BRRRR or Buy and Hold in Detroit

Member since 2024 · 5 posts · 6 votes

Hey BP

I moved to metro Detroit last year and I'm starting my real estate investing journey. I've connected with a few investors who have had successful flips, but I want to pursue other options as well. Has anyone had recent success finding properties that cash flow? If so, what strategies have been working and which locations around Detroit typically cash flow well?

I'm just starting out so any insight would be great!

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Drew SygitBusiness Member

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

@Alex Anschutz to be successful in Detroit an investor really needs to understand:

How the suburbs are different than the City of Detroit.

What majority Property Class each suburban city & Detroit Neighborhood is.

How Property Class affects quality of tenant pool, handymen & contractors, Rent Ready repairs and even property managers.

Too many investors buy rentals without understanding how to property connect all of the above, so they often overspend when buying and repairing and then wonder why their rental isn't hitting their paper ROI.

[email protected]248-209-6824

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AJ ExnerPro Member
Lender · Springfield, MO · Member since 2023 · 656 posts · 318 votes
1y
Hey Alex,
Absolutely, seeing some great success coming out of Detroit with the BRRRR process, but there is definitely a catch to that.
You have to get some reliable GCs that know what needs to get done and how to do it, and you have to have reliable lenders that are flexible on their minimum purchase price/loan amounts and a reliable way of screening tenants (section 8 or otherwise). With a good team, BRRRR in Detroit is definitely doable, but its a unique market with its own set of challenges.
[email protected]417-427-2612
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- Alex Anschutz
  OP
  Member since 2024 · 5 posts · 6 votes
  1y
  @AJ Exner Thank you AJ!
  
  Are you primarily focusing on the city of Detroit or areas surrounding? I'd love to connect and learn more about what variables you look at when analyzing a deal.
  0 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
1y
Hey Alex,

This is an insanely loaded question—Detroit is a very block-by-block market, and what cash flows well in one area might be a nightmare just a few blocks over. That said, you have a huge advantage being local. Being able to drive and walk through different neighborhoods is one of the best ways to get a real sense of what areas align with your strategy.

For background, I started investing in Detroit in 2019 while I was living there and built a 12-door portfolio in just over two years. I’ve written a lot about my experience—both the good and the challenges—and I’m happy to share some of that info if you’re interested.

If you want some first-hand insights, feel free to reach out. I’ve published a lot of resources that might help you navigate the market and figure out what makes the most sense for you.

Good luck!

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1y
@Alex Anschutz to be successful in Detroit an investor really needs to understand:
How the suburbs are different than the City of Detroit.
What majority Property Class each suburban city & Detroit Neighborhood is.
How Property Class affects quality of tenant pool, handymen & contractors, Rent Ready repairs and even property managers.
Too many investors buy rentals without understanding how to property connect all of the above, so they often overspend when buying and repairing and then wonder why their rental isn't hitting their paper ROI.
[email protected]248-209-6824
Logical Property Management4.9460 Reviews
Website View Page
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1y
@Alex Anschutz again, you need to understand the Property Classes of each City & Detroit Neighborhood to be successful.
Otherwise, someone will take advantage of your naivety and sell you a Class D property lipsticked to look Class B or C.
How will you know the difference?
Check out the map on our website:)
[email protected]248-209-6824
Logical Property Management4.9460 Reviews
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Joe HammelBusiness Member
Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
1y
Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from 21 properties here. All of which, I’ve purchased within the last 4 years. My portfolio is made up of cash flowing buy and holds, however, we’ve seen success here with a wide variety of investing strategies when executed properly.

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 arguably the best market to invest.

Purchase: $80k-$130k

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

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/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 one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.
[email protected]248-422-1685
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