Detroit Michigan - Ann Arbor Michigan / Surrounding

35 Replies

What is the deal with Detroit? Every post I read is filled with negative opinions. Is Detroit similar to Washington DC a few years ago? Where locals knew the few bad streets to stay away from but the general population thought of DC as one large ghetto? I lived in DC the last few years, it was great being able to eat at restaurants and walk home. I recently moved outside of Detroit and have gone up a few times to drive around and scope 'where not to invest' I don't see Detroit as it's been portrayed for so many years..... It's a city, you can find rough areas if you search but its definitely on the up and up! What am I missing guys? Why are all posts telling me not to invest in buy and holds in Detroit?

I dont know much about Detroit but people bring in their natural biases in all the time. I hear it often in regards to Prince George's County, just like I heard it about DC in the past. That's why sometimes you have to factor that in in regards to who you are talking to?

I lived in Lincoln Park,MI till I was 15.  Detroit was my "playground" growing up.  We'd take the bus to downtown and shop, go to the theatre, the Auto Show, ball games...   Both my grandfather and father worked there.  But that was long time ago.  I don't think that the problem is with the city itself, but those that live there.  Mostly, lower income.  There might be a problem collecting rents.   That doesn't mean all areas are like that.... just be careful of neighborhoods.  There are lots of beautiful buildings there... old MFH.  Detroit has been through a lot, but has always come back.... in its own way, in its own time.  

@Joseph Lewis Let them hate! More deals for everyone else here. 

I don't directly invest in Detroit, but some of the surrounding areas are cash cows! Strong rental demand, positive economic development, low(er) crime than downtown, and people are still close to the city!

You really should know your way around and scope out the area if you're looking to invest downtown. 

Originally posted by @Gary Carver :

@Joseph Lewis People base there opinions on what they hear from others and the media. As someone who is born and  raised here and invested in multiple properties. Detroit is still a great place to invest. 

 Similar to Prince George's County outside of DC. Many investors go off the news, personal bias and maybe watching the Wire. I often tell other investors to talk to people who live in these areas or someone they are sure can see past their own fears and issues. 

If you are from Ann Arbor, you should know Detroit a bit.  Or take a ride through some of the neighborhoods.  It is the most blighted city of its size in the country.

That being said, the city hit rock bottom during its bankruptcy and is roaring back to life.  But only in certain areas proximate to downtown.

The rest, in my opinion, is a low income housing play at best.  Certain below average neighborhoods are very tough to get tenants.  

I own/manage 60+ single family homes in the Metro Detroit suburbs . Cities such as Westland /garden city /Dearborn heights /Redford areas . Great cash flow with great tenants can be had in these areas . All about 15 min from city of Detroit .

As far as the city of Detroit goes , a lot of challenges for investors . Downtown and a few small areas are A rental locations , but these areas have become expensive and will not cash flow . The other 95% of the city is low income areas with sub $50k houses with a bad tenant base . Difficult to find good tenants , difficult to do rehabs due to theft etc.

What areas are you driving in? If you're looking around Little Caesar's arena, Campus Martius, yes, those areas are nicer and are attracting more investment. But I think they are quite expensive now and not ripe for cashflow investing. Ann Arbor is not at all close to Detroit, a very nice market but I'm not familiar. It's certainly been climbing and has always been an expensive market due to UofM. 

I generally stick to the suburbs and even in those areas you have to go block by block because otherwise you won't know the "bad" areas. A good broker with local knowledge is extremely important.

Seems everyone poo poos Detroit, but for those who are paying attention......its... a rising market, time to make money

@Joseph Lewis I’m born and raised in Detroit and the comparison to DC as far as people see it may be a good start but it’s definitely not true when it comes to price comparison. There are people who invest in Detroit and have made millions and others who invest outside of Detroit because they don’t want to deal with the (poor city government, theft, etc..) Overall it depends on the amount you have to invest.

Estelle Angelinas

I was so closing to buying a 20 unit building 3 years ago in Lincoln Park. I know a lot has changed but have you visit recently? Would you invest a dime into your old neighborhood?

@Joseph Lewis

The problem with Detroit is that they were a manufacturing city and the manufacturing left.

At that time instead of local government finding a solution, a combination of corruption and racial hostility isolated Detroit from almost any new investment.

The result is the impossibility of financing government operation in a city where infrastructure is built for 2,000,000 but where only 625,000 reside. Yes, since 1967 Detroit has lost over 60% in population.

Don't compare Detroit with DC. DC has Uncle Sugar to spend unlimited funds on Federal offices for the ever expanding bureaucracy. Yes, with the boom of the last 8 years Detroit is looking better. Wonder how it'll look after the next recession. Sure, there is always opportunity for the creative investor. Some money was made by those who bought old factories for 2c on the dollar, and leased them out as the cheapest storage space in the US. But investments in markets like Detroit are risky for the non professional investor. Tenant management is difficult, city services are lacking, police protection is insufficient, and the usual bailout of increasing value appreciation may be absent.

Originally posted by @Don Konipol :

@Joseph Lewis

The problem with Detroit is that they were a manufacturing city and the manufacturing left.

At that time instead of local government finding a solution, a combination of corruption and racial hostility isolated Detroit from almost any new investment.

The result is the impossibility of financing government operation in a city where infrastructure is built for 2,000,000 but where only 625,000 reside. Yes, since 1967 Detroit has lost over 60% in population.

Don’t compare Detroit with DC. DC has Uncle Sugar to spend unlimited funds on Federal offices for the ever expanding bureaucracy. Yes, with the boom of the last 8 years Detroit is looking better. Wonder how it’ll look after the next recession. Sure, there is always opportunity for the creative investor. Some money was made by those who bought old factories for 2c on the dollar, and leased them out as the cheapest storage space in the US. But investments in markets like Detroit are risky for the non professional investor. Tenant management is difficult, city services are lacking, police protection is insufficient, and the usual bailout of increasing value appreciation may be absent.

 Nailed it. Detroit's revival is mainly limited to a 3 mile by 2 mile area downtown (helping a few adjacent neighborhoods here and there, too). However, the city is massive. You can fit Boston, Manhattan, and San Francisco within its city limits and still have space left over. 

The city as a whole is not making a comeback. A small area downtown is. The jobs that were lost have not been replaced for the most part (a la a city like Pittsburgh). 

Detroit really needs to drastically reduce the footprint in which it provides municipal services before it can become healthy again. You could cut the size in half and maintain probably 95%+ of your tax revenue, which is nearly all downtown. Not even sure if you can do that legally, though, and it would obviously displace many poor residents. Short term pain for long term health may be necessary though.

Hal, 

I was there 2 years ago, exactly.  It has changed alot.  We almost did, the only thing that kept us was the declining population.  

@Don Konipol thank you everyone for the great responses. It seems to be very similar to do in the sense of portrayal, obviously price wise there is no comparison... DC pricing is out of this world... After receiving these responses I'm feeling pretty confident, yes lower class income generally leads to lower quality tenants. I will certainly over compensate when doing my cash flow calculations, regardless vacancys and rehab after each lease. I'm still in somewhat if shock that people aren't jumping into Detroit. Everything you read says the 2% rule is long gone but there's so many Detroit multi families that are getting 2%. When people calculate the cash flow to check for the 1% or 2% rule should it equal one or two percent gross or net?? Thx guys!
Originally posted by @Adam Sumegi :

@Hai Loc

Is it true that many companies are starting to re invest into Detroit ?

 I don't know the specifics but I heard about a month ago that companies are expanding creating jobs in Detroit core and city is focusing on a few pockets to revitalize and bulldoze and rebuild neighborhoods.. 

The thing is Detroit has no timeline.. It can take 2 or 3 decades to get back to where they were. So if you are in it for the long haul you should be ok

For a city that "supposedly" isn't a good place to invest, there is a lot of discussion going on. Not only on this forum but in others. There is also a lot of foreign interest as well. I read that there were "guided tours" organized through old buildings and there were lots of foreign investors. Also many mansions have been sold cheap. Do they see something that others don't? Or is it that where we see ruins, they see opportunities? Entire office buildings are rehabbed and turned into low income apartments. Sure, it'll take time, but the city didn't get to where it is now overnight either. Whether it'll get to where it was.... who knows. But then nothing is like it was, is it? As investors, aren't we the ones who bring change and improvement? As I'm preparing to make my first investment... I hope to be able to improve on the building eventually. I strongly believe in resilient investing.

Happy New Year to all.

One of the biggest problems with Detroit investment is the funding of schools through property taxes. The schools are horrible. The people I personally know that work in Detroit commute from the suburbs (Livonia, Canton, etc). Because the tax base has continually shrunk, taxes have gotten higher. Taxes and insurance should be a primary consideration for anyone looking to pick up real estate in Detroit. Those can quickly make a sweetheart deal look not so great.

I'm sure there are people making money investing in Detroit, and certain areas are seeing a big comeback. Personally I feel the suburbs are less risk with a more stable tenant base, so that's where I'm more comfortable putting my money.

Any time an area hits a low as low as Detroit, there’s a general feeling that if I buy property I’m picking it up sooo low it can only increase in value. Well, maybe.....or maybe not. The possibility exists that Detroit gets better, property values increase, crime goes down, etc. There’s also the real possibility that things stay the same, or even continue to deteriorate.

Personally, I hope they get better for Detroit. However, since I’m not a large enough investor to where my investment will make much impact, I’m going to compare both the upside of investing in Detroit and the downside risk, with opportunities and risks in other areas.

For me, major negative of Detroit is that the city is not an attractive place to live. Some cities have great weather, Detroit has horrible weather. Some cities have great infrastructure, like public transportation, etc., Detroit has horrible infrastructure. Some cities have a great school system, the quality of public education in Detroit is horrific. Some cities have great culture, not Detroit. Some cities are attractive for tourism, not Detroit. I can go on and on. Detroit grew because it had ONE attraction, we’ll paying jobs, both union and management, in the automotive manufacturing industry. Quite frankly, as hard as I try, I just don’t see what it is that’s going to bring Detroit back to life.

I have a friend who, in 2010 purchased 100 houses in Detroit - for $335,000! Not $335,000 down, $335,000 total. And he still didn’t make any money!

When an economy goes that low, even the smallest progress doesn't show.  It has to recover first, in order to begin to show growth.  I live in Greece, EU.  We are often compared to Detroit.  Athens isn't any better, in fact it's worse. As for culture... well it's mixture of different cultures and it's unique music (Motown), left its mark on the music industry.  I still enjoy listening and dancing to it.   Regarding tourism, it depends on what type. Some people are drawn to war zones.  We see that a lot here.  

Yet inspite the problems Athens has, there has been lot of investing. Here again by foreign investors, who buy property at low prices, fix them up and rent them short term.  ie for summer, conferences, sporting events, etc.  Things are never going to be like they were, anywhere.  Can't go back only forward.... wherever it may lead.