The Risks and Rewards of Advertising in the Detroit Rental Market

The Risks and Rewards of Advertising in the Detroit Rental Market

3 min read
Drew Sygit

Drew is a classic overachiever, bringing intensity and passion to everything he does. While in the mortgage business, he rose to a VP position at the first broker he worked for and then started his own company.

Experience
In the pursuit of excellence, Drew obtained several mortgage designations and joined mortgage and several affiliate association boards. He also did WebX presentations and public speaking engagements. It was during this time, he started personally investing in single family rentals, leading him to start Royal Rose Property Management with two partners. He also joined the board of a local real estate investors association, eventually becoming its president.

The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank went on to eventually acquire four failed banks from the FDIC, increasing from $100MM in assets to over $2B while he was there. After that he took over as president of Royal Rose Property Management and speaks at national property management conventions.

Accreditations
Former board member of Michigan Mortgage Brokers Association, Financial Planners Association of Michigan & Mariners Inn (nonprofit)

Former taskforce Member of Michigan Association of CPAs (though not a CPA)

Involved in mortgage business for over 18 years, obtained mortgage designations: Certified Mortgage Planner, Certified Mortgage Consultant, & Certified Residential Mortgage Specialist

Board member of Real Estate Investors Association of Oakland; President since 2012

2009-2012 Shared-Loss Manager for Talmer Bank (now Chemical Bank) handling FDIC failed bank loan loss strategy, reporting, REO management, collections, & gap analysis

Started investing in real estate in 1996

President of Royal Rose Property Management since 2001

Education
Drew received an MBA from Wayne State University, concentration in Finance & Marketing.

Follow
LinkedIn

www.RoyalRoseProperties.com

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Our company operates out of the Metro Detroit area, which, as of this writing, contains the second-least-expensive housing market in the U.S. That means we’ve got a solid perspective on low-cost rental markets for which you won’t find much advice about online. Over the course of this month, we’re going to talk a bit about how operating in a high-risk, high-reward environment affects the property management process. Today, we’re talking about how the Detroit rental market affects advertising efforts.

Switching it Up (by Necessity)

Properties follow a predictable cycle—tenants move out, the property gets spruced up and possibly renovated, marketing pictures are taken, the property is advertised for rent, it’s shown, and finally someone signs a lease and moves in. There’s a good reason for this process: usually, you only want to market a house that is immaculate—because immaculate houses tend to rent faster and for more money.

But if the market you’re operating in is a high-stakes economic environment like Detroit, there are several factors that can play into altering this order:

  • Incentive to get the property on the market more quickly
  • Inability of the owner to pay for further repairs or cleanup
  • The neighborhood’s blighted state making cleaning up the property a bad investment

Related: 25 Single Family Rental Markets Predicted to See the Largest Growth in 2017

The Race to the Market

Getting a property on the market quickly means a lot more in a high-stakes economy—both avoiding risks and amplifying rewards can be challenging. Because several of the risks can be summarized as “jerks will abuse the house for their own profit,” any steps you can take to speed up the transition from move-out to move-in acts to reduce the risk of the property getting stripped, squatted in, or vandalized.

This means it’s commonplace around here to show a house that is still partway through its repair process, hasn’t been meticulously cleaned, or has boards or metal security panels up over the windows. In other markets, showing a house this way would be a death sentence—around here, it’s common sense. Most property hunters are accustomed to it. It’s also normal to show a house that has no power, water, or even a furnace or water heater in place—they’d just get stolen, so we hold on to them and install them once the lease is signed.

Related: Buying a Rental Property: A Step-by-Step Guide

Blight and Marketing

This may actually be a problem nearly unique to Detroit, but it still contains valuable lessons for property managers everywhere. There are simply large areas of Detroit (about a third, if you remember the first article in this series) that look like this:

A satellite view of the line between a blighted neighborhood and a normal one.
Two street views: one normal, and one blighted and nasty.
(Yes, those two street views are literally just above and below the white line—in the same place looking in the same direction!)

If your property is in the Misery and Sadness zone, the rent you will be able to collect, no matter how excellent it is as an individual house, will be severely limited. North of that line, perfectly legitimate 3-bedroom/1-bath ranch homes rent for $650; below it, a nearly identical home rents for $800 or more. If you can’t collect enough money in rent to cover the basic maintenance costs of the house, you shouldn’t market it as an immaculate abode in the first place. Go ahead and take as-is marketing pictures and hold as-is showings.

By doing things you’d never consider doing in a traditional market, some of the risks associated with the Detroit market can be mitigated (or even turned into upsides)—but few people understand how it works. That’s why we decided this series of posts would be useful in the first place.

So, now you’ve seen one way in which the unique Detroit market can flip the usual property management logic on its head. Next time, we’ll look at what this market does to the next stage of the game: tenant screening.

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Do you have any tips for advertising in tough markets?

Let me know in the comments below!

Understanding how to advertise your rental property in a none-traditional way can reduce the risk of marketing in a high-stakes economy like Detroit's.