Good idea to Invest in Detroit?

New York City, NY · Member since 2017 · 17 posts · 14 votes

Hello BP,

I’m 23 years old and live in New York City. I’m really looking to start real estate investing to become financially free. I have 20k saved up that I’m looking to invest with. I’ve been looking into the Detroit market and notice good trends in certain neighborhoods. I’m looking for anyone that has any experience/advice for investing in the Detroit area. Also wondering if there’s any boots on the ground that could help guide me into what areas I should be looking at and which ones are trending upwards?

Thank you for your time.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

This is a great discussion about Detroit!

Would like to address some of the negative comments, by clarifying what we've experienced first hand, managing over 200 properties in the City of Detroit.

1) Detroit offers high returns for a reason - correspondingly high risk.

2) Risks:
---Tenant Pool: Relatively high percentage of low demographic population of renters with low income, low education, low credit scores, etc. Many will break a lease when a landlord tries to enforce their lease provisions about extra people living in the home, getting rid of unapproved pets, charging them for damages, etc.
---Stretched City Resources: Detroit is geographically one of the largest cities in the USA, built for a population of 2 million, with less than half that now. The resulting cut in city revenues led to the obvious cut in fire, police & other city supplied services - BUT the size of the city didn't shrink! So, city resources are spread thin and are prioritized. EXAMPLE: the police don't really respond to nonviolent crimes like squatters unless you call multiple times and are persuasive.
---Theft: vacant properties have furnaces, hot water heaters, copper, etc stolen all the time. We've even had toilets, kitchen cabinets and new windows stolen occasionally. Mysteriously, when tenants being evicted move without warning, many of these things disappear. Naive investors think calling the police will help - see above Stretched Resources.
---Deferred Maintenance: most properties were built 70+ years ago and have been neglected for decades and need much more than just paint & carpet or new kitchens & baths. They often need insulation, new windows (custom-sized and a LOT of them), underground sewer line replacement, structural work, etc.

3) Many wholesalers, flippers & turn_key providers misrepresent the risks above to out-of-state and out-of-country investors. The risks are downplayed or not mentioned at all.

4) Many wholesalers, flippers & turn_key providers sell properties by hyping the potential returns. Property prices are based on these hyped returns, not the true market values. So, many investors over pay.

5) So, naive investor buys an over priced property or two, not understanding all the risks involved. They think they have a stable rental with stable tenants and expect a stable ROI. Then the troubles start (see Risks above). Usually, the issues are downplayed as the wholesalers, flippers and/or turn_key provider that sold them the property(s) wants them to buy more. Eventually though, the problems add up and the truth starts coming out. The investor then has to confront the fact that they were scammed a bit (or a lot) and decide what to do. Many are very upset and end up selling their property(s) at a significant loss.

All this leads to Detroit getting a bad name!

As many on this thread have stated, they are investing in Detroit successfully, because they understand the risks - often learned the hard way.

If you're thinking about investing in Detroit, read everything you can to make sure you understand the risks. This will help you avoid the multitudes of scammers out there trying to sell you junk!

We want you to invest your money in Detroit wisely and keep it here. That makes everyone's investment worth more and we all win!

[email protected]248-209-6824

Logical Property Management4.9459 Reviews

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Julio Velazquez
East Elmhurst, NY · Member since 2017 · 125 posts · 27 votes
6y
@Mike Sullivan If the numbers make sense then Detroit does make sense. By numbers I mean population growth.. unemployment rate, poverty, things in that nature..
I’m curious as too how the Detroit market is as well.. I’ve been reading and hearing good things. To my understanding property value increased 20% in the Detroit area best it’s been in a while from what another member on BP wrote.
Best of luck.
2 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
6y
If you're an OOS investor with $20k to invest, it's likely a terrible idea to invest in Detroit.
If you're local and have $20k to invest, it could be a decent idea. But the risks are still high.
Detroit is a challenging market, even for us here on the ground. But I believe those that are savvy and willing to bust their butts have a generational opportunity here in Detroit.
There's plenty of discussion on BP about Detroit. Read it. Then make a decision whether it's right for you. But again, if you're working with $20k I'd say you're better off doing something locally or in a more stable OOS market.
11 Reply
Rassan Sampson
Westminster, CA · Member since 2017 · 43 posts · 39 votes
6y
@Mike Sullivan I started with my first investment property last year from OOS and bought in what I believe is one of the better neighborhoods in Detroit (EEV). My biggest piece of advice is to make sure you have really strong cash reserves. Between having the water heater and furnace stolen, non paying tenants, and the city inspection repairs, I've spent thousands more than budgeted. Luckily this won't end my investment career but I can see how these things can crush people's motivation and momentum.
11 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
6y
Originally posted by @Rassan Sampson:
@Mike Sullivan I started with my first investment property last year from OOS and bought in what I believe is one of the better neighborhoods in Detroit (EEV). My biggest piece of advice is to make sure you have really strong cash reserves. Between having the water heater and furnace stolen, non paying tenants, and the city inspection repairs, I've spent thousands more than budgeted. Luckily this won't end my investment career but I can see how these things can crush people's motivation and momentum.

Yep, and that's why I said if you're working with $20k it's not a great idea. But if you're working with 10x that and have the ability to finance 10+ properties, I think it's far more doable.
1 Reply
Mike Sullivan
OP
New York City, NY · Member since 2017 · 17 posts · 14 votes
6y
@Julio Velazquez thank you for the info, I’ll always make sure the numbers add up before doing anything.
0 Reply
Mike Sullivan
OP
New York City, NY · Member since 2017 · 17 posts · 14 votes
6y
@Travis Biziorek I’ll definitely read more into it before anything but just thought I’d reach out first. $20k doesn’t get you much where I’m from but I am willingly to do whatever it take to get where I want to be in life and everyone starts somewhere. So with the right team and dedication I believe I can use that $20k or OPM to build a portfolio in possibly the Detroit market.
2 Reply
Mike Sullivan
OP
New York City, NY · Member since 2017 · 17 posts · 14 votes
6y
@Rassan Sampson Thank you for your response and advice. Just curious do you have a property manager who takes care of the house?
0 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
6y
Originally posted by @Mike Sullivan:
@Travis Biziorek I’ll definitely read more into it before anything but just thought I’d reach out first. $20k doesn’t get you much where I’m from but I am willingly to do whatever it take to get where I want to be in life and everyone starts somewhere. So with the right team and dedication I believe I can use that $20k or OPM to build a portfolio in possibly the Detroit market.

I'm not saying you can't. You definitely could. But recognize you are picking what's likely the toughest, most unique market in the states.
You better have a damn good reason why you want to start here beyond the fact that it's affordable.

0 Reply
Rassan Sampson
Westminster, CA · Member since 2017 · 43 posts · 39 votes
6y
@Mike Sullivan yea I have a property manager which is another challenge and probably a topic worthy of its own discussion.
To add on to what @Travis Biziorek said with regards to having a good reason to be there, I was traveling to Detroit frequently for automotive work and my in laws are there, I got married there last year in a Ford museum. I actually got the idea to invest after several visits so prices didn't take me there, just lowered my barrier to entry. I think it's a unique city that requires hands on exploration, never been anywhere like it.
2 Reply
Paul S.
Member since 2019 · 248 posts · 248 votes
6y
Lets start off with my week.. this should help answer your question: I got a PM from an investor from CA that purchased 2 "Turn Key" properties from a scam group here in Detroit - Much like the garbage Isaura Orellana and her group push. I thought I would evaluate the properties on my time to try to help out. One property has been broken into many times and now requires a 15k rehab the owner does not have. The other property was listed for rent by a random Detroiter and rented without the owners knowledge. This man is sitting on 2 properties worth around 35-40k total, he needs a 15k rehab he doesn't have, management company is clueless and soaking him, and he is into Detroit for over $120,000. This poor man is going to take a very large haircut from our fine city. I've said this once and I'll say it 1000 times... It is VERY hard to make it in Detroit if you are here every day - It is nearly impossible to make it from OOS. With that said - spend away boys!!!

5 Reply
Jonne Washington
Detroit, MI · Member since 2016 · 30 posts · 9 votes
6y
@Rassan Sampson
Hi Rassan, I am a realtor here in Detroit and yes there can be hassles when buying property for that amount if you are out of state. But if you has someone here to help you manage your properties then that would be a great start. But there are some properties here in Detroit going for about $7,000-$10,000 and they need work done but may still be livable. I recently saw one for about 5600 and it really didn’t need much work from the beginning but again it depends on the area too.
1 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
6y
@Mike Sullivan: Not sure what Ms Washington is selling for $5600, but can pretty much guarantee it's a money-loser for an OOS investor.
We manage over 200 properties in the City of Detroit (as well as almost 300 in the suburbs) and we're often contacted by owners that got screwed by someone who sold them a property in the wrong neighborhood. These owners want us to perform miracles and save them, but we rarely can. We won't even consider managing properties in almost half the city!
Consider this: Detroit was built for around 2,000,000 people, but there are less than half of that living there now. So, what are you going to do with a $5600 property in the half of the city that no one is living in? NOTE: the 50% uninhabited is spread throughout the city, although the east side has higher overall vacancies than the west side.
SUGGESTION: post here on BP for a partner with another $20k and you may be able to do something if you're careful. $60k would be better & safer, so find two partners:)
[email protected]248-209-6824
Logical Property Management4.9459 Reviews
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7 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
6y
Originally posted by @Jonne Washington:
@Rassan Sampson
Hi Rassan, I am a realtor here in Detroit and yes there can be hassles when buying property for that amount if you are out of state. But if you has someone here to help you manage your properties then that would be a great start. But there are some properties here in Detroit going for about $7,000-$10,000 and they need work done but may still be livable. I recently saw one for about 5600 and it really didn’t need much work from the beginning but again it depends on the area too.

Highly advise everyone to put this person on block. You will be another horror story if you listen to this advice.

0 Reply
Rassan Sampson
Westminster, CA · Member since 2017 · 43 posts · 39 votes
6y
@Jonne Washington those prices sound like a bad time and wouldn't line up with my goals but I have to ask, which neighborhoods are you seeing those prices in?
0 Reply
Jonne Washington
Detroit, MI · Member since 2016 · 30 posts · 9 votes
6y
@Travis Biziorek
I highly advise you to stay in Troy. I said if he had someone here to help him manage the properties then it wouldn’t be a bad thing for him to do. I stay in the city of Detroit and just don’t try to sell homes here. I have people asking me about properties all the time and I was actually shocked myself to see some houses going for that cheap and still be liveable. Reading is so fundamental.
2 Reply
Jonne Washington
Detroit, MI · Member since 2016 · 30 posts · 9 votes
6y
@Rassan Sampson
Hi Rassan, I was merely just stating what I see in the market and if you were to have a partner here in Michigan to help you since you inquired. I wasn’t saying that you should go for it on your own. And yes those properties aren’t in the best neighborhoods but those neighborhoods are filled with a lot of renters rather than buyers.
1 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
6y
Originally posted by @Rassan Sampson:
@Jonne Washington those prices sound like a bad time and wouldn't line up with my goals but I have to ask, which neighborhoods are you seeing those prices in?

They aren't neighborhoods, brother. They are war zones.
1 Reply
Jonne Washington
Detroit, MI · Member since 2016 · 30 posts · 9 votes
6y
@Drew Sygit
Never said I was selling a property just said that I saw one going for about $5600 that didn’t really need a lot of work and you’re right they aren’t in the best neighborhoods but in those areas people are more so renting than buying property. If people are looking for rentals then that may not be a bad option.
1 Reply
Jonne Washington
Detroit, MI · Member since 2016 · 30 posts · 9 votes
6y
@Rassan Sampson
I’m sorry they aren’t in the best neighborhoods but it’s a lot of renters in that area and honestly I stay in the city of Detroit. I stay here and yes sometimes they aren’t in the best looking neighborhoods but the house for 5600 was a house listed on my block in Detroit and my block is pretty peaceful and quiet. It’s actually a lot of older people by me too. But hey I definitely understand not wanting to buy there. Just a suggestion again. But if you ever do some really good neighborhoods in Detroit are rosedale Park, Palmer Park area/university district and Boston Edison to name a few. Those are good neighborhoods in Detroit if you ever decide that you want to invest here.
0 Reply
Paul S.
Member since 2019 · 248 posts · 248 votes
6y
Originally posted by @Jonne Washington:
@Rassan Sampson
I’m sorry they aren’t in the best neighborhoods but it’s a lot of renters in that area and honestly I stay in the city of Detroit. I stay here and yes sometimes they aren’t in the best looking neighborhoods but the house for 5600 was a house listed on my block in Detroit and my block is pretty peaceful and quiet. It’s actually a lot of older people by me too. But hey I definitely understand not wanting to buy there. Just a suggestion again. But if you ever do some really good neighborhoods in Detroit are rosedale Park, Palmer Park area/university district and Boston Edison to name a few. Those are good neighborhoods in Detroit if you ever decide that you want to invest here.

Jonne, how many properties do you own?
1 Reply
Rassan Sampson
Westminster, CA · Member since 2017 · 43 posts · 39 votes
6y
@Jonne Washington I was just asking about the neighborhoods with those low prices because I've visited the nicer ones you mentioned several times before buying my first investment in Detroit last year.
0 Reply
Gary Carver
Realtor · Detroit, MI · Member since 2018 · 387 posts · 129 votes
6y
@Mike Sullivan. Don’t get discouraged. You can be successful with the right guidance. Continue to do you research. As @Jonne Washington said. There are many homes in your price range , on and off market and you might get lucky and find something worth while. Not all of Detroit is in shambles.
2 Reply
Account Closed
Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
6y
My research into Detroit showed that it is very vulnerable to swings in the market, and the economy depends only on a couple main industries. When those industries suffer, so does everything else. For me personally I would stay away from Detroit, but I am taking a more long term approach. For some quick deals that you can get in and out, make a buck and move on, it could be a great market. Do your homework!
1 Reply
Paul S.
Member since 2019 · 248 posts · 248 votes
6y
Originally posted by @Account Closed:
My research into Detroit showed that it is very vulnerable to swings in the market, and the economy depends only on a couple main industries. When those industries suffer, so does everything else. For me personally I would stay away from Detroit, but I am taking a more long term approach. For some quick deals that you can get in and out, make a buck and move on, it could be a great market. Do your homework!

I have to disagree. The vast majority of people outside of the bubble in Detroit are on the govt dole or minimum wage workers - they are insulated from economic swings. Anyone in the Detroit area that depends on the industries you are referring to (auto I assume) live in the suburbs. The performance of my units never changed from the boom to the bust now back to the boom.
0 Reply
Account Closed
Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
6y
@Paul S. Totally understand. For me it was a no, but there are definitely areas of every city that are worth investing in if you do the research and find the right niche.
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