The Verdict on Detroit—Is it a Good or Bad Market for Investing?

Metro Detroit is in a fairly legendary place in terms of its housing market. Tens of thousands of empty houses sit decomposing in some areas, while other areas are blossoming. You can find houses worth $80k that are selling for $150k—and some that are selling for $80. In terms of real estate investment, there has never been a place where the emptor needs more caveat. For an investor who mixes risk tolerance with diligence and patience, however, the potential rewards are above and beyond.

4 Upsides to Investing in Detroit

Upside #1: Rent-to-Value is Through the Roof

According to BiggerPockets’ annual real-estate market review, Detroit has the second highest rent-to-value ratio in the country at just over 8.5%. This means that investment properties in Detroit have enormous potential to pay off the initial investment quickly and turn into profit streams.

Upside #2: Low Entrance Requirement

Obviously, in a market where houses come in such a wide range of prices and actual values, it’s going to be possible to get in on the housing market for less money than in a market where houses are consistently kept near their actual value. This makes Detroit a choice market for people who want to turn a small amount of initial investment into a decent amount of cash flow.



Related: Rents Dip Below Inflation, Home Appreciation Slows: Are Markets Cooling Off?

Upside #3: Growth Happens

The Metro Detroit area is a mix of wealthy, fast-growing areas—and the opposite of that. As it happens, that’s a great recipe for finding homes in areas that are going to start growing, provided the overall economy of the area keeps trending upward. As the Metro Detroit area is trending upward and seems to be set to do so for quite some time, this makes finding likely investment homes easier here than in many markets.

Upside #4: Proactive Government

The City of Detroit is strong on its position that the real estate market in the city needs help—and they are definitely helping. By demolishing sizable tracts of empty, deteriorated homes, the city is in the process of “filling in the crater” that is the housing market of the suburbs surrounding midtown and downtown. Add to that significant improvement projects like the Cuts, a series of long, narrow parks connecting inland neighborhoods to the river, and the question becomes not if the real estate market is going up in value, but how fast.

by  | BiggerPockets.com

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