My journey investing in Detroit

[Chen Zhou]

About 2 months ago, I was planning for a my 1-week trip to Pittsburgh-Cleveland-Detroit (the classic rust-belt cities) and I started networking on BiggerPockets to find good turnkey companies/realtors that I can work with locally. At the time, I knew very little about Detroit or any of the 3 cities, but the idea was to survey these 3 markets that regularly rank as cities with the best rent-to-purchase ratios and decide where to start. I would never have imagined that I'm already in contract for an investment property near downtown Detroit 2 months later (aiming to close August 2019). I would love to share my experience along the way to give back to this community as I found my amazing realtor team (https://www.detroitpropertybrothers.com/) here. 

A bit about myself - I'm your classic Silicon Valley cliche: can't afford any investment property in the bay area but want to invest in real estate to achieve financial freedom in the long-term. I love real estate for the same reasons as many people on this forum - there are so many ways to play in real estate (leverage, rehab, addition, buy and hold, etc.) and tax benefits are tremendous. 

Why Detroit? I believe that there are a few macro trends benefiting Detroit (we are mostly talking about downtown Detroit and some adjacent neighborhoods): 

1) the city climbed out of bankruptcy in 2013 and is having a historical rebirth with the new mayor Mike Duggan in office (likely running for another term). His revitalization strategy and partnership with the private sector (Dan Gilbert, Ford, etc.) have worked better than many people's expectations so far and he also brought in great staff into the administration. With all the new businesses coming into downtown Detroit, the demographics is changing very rapidly - Exodus of older-generation auto industry workers are replaced by a steady inflow of college-educated young talent into Downtown Detroit for jobs created for the new economy...Same thing started in Pittsburgh about 5-10 years ago: https://www.citylab.com/equity/2015/08/brain-gain-in-the-rustbelt/402922/

2) coastal cities are getting so expensive that most millennials and Gen Z cannot afford to live in San Francisco/Seattle/NYC anymore. Instead, they are looking for more affordable second-tier cities that have exciting job opportunities (startups, tech, etc.) and also a critical mass of other like-minded young people. Downtown Detroit offers exactly that with the tech scene booming (check out StockX, Rocket Fiber, Bloomscape, Microsoft, Google/Waymo, Amazon, Quicken Loans, Ally, etc.) and big Autos (Ford, GM, etc.) putting their autonomous driving and EV teams in downtown Detroit to compete with Silicon Valley for top talent in this country. For the auto giants, this is a strategic imperative otherwise they would become irrelevant in the 21st century, that's partly why Ford is trying to rehab the Michigan Central Station in Corktown to compete with Silicon Valley: https://www.youtube.com/watch?v=c42nTd6t1fA&fbclid=IwAR1PmOZYjwoGNG0cjY_ra2_MU9S_lcR3kPLP3gPphPguh3qZ20OUx7iW7eE

3) millennials and Gen Z prefer high-density urban living much more than the previous generations and they don't want to own a car if possible. You don't need to own a car to get to restaurants/bars/groceries/parks in Downtown Detroit and some adjacent neighborhood such as Corktown, Midtown) because everything is within walking distance. 

If you are interested in this topic, please feel free to leave a note with specific questions. 

[Chen Zhou]

Originally posted by @John Miles:

@Chen Zhou Thanks for this detailed content! My friend and I are looking at investing in the Detroit market and wondering if you have any update on your experience so far. If easier and you’re up for it we could DM to setup a call?

Thanks, John. Things are still going well. I'm probably very lucky that I got amazing tenants who renewed their lease with me last year. I think Ford's making pretty significant progress with the Michigan Train Station despite COVID. I'm really looking forward to them opening the campus in 2023 and I will definitely make another trip out there then!

Let me know if you have any specific questions. 

Chen

[Chen Zhou]

Originally posted by @Joseph Hummel:

@Chen Zhou

Awesome story Chen- I think you and I feel similar- I sorta fell in love with the rebuilding efforts of Detroit (my wife and I are in Tahoe not too far from you) we started right before covid, it slowed down process, since contractors disappeared but we found someone who worked well and now we are almost ready for our next property there. I always joke with friends “hey you wanna buy a house in Detroit?” We are looking at some land bank deals as well as apartments still.

This is great to hear! I'm very excited about everything going on in Detroit. Would love to get your recommendations on contractors down the road. I might do some small renovation when it comes the time to sell (definitely not until Ford opens the Michigan Train Station campus). 

[Drew Sygit]

We're experienced property managers, flippers, etc, so let us know if you need advice. 

We all win when more people invest in Detroit:)