Good idea to Invest in Detroit?
New York City, NY · Member since 2017 · 17 posts · 14 votes
Good idea to Invest in Detroit?
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votesThis 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!
Logical Property Management4.9469 Reviews
71 Replies
- Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes6y
I consider this market to be very risky for you. You're a combination of a beginner and an outside investor. Detroit has considerable urban blight, and the real estate prices reflect this. Big chunks of Detroit are impoverished.
Here's a statistic: Detroit lost 61% of their population since 1960. They recently also went bankrupt.
It was a city in steep decline. But I used the word "was." There are a lot of positives today. Good new mayor, strong emerging areas near downtown. And people are trying to re-purpose some of the cheap real estate. Those who know how to make money renting properties in the City have a superior rate of return, for sure.
In conclusion - great market for local and experienced operators. Highly risky for outsiders. Avoid turn key properties as well.
@Mike Sullivan
Hi Mike, I grew up my whole life until graduating college in Grosse Pointe. A town bordering east side Detroit. The people on BP can tell you much about the investing side, but I can tell you about what I’ve seen from growing up there.
I remember kids from my elementary school moving away because the economy of Detroit slowly failed. It couldn’t have gone any lower after bankruptcy. Only upwards.
Now, it’s been a year since I’ve looked at economic data, but the poor demographic in Detroit are actually getting poorer. When you read the good things about Detroit, it’s not really impacting the city as a whole in a positive way. While certain segments like Midtown are growing with young professionals, the outskirts are not getting much better. I would just be extremely weary of which parts you look in the city. Like I said, some parts in downtown may have potential.
- 6yMichael MagnoBusiness MemberReal Estate Agent · Wadsworth, OH · Member since 2017 · 234 posts · 168 votes
@Mike Sullivan
With your bankroll, plus a small mortgage, you could
get something cash flowing in the Cleveland market if you decide to shift your focus from Detroit. Let
Me know if you want to chat about it sometime.
@Travis Biziorek
Travis, I completely agree with you. Describing these neighborhoods with dirt cheap homes as “not the best” paints a very inaccurate picture of the war-zone someone OOS can unknowingly get themselves into.
The young lady’s response, “stay in Troy”, which seems to be quite a loaded response is Precisely the type of response a landlord can expect to hear from some of the subpar tenants one can expect in Detroit.
I would recommend saving your money and investing in an area where you have a list of reputable property management companies that wont charge an arm and a leg to run your property in an area you wouldn’t feel safe walking around in. Also, I’ll be “staying in Troy”, where I can safely manage my properties and make a great return! Cheers
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes6y
Originally posted by @Tom I.:
@Travis Biziorek
Travis, I completely agree with you. Describing these neighborhoods with dirt cheap homes as “not the best” paints a very inaccurate picture of the war-zone someone OOS can unknowingly get themselves into.
The young lady’s response, “stay in Troy”, which seems to be quite a loaded response is Precisely the type of response a landlord can expect to hear from some of the subpar tenants one can expect in Detroit.
I would recommend saving your money and investing in an area where you have a list of reputable property management companies that wont charge an arm and a leg to run your property in an area you wouldn’t feel safe walking around in. Also, I’ll be “staying in Troy”, where I can safely manage my properties and make a great return! Cheers
She was clearly offended and trying to belittle me in the most unintelligent and ineffective way possible. Doesn’t bother me.
I love Detroit. I love the areas I buy in, the people I meet, the neighbors I chat with. I feel safe. My wife visits our properties alone with our two young children. But I don’t buy $5,600 homes in war zones.
That poster probably owns zero properties, and is probably here trying to “wholesale” garbage properties to unknowing OOS buyers
- Rental Property Investor · Detroit, MI · Member since 2019 · 8 posts · 5 votes6y
@Jonne Washington
Yes there are good neighborhoods but it’s not common to get anything at $5600 in those areas; they’re historical. I have several properties with tenants on both east and west sides of Detroit available. It is also advantageous to have property management, but you can have auto payments set up and contractors to maintain property repairs.
- Rental Property Investor · Detroit, MI · Member since 2019 · 8 posts · 5 votes6y
@Steve B.
Believe it or not, homes can be purchased at that priced, rehabbed and rented. It really does help to have someone on the ground, familiar with the city to tell you areas to invest in. So much development is taking place here; there’s plenty of opportunities awaiting interested investors. Of course, at that price you’re less likely to have a gem in an historical district, but many opportunities are here.
- Detroit, MI · Member since 2016 · 30 posts · 9 votes6y
@Rassan Sampson
The house I was referring to is in 48234 zip code which isn’t the best neighborhood but someone had bought the house. There were others in like 48205 zip code. They are few and far between but they are out there. The neighborhoods definitely needs work but I just think that maybe in due time with the right people and hard work and community just bringing the inner parts of Detroit back to life.
- Detroit, MI · Member since 2016 · 30 posts · 9 votes6y
@Gary Carver
Definitely agreed.
- New York City, NY · Member since 2017 · 17 posts · 14 votes6y
@Gary Carver Thank you for the advice and encouragement. I appreciate it!
- New York City, NY · Member since 2017 · 17 posts · 14 votes6y
@Michael Magno Id love to talk to you about the Cleveland market. I am interested in anywhere that can cash flow.
- Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes6y
Hey @Mike Sullivan, a good broker is going to be key here. I grew up in Michigan and don't invest in Detroit. I invest in the suburbs (Livonia, Westland, Redford, etc) and even in those areas it's really block-by-block. My suggestion is to find a broker AND a property manager now and have them give you their opinion on properties. When my PM tells me he won't manage in a certain area, I listen to him.
- Member since 2020 · 3 posts · 3 votes6y
@Mike Sullivan
I would recommend areas such as Ann Arbour or Grosse Point or Grand Rapids. Detroit, even with as positive of an upturn as people might be saying, is still Detroit. Ann Arbour is a college town, and if you can find a cheap single family home, maybe fix it up, that area will only increase in value as the UOM university becomes more popular. As for grosse point, it is a very rich area, however you could probably find single families on the outskirts of the town, which is still a very popular area for lower income residents. (Meaning not wealthy enough to purchase a 600000 home). As for Grand Rapids, it’s a popular town with lots of tourism, so if you were to buy a single family I would personally use it as a rental, as the appreciation is not very high for the area. I live in Saline MI, so I’m not just making stuff up lol.
Originally posted by @Tristan Trier:
@Mike Sullivan
I would recommend areas such as Ann Arbour or Grosse Point or Grand Rapids. Detroit, even with as positive of an upturn as people might be saying, is still Detroit. Ann Arbour is a college town, and if you can find a cheap single family home, maybe fix it up, that area will only increase in value as the UOM university becomes more popular. As for grosse point, it is a very rich area, however you could probably find single families on the outskirts of the town, which is still a very popular area for lower income residents. (Meaning not wealthy enough to purchase a 600000 home). As for Grand Rapids, it’s a popular town with lots of tourism, so if you were to buy a single family I would personally use it as a rental, as the appreciation is not very high for the area. I live in Saline MI, so I’m not just making stuff up lol.
Tristan, you're telling a guy with 20k to look at Ann Arbor (check your spelling smh) or Grosse Pointe (check your spelling again smh)..you may live in Saline but you ARE making stuff up. Have some knowledge before you engage your keyboard please.
- Member since 2020 · 3 posts · 3 votes6y
@Paul S.
You do understand that I am not talking about downtown or close to the college campus. Obviously you cannot invest with 20k. Plus there are many possibilities for financing if the OP does want to invest closer to the college campus. I am talking about the suburbs, not the downtown. As for grosse pointe your probably right, but there is no need to be rude about small things such as spelling. It is a misunderstanding on your part and a miscommunication on my part.
- Detroit, MI · Member since 2016 · 30 posts · 9 votes6y
@Cynthia L. Smith
You are right, the chances of getting a home for that cheap in those areas are probably impossible I haven’t seen them in that area but they are nice investment areas because a lot of people are buying in those areas and yes you can find homes in Detroit for cheap and may not be as bad as people would think. Yes they will need work done to them but some of those homes are livable if you find the right seller/person as well. I love Detroit though I feel like it needs work and time but with the right people it could be back to where it was back then.
- Rental Property Investor · Newport, KY · Member since 2019 · 12 posts · 6 votes6y
I’ve been wanting to invest in the Detroit market as well! I’m originally from the Detroit area, but haven’t lived there in years. Looking for my first property to get my feet wet. The good thing is my whole family still lives there so I have some boots on the ground.
- Flipper/Rehabber · Eastpointe, MI · Member since 2013 · 18 posts · 12 votes6y
Thank you @Gary Carver and @Jonne Washington. If it were easy - everyone would be on board. It gets old and tired when you are constantly reading about the dreaded horror stories of Detroit - but, in the same token everyone wants to know 'where to get a good bargin'. It's even more disheartening when it comes from a local such as @Travis Biziorek who ironically manages properties in the City (I guess). "War zones" to most non-locals are neighborhoods where working people with families reside and are trying to make the most of what they have as all aren't privy to moving to Midtown and/or any other up and coming area in the City. In addition, how oxy-moronic is it to make the statement of $20k not being enough but 10x that is great. If you haven't heard the saying, "When there's blood on the street - buy the street!" now you have.
- Investor · South Bend · Member since 2020 · 14 posts · 12 votes6y
@Chass Reed
As someone who lived in Detroit (attended UDM) for four years I always wanted to invest in Detroit. The things that always kept me away were the lack of city services, and the amount of abandoned homes. As someone mentioned the city was built for 2 million people and now has half of that. That’s a lot less tax money coming in to the city to pay for garbage, snow removal, police, and fire. The city did not shrink, but the population has. Half the services to cover the same geographical area was a big concern. The infrastructure was broken, has that come back yet?
- Specialist · Gothenburg, Västra Götalands län · Member since 2016 · 26 posts · 33 votes6y
@Mike Sullivan
Hi Mike!
My name is Magnus and i am a Swedish investor.
I have 10 houses in Detroit. Been investing since 2017 and have get some experience of it.
I would go for the outer areas like Ferndale, Redford, Southfield, Warren, Eastpoint. But check the taxes first. Taxes is cheeper in Detroit area.
Not as much risk for sqautters and vandalism in the outer cities.
But some parts of Detroit is really good to.
Some of my houses raised pretty good in value.
But i would not buy cheeper then 80k, i had 1 house ended up with sqautters and 1 house was recently vandalised which costed at least 15k to get ready for rent again. both in C minus areas.
The most risk in Detroit what i think is when a house is vacant. Otherwise they cashflow well.
You should get in touch with a Real Estate agent that knows the areas.
Good Luck!
- New York City, NY · Member since 2017 · 17 posts · 14 votes6y
@Magnus Göransson
Hey Magnus,
Thank you for your knowledge. Are you in contact or have any recommendations for real estate agents in the area? Also I assume you use a PM because you live in Sweden how has that been working for you long distance?
- Westminster, CA · Member since 2017 · 43 posts · 39 votes6y
@Jason Hamilton as far as abandoned homes go, there is an effort to remove blight. This is the first thing that came up when I Googled "Detroit blight removal" https://m.metrotimes.com/news-hits/archives/2020/01/20/duggan-may-revive-ambitious-plan-to-eliminate-remaining-blight-in-detroit
It's far from solved or fully funded but it does have people's attention which is positive. I haven't done much research on this yet but it's worth looking into. I think you can find blight removal maps, tentative timelines, and current issues with enough searching.
- Flipper/Rehabber · Eastpointe, MI · Member since 2013 · 18 posts · 12 votes6y
@Jason Hamilton I'm a native of Detroit and I currently live in the City. No, the city did not shrink but currently the population is on an uptick due to the hoopla of the Tech industry...whatever it takes :) The services are better from a personal standpoint. I have no complaints. I just find it ironic sometimes of all the negative talk about the City from those that are making money here. I currently have two properties here that I purchased for pennies on the dollar - in decent areas that's rented to deserving and decent families. So for @Jonne Washington to mention that she ran across a decent home for $5600 and to be ridiculed for her statement from someone in Troy is crazy and out of line. Just my thoughts....like enough is enough.
- Specialist · Gothenburg, Västra Götalands län · Member since 2016 · 26 posts · 33 votes6y
@Mike Sullivan
I use Real Property Management Metro Detroit since Januari this year.
My PM is Ruth and she knows all you need to know about where to invest and has contact with several good agents.
I can not say its been easy to live in Sweden and done this.
But i dont regret it one bit and i will continue.
Now it feels stable.
I also hade one house flooded 2 times in 1 year without insurance. Also you can google on floodzones in Detroit which i thought it wasnt.
Nightmare but now i learn that to.
You dont have to have any fear with going in with the right people. Just do it.
Its good that you get a lot of info before going in, i didnt really do that.
Magnus
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