Is Detroit a good market to begin in for Newbie Investor?

35 Replies

Originally posted by @Kelli P. :

Hi BP Fam! I am a newbie investor and  I've been doing a lot of research, reading and podcast listening over the past couple of weeks and came across BiggerPockets along the way.  Currently, my goal is to start with passive investing in SFRs to buy, rehab and hold for cash flow. Based on my research, I am really drawn to the Detroit area.   There seems to be opportunity for good cash flow in some of the up and coming neighborhoods.  For those of you seasoned Detroit investors, do you think it advisable to start as a new long distant investor in Detroit given the challenges of finding good neighborhoods?  I know having a good team on the ground will be key, so any tips or referrals in that regard (starting with a good real estate agent, contractor and property manager) would be great!  Right now the areas I'm considering are Fitzgerald and Grandmont/Rosedale.  Any and all thoughts and advice would be greatly appreciated! 

Hi Kelli,

I was not only a newbie but also an out of country investor! In less than a year I have purchased, rehabbed, and rented almost 50 properties! Of course you can do it!

Looking at a 3 BR/1.5 Bath SFR on Whitcomb between Lyndon St. and Grand River Ave--looks to be in or bordering the east side of the Grandmont Rosedale area. Is there anyone here who happens to be familiar with that block? From photos it looks to be a well maintained block--no boarded up houses or garbage on the streets and the lawns look well-kept. I have a broker stopping by it today to take a look, but just wondering if anyone here knows the area and what your thoughts are. Seller is asking $65K and has presented a scope of work to be done to get it rent ready (price includes scope of work). Seller predicts possible rents of $900/mth. Obviously, I have a lot more diligence to do, but I was just hoping for some initial thoughts from those who are familiar with the area. Thanks!

Detroit has an interactive map where it shows all crimes and when they were reported. Ive never used this to make decisions about anything but Im a data nerd and find it really interesting.

@Kelli P.   I LOVE Detroit metro as an out of state investor, but I agree with others who have suggested suburban Detroit as a better starting point.  I'm a fan of the burbs just outside of Detroit.  Have purchased 4 units in 2 different burbs and have never once regretted the decision - those properties helped me gain financial freedom. They have cash flowed (2% rule +) and appreciated (average of 73% since 2014).  There are still deals to be found in those markets, too.

You have all the benefits of Detroit - large metro, restaurants, stores, major airport hub, but without the risks of crime and city dysfunction.  IMHO, the city of Detroit is NOT for newbies or people out of state.  I've lived in some rough areas (including Harlem and Brooklyn pre-gentrification) and parts of Detroit scare the crap out of me - literally terrifying.  I know things are getting better and there are some great areas, but those nicer areas are also expensive now.

Find a good investor-friendly realtor and do a canvas of some close-in suburbs and some in-town areas and then trust your gut and the numbers.  Then, before you pull the trigger, post some dummy ads to see what types of tenants you will get.  This is another big thing for MI - property has been so cheap than anyone with decent credit and a job will generally buy, so I found the tenant quality quite poor overall.  I focused on burbs near the airport and rent exclusively to pilots, flight attendants, and airline personnel to counter this.

Lastly, when running your numbers, be sure to get your own quotes for insurance and taxes to include in your analysis.  Sadly, the entire state of MI is discriminated against by the insurance industry so I found it hard to find insurance at first and then was shocked by the prices.  Call with the specific addresses and get quotes so you know what you're dealing with.  Taxes vary widely from city to city in metro Detroit.  Also, if you decide to go the suburb route check the reviews of each city's rental laws and bldg inspection department.  I stopped buying in one burb that I had great success with because the bldg inspectors are such asses it isn't worth the trouble to add anything in the area.  Good luck with it!

Awesome info and advice from @Ericka Grant and @Patricia N. !  I really appreciate your input! Ericka, congratulations on achieving financial freedom through real estate! #goals!  I love your advice about the dummy ads! The only problem seems to be that the good properties are being scooped up very quickly, so I'm not sure if there would be time for that to play out.  But I'd love to give it a shot!

Hello, I am a Realtor that is born and raised in Detroit! With that said, you would have to know the "areas" in the city that are worth the investment. My favorite area in the city is 48221.I have seen rentals in the 48221 can go as high as $900 per month! Its called the Bagley area if you want to do reasearch and feel free to ask me any questions! 

@Kelli P. Thank you for your post and all the follow up questions it generated. I, too, am a newbie investor and was actually in the process of planning a trip to lay eyes on Detroit myself mid April. Would love to connect with you offline and lend a hand anyway I can.

@Kelli P.   To avoid slowing things down, do the dummy ads once the property is under contract but still in due diligence, that way you can still "scoop it up" quickly but drop it without consequence during DD if the tenant pool looks bad or you aren't getting bites for the rent you want .  

This has saved me many times and costs nothing - zillow rentals and facebook marketplace are where I usually place the dummy ads.  On a good property I will get 10-20 emails a day from prospective tenants and you can scope out credit, employment, etc from a quick email/convo (don't run actual credit checks) to give you an idea of who is interested in the unit.

I agree with what Larry said.   I live here in the Detroit metro area but I do not yet invest here.    Especially in Detroit proper!    There are a lot of nuances about the city that unless you have a strong team on the ground you just will not know about.     Even if I choose to invest in the Detroit metro area I almost certainly will begin investing in the suburbs.   There is a lot of money to be made in the surrounding suburbs.

I started out in Indianapolis because I know the city well and there is a lot of growth and opportunity there.   Taxes are stupid low lots of wholesalers hawking their properties and the infrastructure for investors (rehabbers, roofers, property managers, etc.) is plentiful.    

I also agree with what many people have said - build a team first.   Network on bigger pockets, talk to investors and rehabbers, and property managers on the phone.   As many as you can stand to do.   Build up a list of wholesalers and get on their cash buyer's list.   And then if you find a property you can run it through that team to decide if it is a good area good taxes and good cashflow.

Originally posted by @Larry Stone :

I think I need to clarify something.   The comments I made specifically involved DETROIT PROPER investing.  However, if your from out of town you might want to consider a suburb of Detroit.   The initial price to purchase a property will be higher, but the ease of either doing a rehab for a flip or actually cleaning a place up as a rental will be much easier and safer.   The suburbs of Detroit are EXCELLENT places to hold rental properties.  You can still purchase lots of properties for well under 100,000.00 and get a much better renter or at least not have to worry as much about the property itself during your rehab.   Consider Grosse Pointe Park (it borders Detroit) or Grosse pointe Woods.  Both have strong rental markets.   Also, Eastpointe is another town that sits directly across from the famous 8 mile road and makes another great rental/ flip market.     The suburbs are much friendlier places to invest in and for the most part the city offices are easy to work with, Detroit, not so much.  Don't take the bait and try and buy some brick house in Detroit for $5.00 a square foot  like you are getting the deal of a lifetime.  Trust me, if that were the case there are plenty of deep pocketed investors right here that would have beat you to the punch!!   The Detroit area is full of money so if its super cheap and the locals wont touch it you have to ask yourself why.      Stick to the suburbs. 

When looking for ANY property, find a person at a Title Company that will give you log in access.  You can run property profiles and comps all day long.  It's my number one resource I go to!

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