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BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Jeff Neikrie
  • New York, NY
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Investor approaching the Detroit market, looking to build my core four

Jeff Neikrie
  • New York, NY
Posted Dec 24 2023, 11:37

Hi BP Community, I'm an investor in a few Ohio markets and I'm looking to break into Detroit. I live in New York.

My initial research points to Detroit being an excellent cashflow market, almost too good! I would love some candid feedback from those local in Detroit especially those of you RE professionals that work with out of state investors. 

What are some up and coming neighborhoods?
Outside of the typical challenges for out of state investing, what are some of the pitfalls that may be unique to investing in Detroit?
Why are you excited about Detroit as a market in the long term?

Feel free to reply anything else you would like to share. I'm looking to network with best-in-class Agents, Property Managers, Contractors, and Lenders. 

Thanks for taking the time read my post - happy investing!   

Jeff

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Leroy K. Williams
  • Property Manager
  • Southfield Mi
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79
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Leroy K. Williams
  • Property Manager
  • Southfield Mi
Replied Dec 25 2023, 06:09

Happy Holidays Jeff,

1.  As it relates to the up-and-coming neighborhoods there are 5 that I would point out as good investment opportunities

      Northend- This is an area right along the border of midtown.     

     East English Village- Along Detroit's East side bordered by one of the more affluent townships which is Grosse pointe

     University Detroit- Near the University of Detroit

     Jefferson Chalmers- Along the Riverfront

      New Center- Which is another midtown neighborhood which shares space with the Henry Ford Medical Campus

My group happens to be closing out projects in 4 of the 5 of these neighborhoods

2. Pitfalls:

The first would be Laying over the same investment blueprint which works in other cities onto Detroit. Many out of state investors make the mistake of investing by zip code in Detroit-that doesn't apply here.  Detroit is literally a block by block city and if you are not here to see the property you need boots on the ground that you can rely on to assess any potential purchase.  

Another pitfall is under improving properties in low income areas believing that since its a depressed area in terms of income the people will not have high standards.  This is wrong for Detroit.  There are so many rentals on the market at any given time which allows potential tenants to be selective. 

3. Things I am excited about:

Man there are so many.  I would say the regionalization and Development of Detroit into an international destination. For decades Detroit has been an island to itself. The new movement is for Detroit to become a Mega City by cooperating and merging with its surrounding cities to become a true Metro-Detroit. This unity includes joint transportation, greenways, shopping districts and more.  Detroit is also seeing the expansion of our international trade activity via the two new bridge routes to Canada. 

Our Medical districts are expanding, Our downtown is booming and growing. We have an NFL draft convention set for next year. Detroit is happening in a major way.

4.  Your team- My team "Propertyrehabcentral.com" specializes in helping out of state investors locate great deals, place them with passionate and competent realtors, handle the rehab management, market the units, and take care of placement and ongoing management for cash flow investors. If your plan is to flip we help create a product that will sell quickly.  Feel free to inbox me and we can discuss more.  

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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
Replied Dec 26 2023, 03:56

I'm pretty biased towards Metro Detroit for obvious reasons lol.

HOWEVER, I do personally make over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

So I do practice what we preach, and it really freaking works.

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s statistically the best market in the country for cash flow.

I cash flow $100k a year off 23 doors and have built a ton of equity in a short amount of time.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has the the highest rent to price ratio in the country…and we’ve found the perfect balance of price/location within the area.

Here is a picture of my portfolio...

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Andrew Postell
Lender
Pro Member
#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell
Lender
Pro Member
#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
Replied Dec 26 2023, 08:22

@Joe Hammel would you mind me asking how you are sourcing your deals?

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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
Replied Dec 26 2023, 10:52

@Andrew Postell

Hi Andrew, almost every single one came from the MLS. I had like 2 of them direct to seller through a connection being that we have a large database and they asked me to buy but 95% of the time they just come from the MLS. We are lucky to just have these types of deals here.

I actually created a YouTube video where I talked through the sourcing and numbers of each property you can find by searching my team on YouTube easy enough. (Not able to link in a post)

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Travis Biziorek
  • Investor
  • Arroyo Grande, CA
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Travis Biziorek
  • Investor
  • Arroyo Grande, CA
Replied Dec 26 2023, 10:52

Jeff, I know it's been awhile since we've chatted and I've massively improved my online resources for everything you listed here... neighborhoods, PM's, accurately running numbers, etc.

Happy to email that stuff over if you want.

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Andrew Postell
Lender
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#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell
Lender
Pro Member
#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
Replied Dec 26 2023, 11:57

@Joe Hammel very cool.  And you are doing 20%-25% down on each?

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Tony Stephan
  • Investor
  • Metro-Detroit, MI
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Tony Stephan
  • Investor
  • Metro-Detroit, MI
Replied Dec 26 2023, 14:48

Love Metro-Detroit! My wife and I have 131 units here and great cash flow and equity. We run our own portfolio as well and have zero issues. My largest deal is a 56 plex that's crushing it for us right now. Reach out if you have any questions! @Jeff Neikrie

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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
594
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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
Replied Dec 26 2023, 18:06

@Andrew Postell

Mostly 20% down

Occasionally BRRRR'ing, cash buy with a refinance on the cheaper stuff

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Samuel Coronado
Pro Member
  • Investor
  • Huntsville, AL
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Samuel Coronado
Pro Member
  • Investor
  • Huntsville, AL
Replied Feb 9 2024, 08:20
Quote from @Joe Hammel:

I'm pretty biased towards Metro Detroit for obvious reasons lol.

HOWEVER, I do personally make over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

So I do practice what we preach, and it really freaking works.

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s statistically the best market in the country for cash flow.

I cash flow $100k a year off 23 doors and have built a ton of equity in a short amount of time.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has the the highest rent to price ratio in the country…and we’ve found the perfect balance of price/location within the area.

Here is a picture of my portfolio...


 How hard is it to evict someone out there?

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River Sava#2 New Member Introductions Contributor
  • Lender
  • Charlotte, NC
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River Sava#2 New Member Introductions Contributor
  • Lender
  • Charlotte, NC
Replied Feb 9 2024, 09:29

Hey Jeff - Happy to connect and chat through this market / refer some contacts over to you as your're right it is hot!

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Joseph Bui
  • Rental Property Investor
  • Midwest
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Joseph Bui
  • Rental Property Investor
  • Midwest
Replied Feb 12 2024, 12:56

I own multiple doors across the city for both single and multi family. I work with a good team and happy to knowledge share if you are interested.

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Scott Suryan
Pro Member
  • Detroit, MI
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Scott Suryan
Pro Member
  • Detroit, MI
Replied Apr 28 2024, 10:32
Quote from @Joseph Bui:

I own multiple doors across the city for both single and multi family. I work with a good team and happy to knowledge share if you are interested.

Would be very interested to know who you have for your team. Do you use a property management company?  I am new to investing and am trying to build a team to help me do this as passively as possible while maintaining my current 9 to 5. 
thanks,
Scott Suryan
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Michael Smythe
Property Manager
#2 Managing Your Property Contributor
  • Property Manager
  • Metro Detroit
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Michael Smythe
Property Manager
#2 Managing Your Property Contributor
  • Property Manager
  • Metro Detroit
Replied Apr 29 2024, 05:29

@Scott Suryan Joseph gets compensated for referring people like you to his "turnkey team".

You can ask him about it, but he'll probably be open about it with you without asking, to show his integrity.

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

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Eve Favorse
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Eve Favorse
Pro Member
Replied Jun 15 2024, 04:13

@Michael Smythe,what’s the best source to find property class by region?

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Michael Smythe
Property Manager
#2 Managing Your Property Contributor
  • Property Manager
  • Metro Detroit
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Michael Smythe
Property Manager
#2 Managing Your Property Contributor
  • Property Manager
  • Metro Detroit
Replied Jun 15 2024, 07:59

@Eve Favorse we've got info on that for Metro Detroit & the City of Detroit.

When did you want to discuss?