Purchasing Rental in Detroit, advice?
Investor · Orlando, FL · Member since 2016 · 27 posts · 5 votes
Hi all, I'm looking to purchase a rental in Detroit. It's in the 48238 zipcode, close to the University District and Marygrove College. It's a 3/1, 1400 sq feet and renovated. It's about $35k, all brick, no central A/C. It has a renter, but don't know much about the renter. The renter is paying $750/mo.
Couple questions:
- Does anyone know that zip code, is it a good zip code to invest in in Detroit?
- The seller asked that I not speak with the renter prior to purchase, this seems to be a red flag to me, thoughts? She said that it might spook the renter?
Any thoughts in general on Detroit? I feel like a classic American city like Detroit revitalizes, but it could just be a media story. Anybody "on the ground" investors with thoughts? Thanks in advance.
@Darren Wendroff - When making a trip up here, I would take a look at the map and take a look at the "hot" neighborhoods as specified above. There are specific reasons for each of these neighborhoods to be hot, such as money being pumped in from Quicken Loans, Federal Money, or have been hot for the last decade. I would tend to look at spillover areas. These are areas that are next to these neighborhoods which you can find some really good deals. For example, if you were looking at Corktown, which is a really hot neighborhood, I would look at North Corktown, Core City, Hubbard Farms, Southwest Detroit even. People aren't shying away from living in these areas, if you give them a good product. I've partnered up with @Mike Carino on a few of these deals the past few years, so he has experience here as well. So far, these are where the best ROI's we have seen in the city are occurring. It's speculative, but isn't all real estate? Just my thoughts. Anyone else have experiences in such tactics?
Both of my Detroit properties(Brush Park and North End) was that method. When I bought in Brush Park in 2013 most activity was up near Warren Ave near Wayne State. Or you had Downtown. People felt it was crazy, but Brush Park will probably end up being the most expensive neighborhood in Downtown/Greater Downtown when it all shakes out. The "Hot Areas" are just crazy expensive and IDK how you can make money renting, buying at these prices. Now we are doing the North End and shockingly its been easy to get renters and at solid pricing. I'm noticing its mainly people in The "Hot Areas" been in the City 2-3 years and they decide to go into a little cheaper place. West Village is a perfect example. Its adjacent to Indian Village, near Belle Isle still only 3 miles to Downtown.way cheaper than the 7.2 Area.
But I think the next major domino to fall will be Development up Gratiot. Its just a complete disaster through the area but with it being such a major artery coming into the City for people in Macomb County it has to turn around. I grew up near City Airport so thats a ways from Downtown. But literally on Gratiot as soon as you pass Eastern Market its "Pure Detroit". Jefferson, Woodward, Grand River, Michigan Ave, all have a buffer-zone. I want to get a couple spots in that part of town, but it will be just such a rough ride because nothing is there, and its far from anything thats attracting people in terms of on foot/bike, and frankly I'll be honest I don't think its nearly as safe as some of the other ateries into the City. I mean the SMART Bus on Gratiot is known as the Heroin Express. But its the last Downtown area you can get in on the "ground-floor".
Its all speculative really, just a hunch.
My Wife and I kick ourselves daily that in 2009 there were townhomes on Woodward next to Comerica selling for 55K as high at 70K and we felt it was crazy, we bought our house in Madison Heights. NOW those same places are selling for mid-300K and command 1900-2500/mo in rent. Meanwhile our house in MH went from 50K to 88K and gets 950/mo. We missed the boat majorly on that one.
No one has thoughts?
Thanks Ken, I've heard not so good things about Detroit :/
Have there been any positive stories out of the area? It feels like it's revitalizing, and some zip codes are good, but it's tough to get a feel.
As an investor who has renovated and sold over 200 properties in the Detroit Metro area I would respectfully disagree with Ken. If you are familiar with the area or work with someone who is, you can find some tremendous opportunities.
Specifically, to your questions. It is hard to tell you in general if a zip code is a good or bad investment. Even the best areas have bad investments and visa-versa. In general, that area good for investing in rentals. Better employment and the college.
With regards to not speaking tothe renter. This is something normally you can work with the seller on. What we do in many cases is have the seller let the tenants know there will be an insurance inspection and that way it does not raise concerns.
On the property details. Again hard to give exact answers without full details and review of property, but overall what you listed would be expected in that area.
If you would like to discuss more or see our SFR opportunities in the Detroit Metro area, just let me know.
Robert
Thanks Robert, I'd like to connect to learn more about your experience in the area, are you free for a call?
I invest in the University District and nearby. The truthful answer to your question is, it depends. Some streets in that ZIP code are fine, others not so much. For that general area, I'd stick to properties near and around Livernois between Six Mile and Eight Mile -- which is north of your ZIP code. Lot of new investment going on there. University District or parts of the Bagley neighborhood. PM me if you have questions about anything. Happy to help.
Jeremy, thanks for the reply, sent a request to connect. Would love to talk, thanks again.
Detroit has houses that are better than 95% of the cities in the US!
Detroit also has houses that are worse than 95% of the cities in the US!
BOTH inside the city limits of Detroit.
I live inside the city of Detroit and am glad I moved from Orange County California.
Detroit is a great city with great history inclusive of its industrial roots all the way to its civil rights and labor struggles. My family has been here since the 1920's and my Grandmother owned owned a house in the 48238 Zip code where I played as a child. Today it is much different there than it was when visited my Grandmother. Street by street and block by block Detroit varies in its investment appeal. Do not enter unless you know what you are doing in Detroit. You are best served in having a local representative who you know and trust and who actively manages or invests in the area you are looking at. I am a long time investor and live in metro Detroit and I don't invest there because of the complexity. I could not imagine managing it from afar. My 2 cents.
I cannot agree more with @Brian Sullivan. If he as an experienced local investor stays away- believe me- you should to.
Detroit is not for long distance investing.
@Darren Wendroff I invest, flip and wholesale on "Certain blocks" if you dont know the blocks and you dont know the people..... Do waste your time. You will get burned one way or the other. Work with trusted people that you know and know the areas very well.
I love Detroit and Metro Detroit. I really depends on your own type of investing strategy. There are plenty of nice and easy safe, and even turn key bets in metro Detroit where you dont have to worry and property management that can withstand the small problems.
Being an outside investor is hard. So why make it harder? Invest in the right team on the ground if your going to invest the money in the city... Yes I invest in the city and I am an outside investor.. But I did the time for me to put myself in that position.
@Mike Carino thanks for the insights, I've heard that also about certain blocks. The block that I'm looking at looks decent, but the block next to it not so much.
I cannot agree more with @Brian Sullivan. If he as an experienced local investor stays away- believe me- you should to. Detroit is not for long distance investing.
Bigger Pockets is full of Detroit haters! Yes including lots of Michigan people that live in the suburbs that were expecting their property values to go up rapidly and are bitter when they see Detroit values going up 5-10 times as fast as the suburbs.
I am invested in seven of the Detroit area cities and the ones in Detroit are generally better performers.
For a person to talk about visiting their grandmother years ago and seeing the neighborhood change does not qualify them as a Detroit expert. Rochester is a very nice Northern suburb about 15-18 miles from Detroit.
Reread this and my other early threads, WHERE are my critics today?
There were lots of critics that said buy in the suburbs stay out of Detroit! But from a review of their profiles they don't even seem to be involved in RE anymore at all! (Or perhaps they just don't come to BP anymore)
In several of the threads I have invited the "local" Detroit Doubters to come down and tour the neighborhoods with me. See parts of Detroit they have never seen before or parts they have not seen in 10-15 years.
But again I have NEVER advocated buy a house in Detroit and sit and watch it from afar.
Not only do I currently invest in 4 of the suburban communities, but I am actively looking in Detroit. Before questioning my credentials know that I have been investing in Metro Detroit since 1988. I am involved in my local REIA and have been for nearly 30 years.
I drive through Detroit and Highland Park every day. My work has taken me into many of the communities and homes in Detroit. I can tell you about the early 20th century homes of the University District as much as I can tell you about Palmer Woods, and Indian Village. I can also tell you about 3rd avenue in Highland Park where the weeds grow taller than some of the burned out houses. And Brightmoor. I have seen the revitalization of Cass from one of the worst slums in the country to a once again vibrant community with promise.
I did not hold myself out as an expert in investing in Detroit. If you look at my words I said I do not invest there because of the complexity. I have seen a lot of people lose their hard earned money in Detroit by making stupid decisions. I know a guy who got shot in the abdomen while picking up rent. And I have seen people make millions as slumlords. My point simply, if you do not know Detroit it is not wise to invest there from afar unless you are well represented by trusted resources on the ground. And I can tell you as many stories of people who have failed doing this.
One guy from California hired a local property manager. The house was stripped twice of all copper pipes, furnace, hot water heater. When the property manager was pistol whipped by a squatter they quit managing the property. The California investor was left high and dry losing a $35,000 investment after only getting 1 year of rent. That was on Ardmore in the neighboring 48227 zip code.
I also know people who have bought up entire blocks and have made tons of money actively managing their investments.
I do live in Rochester because I want good schools for my children - something Detroit does not offer. But I know Detroit too and I do not hate it. Quite the opposite. I am in love with its architecture and its communities. I don't invest on speculation (i.e. increasing property values). And anyone who did in the last 50 years would have lost their arse in 45 plus of the last 50 years unless they invested in the southwest Detroit Latino community. That is the only part of Detroit which consistently grew in the last 50 years.
I invest for cash flow from rent. I prefer Oakland county border communities to Detroit because they offer greater value as rentals (city services, police and fire coverage, schools). Seems certain people feel that anybody who doesn't share their pie in the sky view of Detroit is a "Detroit Hater".
@Brian Sullivan, thanks so much for the great insights, I've started to research more people "on the ground," that is a reoccuring theme I've heard. I'm not afraid of the risk, but do want to make an educated decision, I think educated risky decisions are where true investment gains are made. Thanks again.
I agree with Brian. Detroit can be very seedy. It has always been my opinion that if an investor could afford it to purchase an entire block. That way you can somewhat control market value in that area. Stripping of homes and squatting is very common, especially if locals know that the property is vacant. If you know what you are doing or are working with someone who knows the neighborhoods, then definitely go for it. There are pockets in Detriot that are absolutely gorgeous.
@Brian SullivanI voted for your second post You got 2 votes from 2 active investors that buy houses in Detroit including me.
In your first post you did come across as "Nothing good in Detroit except its past" and @Saul L. took your statement and pointed out since you were local and don't invest there then of course nobody should.
In your second post you said: "but I am actively looking in Detroit"
As I've pointed out it takes more than a property manager to be successful in Detroit. And i don't advocate investing in Detroit and then hiring "experts" to assist you from afar.
All the time I see people talking about building their "team" in Detroit: (Real Estate Agent, lawyer, accountant, property manager, contractor, or TurnKey company) All of those people make more money the more you buy and they're getting paid out of your pocket before you make any money and whether you do or not.
Good luck as you explore the jungle South of Eight Mile
I would fly up for a 3 day weekend, catch a Tiger's Game or a Lion's preseason game look at a ton of properties. The whole trip will run you flight/hotel/food/entertainment maybe $3k that you get to expense at the end of the year anyway.
I wouldn't play in that zip-code, I would do anything along Livernois North of U of D...Also don't be afraid to look in the North End(woodward between grand blvd and Chicago). I bought a triplex for 49K in April I put 15K into it and I get 850, 800, and 500 on a 2b/1ba, 1b/1ba, and studio.
So I purchased three units for 65K, and I slightly overpaid, If I went in with cash on my intial offer I could have saved $10K.
The banks said I couldn't get 1700/mo out of the house, refused to loan money even though the appraised value was 52.5K, so I paid cash and now get $2100....None of my renters are Section 8, all are workers making 30-55k a year(two are medical doctors who are residents).
FYI-invest in good exterior lighting whatever you buy here, its worth it.
I strongly advise NOT to invest in the 48238 area for a rental property. The best places to invest in Detroit are Indian Villiage, Sherwood forest, Boston Edision, East English Village, Midtown, New Center, Downtown, University District, and Rosedale Park. These are great and upcoming areas.
Indian Village, Sherwood Forest, BE, Midtown, Downtown, UD...those areas are GREAT but very expensive for a rental unless you are speculating on rate increases...
Stick with Rosedale Park, parts of New Center, the Bagley area or Woodward corridor north of Midtown (nice call @Christian Hutchinson). There are many more good rental areas but if you are not local they can be more challenging.
Good luck.
@jon
Thanks for the great feedback. I'm researching now, really appreciate your insights. I think I'm going to take a trip up there and see what's on the ground. I do want to invest there, but seems like the overriding message is see what's happening in the neighborhood before dropping money. Thanks again all.
@Darren Wendroff - When making a trip up here, I would take a look at the map and take a look at the "hot" neighborhoods as specified above. There are specific reasons for each of these neighborhoods to be hot, such as money being pumped in from Quicken Loans, Federal Money, or have been hot for the last decade. I would tend to look at spillover areas. These are areas that are next to these neighborhoods which you can find some really good deals. For example, if you were looking at Corktown, which is a really hot neighborhood, I would look at North Corktown, Core City, Hubbard Farms, Southwest Detroit even. People aren't shying away from living in these areas, if you give them a good product. I've partnered up with @Mike Carino on a few of these deals the past few years, so he has experience here as well. So far, these are where the best ROI's we have seen in the city are occurring. It's speculative, but isn't all real estate? Just my thoughts. Anyone else have experiences in such tactics?
Hi @Darren Wendroff ,
There are lots of great investment deals in these up and coming neighborhoods and surrounding areas like @Kyle Manduch mentioned. Please let me know when you are thinking of coming into town. We can schedule a city tour, so you can get a feel for exactly what we all have been talking about.