DETROIT RENTAL PROPERTIES: ARE THEY UNDERRATED?

For those who aren’t familiar with the Detroit real estate market, it’s one of the most underrated markets in the U.S. It offers plenty of amazing opportunities for new and seasoned investors alike. You may be wondering how Detroit rental properties fare? Or better yet, will this be a good investment? The simple answer is YES. Let’s look at a few factors, so you can succeed in the Detroit market.

LOCATION

As an investor or an avid real estate enthusiast, you know that location, location, location is everything when it comes to real estate business. However, what does “location” really mean? If we narrow it down, as an investor, you’re looking for a location with a good/safe neighborhood, attainable property prices, good rental rates and return on your investment.These are just some of the key points when considering location.

• Neighborhood

What makes a good neighborhood? One, of course, is that it should have a relatively low crime rate. This gives people a sense of security, and feeling safe in their home. Detroit has a history of receiving some negative reactions in terms of how safe its neighborhoods are. People who currently hold this sentiment, have not been paying attention to the Detroit renaissance. Detroit is on a decade long revitalization, which includes improving many of its neighborhoods. What was once an undesirable crime-ridden area is becoming a safe haven for families to live in. New housing developments are attracting people to the city.

This can be directly correlated to employment rates in the area. Detroit has been showing a growing economy during the past years, as both small and large corporations, and many small businesses have begun showing their presence. This rapid growth has resulted in increased jobs throughout the city.

• Property prices

Let’s compare the average price of homes in other US cities to Detroit. Data through August 31, 2019 indicates that the median listing price in the U.S. is $289,000 while rent prices average around $1,700/month.

How does Detroit fare in comparison? Median home values are at $79,962 while rent list prices are at $850/month. In fact, in the immediate surrounding Detroit-Warren-Dearborn Metro area, rent prices are at $1,312/month, while still showing much lower prices compared to the U.S. rental market.

• Cost of living

How much does an average Detroit resident need to earn in order to live comfortably? For a family of four living in the Detroit-Livonia-Warren Metro area, an annual income of $79,308 is needed to live comfortably. Comparing this to San Francisco, the same family needs to have a basic budget of at least $148,439 a year to live comfortably.

CONDITION OF PROPERTIES

The Metro Detroit area is seen by some to be a risky housing market. Some are stuck in the past, when words like “blight”, “foreclosure” and “vacant” were popular words describing Detroit. Most of the city is seeing a reduction in vacant homes, and the increase in stable neighborhoods, and others starting to blossom fast. Listening to old rectorict may prompt new investors to avoid Detroit altogether; however, with the correct knowledge and due diligence, you’ll find a lot of investment opportunities in Detroit.

• Rapid growth

Detroit has a mix of areas with properties that are in various conditions, both good and bad, so be mindful of the house you’re looking to acquire. Properties in areas once thought not to have any promise, now have great potential for growth in the long run. Investors who spend a relatively low amount for a property, in an up and coming Detroit neighborhood, can expect a surprising amount of cash flow when the area blooms.

• Government initiatives

Sure, there are some neighborhoods which have not seen the improvements. The city of Detroit has been proactive in altering the condition of its properties. Several projects and initiatives have been implemented to address rougher neighborhoods. The city is trying to demolish dilapidated vacant homes, then offer the adjacent homeowner the opportunity to purchase the empty lot for a few hundred dollars. There are other properties the city holds for sale at reduced prices. There is a city department that follows up on newly acquired homes to ensure the new owner is making the house livable, clean and secure. All this is good news for investors with properties in the city of Detroit.

PROPERTY MANAGEMENT

A rental property can be financially rewarding. However, it takes a lot of time and commitment to make sure the property is up and running properly. This is easier said than done. If you’re not prepared, you might find yourself in a very tricky spot in the near future. Enlisting a professional property management service will help you avoid headaches. Detroit has a large rental market, with many investment opportunities. It’s important to have a local,tried & tested property manager helping manage tenants and vendor relationships effectively to maximize the profitability of your time and money. ProWay Property Management does all that in Detroit and Southeast Michigan rental properties. To learn more about our services, call (734) 744-5080 or send us an email at [email protected].