority ensures the community thrives with social, cultural, and economic activity. They follow the Main Street Four-Point Approach to revitalize the downtown area of Allen Park, focusing on design, organization, marketing, and economic development.

Here’s a list of the most significant businesses in the city:

• Belle Tire: An American tire, wheel, and automotive service retailer
• Local 169: An organization that provides the nation with contingency and war requirements
• Detroit Lions: A professional American football team from the City of Detroit
• Allen Park Public Schools: An organization providing education for locals
• EcoMotors: A developer of engines for cars, trucks, commercial vehicles, aerospace, and more
• Ford Motor: A multinational automobile manufacturer headquartered in Allen Park
• Beaumont Health: A non-profit organization to care for Southeast Michigan patients

These companies and organizations boost the local economy in Allen Park, making the city an attractive area for attracting new residents and investing in rental properties. Now is a good time for you to purchase properties while the prices are still relatively low.

School Rankings

If you want to attract family tenants, invest in an area with good schools. Luckily, several quality schools serve the City of Allen Park. GreatSchools notes the following goods:

• - Arno Elementary School
• - Lindemann Elementary School
• - Bennie Elementary School
• - Allen Park Middle School
• - Allen Park High School

Given that there are more options for elementary schools in Allen Park, we suggest that you focus on properties that’ll attract families with younger children. Chances are, family tenant prospects will love the fact that there are good elementary schools near the property you’re offering.

Crime and Safety

There’s no getting around it—Allen Park isn’t the safest place to live. Its crime rates are considerably higher than the national average, but they’re actually 22% lower than the Michigan average. In fact, certain areas in Allen Park are “safe” according to NeighborhoodScout:

Source: NeighborhoodScout.

Plus, Allen Park is part of the crazy diverse Metro Detroit area, where the crime rates change drastically from one block to another. Prioritize safe areas by all means, but remember that safety varies depending on each block, subarea, and neighborhood. You might find a property in a perfectly safe neighborhood just a stone’s throw away from one deemed “unsafe” by other standards.

Livability

Allen Park is part of Niche’s lists of Best Suburbs for Young Professionals and Most Diverse Suburbs in Michigan. The city is designed and ideal for young people between 20 and 49 who are employed in a profession or white-collar occupation:

Source: Niche.

Allen Park also got a Livability Score of 86/100 from Areavibes. Key factors that drove this score include the city’s amenities, housing, and cost of living, where Areavibes gave Allen Park exceptional grades based on multiple data points.

Here’s a breakdown of the cost of living in Allen Park, based on Best Places:

Source: Best Places.

Tenant Class and Demographics: A

Let’s evaluate the potential tenant pool in Allen Park. It’s crucial to determine the type of tenants in the city, so you see the possibility of securing renters who’ll help retain the value of your property and meet payments on time—boosting your bottom-line returns.

Check the information from Best Places below, where we’ve listed the factors that contribute the most to tenant pool class and demographics:

• Income: The average income per capita and household of Allen Park residents is higher than that of Metro Detroit, Michigan, and the nation. You can potentially charge higher rents here than in nearby areas and never have to worry about tenants keeping up with monthly payments:

Source: Best Places.

• Unemployment: The unemployment rate in Allen Park is lower than the average of Metro Detroit, Michigan, and the nation as well. Moreover, numbers indicate that future job growth in Allen Park will be higher, providing tenants with greater chances to secure well-paying jobs:

Source: Best Places.

• Education: In terms of educational achievement, there are more high school graduates in Allen Park than there are in Metro Detroit and Michigan. However, fewer of them have completed a degree. These figures shouldn’t worry you too much though, as high school diploma holders can already secure one of the many jobs in Allen Park:

Source: Best Places.

• Diversity: Niche provides us with a breakdown of the racial diversity in Allen Park:

Source: Niche.

The tenant pool you’ll have in Allen Park is filled with well-earning residents. Still, mind your due diligence by carrying out thorough tenant screenings before accepting any of them into your property. Doing so ensures that you’re only working with those that have stable jobs and high incomes that will support your cash flow streams.

Source: Google Maps.

Overall Score: A-

After sifting through all the necessary information and combining them with our experience in the Metro Detroit space, we gave Allen Park an overall score of A-. The factors that contributed the most to this particular score include the following:

• - Reasonable prices: Allen Park properties have a decent rent-to-price ratio (just 0.1% short of the standard), where you can find properties at a price that’s reasonable against the estimated rent. You’ll get decent cash flow from them—as long as you invest in properties closest to a 1% rent-to-price ratio.
• - Positive equity and cash flow: Allen Park properties have increased property appreciation over the past decade and are continuing to do so in recent quarters. You’ll get a good balance of short- and long-term gains from these properties to gain equity on top of cash flow.
• - High quality of life: Allen Park provides a good quality of life, where the local economy is booming, the schools are ranked well, safety isn’t much of an issue, and overall livability is ideal for young professionals. The city can attract people seeking greener pastures to enjoy life.

Take a trip down to Allen Park yourself to witness the investment opportunities in real life! You’ll be surprised by how many properties offer an excellent balance of cash flow and equity gains if you look closely enough, opening opportunities for you to reap returns immediately and in the future.

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Do you need more information about Metro Detroit cities and neighborhoods?

Our series doesn’t end here. We’re pumping out these reports until we’ve covered every nook and cranny of Metro Detroit and the City of Detroit, so you know exactly where to invest in this real estate hotspot.

If you have a specific area you want us to cover, drop a comment below! We’ll prioritize your request as much as we can. And if you need more guidance, get in touch with me directly. My inbox is always open to help aspiring real estate investors looking to win big.