Deep Dive into Metro Detroit Neighborhoods: Ferndale

Source: Movoto listing

Ah, Metro Detroit. The metropolitan area of Macomb, Oakland, and Wayne counties is famous for its affordable housing stock. It doesn’t matter if you’re new or experienced in the industry—you’ve likely heard of this famous rental market scene.

But… You’ve also probably heard about how confusing and overwhelming the Metro Detroit market can get. With 185 cities and 290 neighborhoods in the area, it’s undoubtedly difficult to sift through all the options to find the best investment opportunities.

You’ll need expert advice and guidance to know which areas to invest in and which to avoid. Lucky for you, this article series will help you do just that.

With our 2 decades of experience operating as a local property management company, we’ve decided to create this ongoing series of examining the cities and neighborhoods of Metro Detroit. Our primary goal is to give you the data necessary to evaluate the strengths and weaknesses of each area, directing you to the best spot for your next investment.

To make things easier, we’ve also prioritized the factors that contribute the most to your success as a rental property investor, such as the returns on investment and the type of property management required.

Are you ready to dive into Metro Detroit? For this installment, we’ll visit good ol’ Ferndale—a vibrant city famously known for being an affordable alternative to its northern neighbor, Royal Oak.

Source: Google Maps

Ferndale

The City of Ferndale is in Oakland County, Michigan. It has a population of 19,414 in a total area of 3.88 square miles (10.05 km2), resulting in a population density of 5,003 people per square mile. It has 8 constituent neighborhoods and is the 67th-largest community in the state.

Ferndale sits right on top of the City of Detroit, making it a “Ring City,” as we’d like to call it. These are the cities surrounding the City of Detroit in a semicircle, where you can find affordable properties without most of the typical risks associated with Detroit investing.

To Ferndale’s west is Oak Park, east is Hazel Park, north is Pleasant Ridge, southwest is Royal Oak Township, and north is Royal Oak. You can see it more clearly in this map below:

Source: Georgetown Public Policy Review

Moreover, for your convenience, here is a list of all the cities in the Metro Detroit area. The ones highlighted in green are Ring Cities, just like Ferndale. If you see any name with a hyperlink, that will take you to its respective Deep Dive article:

The “Funky” City of Metro Detroit

Back in the 1800s, Ferndale was an area of lush green ferns with the name “Jam,” referring to its close proximity to the two-mile log jam on the Nooksack River. Fast forward to recent years, and Ferndale is now one of the trendiest spots in Metro Detroit.

Ferndale has a vibrant nightlife with a unique mix of breweries, meaderies, and a distillery, as well as many highly-rated restaurants. It’s also a destination for art, music, and a prominent do-it-yourself (DIY) culture. This small but mighty city even earned awards, like the Great American Main Street, thanks to its independent shops, support for local markets, and diverse food scene.

Quoting Mayor David Coulter, “I've lived in Ferndale long enough to see it evolve a couple different times, from sort of a dead, inner-ring suburb to a funky, grassroots kind of phase, to where we are now, which is a pretty popular and attractive entertainment and commercial (scene),"

And, while it’s commonly known as the more affordable option to live in versus its neighbor Royal Oak, median home sales have been rising over the past 5 years—up 77% from 2014 to 2019. If this sounds good, wait until you read more about its investment potential in the following sections.

"It's like a mini Austin," said Gaal Karp, a developer with Ferndale Haus. They’re opening a mixed-use apartment building of 106 units, charging $1,350 per month for a studio space—a significant jump compared to the median rent of $975 back in 2013-2017, according to the U.S. Census data.

With Ferndale’s progressive transformation and emerging real estate market, is it wise to buy a couple of rental properties in this up-and-coming area?

Let’s take a look at the details to find out.

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

According to Niche, the average rent across property types in Ferndale is $1,114 per month. If we were to break this number down to specific bedroom sizes, the rent amounts in Ferndale are generally higher than in the rest of Metro Detroit and Michigan:

Source: Bestplaces

Looking at the current listings on Zillow, we can see that 3-bedroom homes are more common in Ferndale. Aside from that, we can also see that the averages listed by Bestplaces are pretty much accurate, if not slightly higher than the estimates (especially for studio units):

Source: Listings on Zillow as of August 2023

Now, let’s use the rent-to-price ratio calculator to see if these homes will bring in good cash flow. The industry standard is to have the monthly rent equal to or higher than 1% of the property price.

Take a look at this 3-bedroom listing for sale on Zillow. With a rent estimate of $1,760 and a property price of $260,000, the ratio comes in at 0.6%—reflective of Ring Cities around the City of Detroit which has an average of 1% rent-to-price ratios.

Source: Listing on Zillow as of August 2023

House Value and Appreciation

Based on Niche, the average house value in Ferndale is $192,100. However, Zillow reports a more impressive home value index of $591.907 across all types of houses. This number decreased by 4.9% over the past year, but definitely higher than in 2021, with an average home value of $529,400. However, based on historical trends, we can expect that it will go back to an upward trend in the following years:

Source: Zillow

Redfin also gave some insights into the real estate market of Ferndale, reporting a decrease of 2% in median sale prices year-over-year. Nonetheless, Ferndale homes are sold for a median price of $245,000, which is 1% above the list price, and are snatched up after roughly just 11 days on the market.

Given all this, Ferndale is a “most competitive” real estate market, according to Redfin’s Compete Score.

Source: Redfin

Looking at the home size and type, NeighborhoodScout shows that the majority (79.60%) of properties in Ferndale are single-family homes. Moreover, most of the homes have either 3 bedrooms (39.2%) or 2 bedrooms (39.1%). There are only a couple of small apartment buildings and apartment complexes (9.7% and 8.9%, respectively) and even fewer townhomes (1.6%).

Ferndale properties are priced relatively evenly across the city, although with a wide price range of $36,000 for empty lots to $775,000 for large multi-family homes.

You’ll also notice that homes tend to be slightly more affordable along the south border of Ferndale since it’s closer to the City of Detroit. It’s a good location to reap the benefits of Detroit’s affordable housing stock while avoiding the investment risks it’s commonly associated with:

Source: Listings on Zillow as of August 2023

In terms of appreciation, Ferndale is undoubtedly one of the best long-term real estate investment areas in the US. NeighborhoodScout reported that the city’s properties appreciated a whopping 139.76% in the past decade (an average annual appreciation rate of 9.14%), successfully placing itself in the top 10% highest appreciating community in the nation.

In the past 12 months, Ferndale’s appreciation rate trailed the rest of the nation at 0.59%—lower than the national average. However, these are average appreciation rates for the city. The neighborhoods within Ferndale definitely differ from one another, which means the investment potential in each area is distinct. You can see how the rates are spread out in the heat map below, as the average appreciation rates can vary from one neighborhood to another:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

With the financial viability of Ferndale homes now clear, let’s discuss the quality of tenants, properties, and living in the city. These factors determine the type of tenants you’ll have to manage, the general property conditions to expect, and the charm of the neighborhood you’ll invest in.

Average Property Class and Condition: B+

Average property age: 71 years

Data from Bestplaces show that the majority of Ferndale properties were built in 1939 and earlier. Compared to the greater Metro Detroit area that has varied property ages, homes in Ferndale are certainly skewed towards the older end of the property age spectrum:

Source: Bestplaces

Based on the industry’s rule of thumb, homes that are beyond 50 years old are considered old. Given that Ferndale properties are around 71 years old, you might run into some homes that require major renovations to bring them up to rental standards. That being said, there are still a lot of newly or recently-refurbished older homes that will require little to no work before you can place a tenant in them.

With careful budgeting, inspection, and overall analysis before purchase, you’ll still find profitable investments in Ferndale’s older housing stock.

Quality of Life in the Neighborhood: A

Aside from calculating the numbers, you want to ensure that the property will attract high-quality tenants. Doing so means having responsible renters who will pay rent on time and take care of your hard-earned assets—a factor that will directly impact your investment return.

Here’s how life in Ferndale looks:

Local Economy

Ferndale’s downtown area around the intersection of Woodward and Nine Mile is experiencing a transformation. Many new developments are popping up, all highlighted by Detroit Free Press:

• * The 138-space parking lot on Allen and Troy is converted into Development on Troy (DOT), expanding the structure into 400 parking spaces and areas for retail, office, and residences. The project also revived the adjacent Troy Street with a public alley, public plaza, and special events area for Ferndale locals to enjoy.
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• * An apartment complex at the iconic intersection of Woodward and Nine Mile called FerndaleHaus was also recently constructed, offering “luxury loft living” with retail stores in the heart of Downtown Ferndale. It has more than a hundred loft-style studio, 1-bedroom, and 2-bedroom units for residents to experience the best that Ferndale has to offer.
• * The 409 on Nine development with 127 apartment units and 5,500 square feet of commercial space was completed just last year. This four-story, mixed-use building offers “maximum walkability, a space to entertain, and on-trend designer finishes,” according to its website.

All these are within half a mile of each other, contributing to Ferndale’s renewal. These economic developments increase job opportunities, attracting new residents to Ferndale and creating a great opportunity for rental investors like yourself. Bestplaces reports that Ferndale has an impressive job growth rate of 33.60%, which is higher than the national average of 30.4%.

School Rankings

Having quality schools near your investment area will help attract families with children still studying. According to Niche, there are a total of 9 public schools that serve Ferndale, including the following top-rated ones:

• - Ferndale Upper Elementary Campus
• - Ferndale Middle School
• - Ferndale High School
• - University High School

Ferndale High School even earned a College Success Award for doing an exceptional job at getting students to enroll in and complete their college degree—including students from low-income families.

Crime and Safety

The crime rate in Ferndale is 4% lower than the Michigan average, which means it’s not the community with the most concerning crime rates. In fact, the nearer you are to the northwest part of the city, the safer it gets. Surveys from Niche also show that 73% of Ferndale residents feel safe, and 70% of them say the police are very visible and responsive.

Here’s a heat map for the crime rates in Ferndale neighborhoods:

Source: NeighborhoodScout

Now, you’ll have to evaluate the crime rate of the exact location of your investment property, as safety can differ from one street to another. In other words, you can find “safe” neighborhoods even in areas that are rated as more “dangerous” on the heat map.

Livability

Ferndale is named #34 in Niche’s Best Places to Live in Detroit Area, giving the city high grades for its housing stock, family-friendliness, job opportunities, nightlife, cost of living, crime and safety, and more.

Here are some other awards that Niche gave Ferndale:

Source: Niche

Data from Areavibes show high grades in livability as well, where Ferndale has an “exceptional livability score” of 88/100, being better than 99% of all areas in the country. The city is #12 in Michigan and #102 in the nation, ranking well for amenities, crime, cost of living, and housing.

Bestplaces also breaks down the common cost of living in Ferndale in more detail:

Source: Bestplaces

Tenant Class and Demographics: A

As a rental investor, it’s of utmost importance to secure quality tenants to retain the value of your property. So, let’s evaluate the potential tenants you’ll get in Ferndale based on the factors that contribute the most to their class and demographics.

• -- Income: The income in Ferndale is higher than Metro Detroit, Michigan, and the nation. This is a good indication that you can charge higher rent for rentals in Ferndale:

Source: Bestplaces

• -- Unemployment: The unemployment rate in Ferndale is also lower than Metro Detroit, Michigan, and the nation. This means your tenants will likely have a steady stream of funds to pay for rent every month

Source: Bestplaces

Here are some fun facts, too: Ferndale has more artists and designers working in the media industry than 90% of all communities in the nation, and more people working in computers and math than 95% of the places in the US.

• -- Education: Ferndale residents have achieved higher educational attainment than Metro Detroit and Michigan, which means they are more able to secure higher-paying jobs. Nearly everybody (95%) has graduated high school and completed a college degree (90.2%):

Source: Bestplaces

• -- Diversity: In terms of racial diversity, Niche offers the following breakdown for Ferndale:

Source: Niche

As we can see, the tenant pool in Ferndale leans towards the higher end of the spectrum compared to Metro Detroit and Michigan. Nevertheless, don’t skip the all-important tenant screening step to secure quality tenants for a low-risk rental property investment.

Source: Google Maps

Overall Score: A-

After reviewing all of this information, we gave Ferndale an overall score of A-. The key factors that drive this high score include the following:

• - Ferndale properties have good cash flow potential, almost meeting the standard 1% benchmark for rent-to-price ratios. You can expect a healthy stream of rental income from its housing stock.
• - Ferndale properties have increased home values and appreciation rates, offering opportunities for you to gain equity in many of its neighborhoods.
• - Ferndale has a quality tenant pool within its growing economy. The up-and-coming area continues to attract residents seeking greener pastures to live in.

Ferndale properties are financially viable with great tenants, workable property conditions, and impressive neighborhood livability scores. This city is certainly teeming with potential for rental investors.

Now that you have an overview of the city, we suggest that you take the time to visit Ferndale to find the ideal property with a balance of potential cash flow and equity gains. Based on our personal experience and thorough research, Ferndale has many properties that yield both kinds of returns.

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Are you interested in another Metro Detroit area aside from Ferndale?

Visit the other Deep Dive articles we’ve already published or drop a comment below to request a specific city or neighborhood. Our team will prioritize your suggestion in the following installments to come.

We’re not stopping until we’ve “dived” into all the areas in Metro Detroit!