Metro Detroit Cities Deep Dive: Harper Woods

If you’re interested in buy-and-hold rental opportunities, then you’ve likely heard of Metro Detroit’s strong rental market and affordable housing stock.

However, with the overwhelming variations among its 185 cities and 290 neighborhoods, you may be struggling to understand where to buy—especially if you’re one of the many out-of-state or foreign investors looking at Metro Detroit.

Because of this, we’ve decided to share our 20+ years of experience (both as local residents and property managers) to create this “Deep Dive into Metro Detroit Cities” series. These articles will take a close look at the strengths and weaknesses of each Metro Detroit area (NOT just the City of Detroit itself)—one at a time.

We came up with some key criteria that will help you evaluate the rental investment potential of each neighborhood. We prioritized factors that most influence the expected returns you’ll get from your properties and what type of management they’ll require.

In our earlier articles, we’ve already covered the following areas:

• Redford Charter Township
• Hazel Park
• Eastpointe
• Warren City

This time, we’ll dive into the 85th largest community in Michigan: Harper Woods.

Harper Woods is part of Wayne County, Michigan, and is a “Ring City”—a term we coined for cities that directly border the City of Detroit. This city has 14,236 residents, with a population density of 5,521 per square mile. There is just 5,814 households here total, with an average household size of 2.42—lower than the national average of 3.14. This small city thus has a sparse, suburban feel with spacious lots, compared to more dense suburbs in Metro Detroit. In Metro Detroit, lots are typically around 40 feet wide and maybe 120 feet deep, and Harper Woods properties are generally this size or a little wider.

Niche.com ranked this city as #15 in the “Best Places to Raise a Family in Wayne County”. The residents mostly drive around the city and rarely take public transit. Their jobs are mostly white- or blue-collar, like being a sales worker, service provider, or office professional.

The southern side of Harper Woods (which is closer to the City of Detroit) sees more of its housing stock being rented out to lower-income tenants. Where it borders Grosse Pointe (a very affluent area), Harper Woods’ areas attract higher-income tenants. There’s therefore a divide in demographics and housing stock type that new investors need to be aware of.

Even though the city is relatively new (incorporated in 1951), Harper Woods has already contributed in a major way to the cultural history of Metro Detroit. It was home to the East Side Drive-In, the first drive-in theater in the metropolitan area. A couple of poets and writers, like Donald Hall and Loren D. Estleman, even mention Harper Woods in their works. It’s still known as a culturally “cool” place to live, even today, so it attracts a lot of young families and professionals.

Rent Prices

With an overall city population of 14,236, homeowners make up 57% of all occupied housing (8,114 people). Meanwhile, renters make up 43% (6,121 people).

Here’s an overview of the average rent price for each type of housing in Harper Woods:

Source: Bestplaces.com

House Value & Appreciation

According to Zillow, the average home value in Harper Woods is around $111,175. This increased by 6.1% compared to last year. Zillow forecasts a continued rise of 7.4% in prices by September 2021:

Source: Zillow.com

Meanwhile, Niche.com lists Harper Woods’ median home value at $76,100 (not the average home value, but the middle-of-the-bell-curve value of a house in this area). Around 46% of all home prices in Harper Woods range from $50k to $99k, making it an ideal place for first-time investors to get into the rental market on a limited budget.

Source: Niche.com

According to Redfin.com, the housing market in Harper Woods is somewhat competitive, with some homes getting multiple offers. Currently, it’s still a relatively “undiscovered” part of Metro Detroit’s rental investment market - despite the fact that there’s a strong rental demand in this area. However, this landscape will probably become more competitive as more people are priced out of neighboring areas (like Eastpointe), and as more and more investors move into Harper Woods seeking affordable rental properties.

The future of Harper Woods’ real estate market is relatively safe in terms of appreciation. Home and rents values will likely continue to increase. This makes Harper Wood properties ideal for investing in, in terms of both equity gains and cash flow.

Rent-to-Price Ratio (The 1% Rule)

At $1,334 per month for the average rent (NeighborhoodScout.com), and an average purchase price of $101k (according to Redfin.com), Harper Woods has an average rent-to-price ratio of 1.32%.

When comparing investment properties, the rent-to-price ratio is a quick, back-of-a-napkin way to roughly calculate whether or not a rental will give you positive cash flow. Ideally, the ratio needs to be at least 1%, if not higher. In most Ring Cities, the average rent-to-price ratio is in the 1-1.5% range. This makes them strong cash flow-generating properties.

Quality of Tenants, Properties, and Living

We developed quantitative scores (grades A through F) to assess the type of tenants, properties, and quality of living you’ll expect to find in Metro Detroit areas.

These scores are based on a variety of data points, plus our own local knowledge. The scores used here are not “official”, but are meant to be used as a rough guide in assessing Metro Detroit neighborhoods.

Average Property Class and Condition: B-

Average property age: 66 years

According to NeighborhoodScout.com, a whopping 87.9% of the houses in Harper Woods were built around 1940-1969. This means that you’ll find some properties which have been recently refurbished, and others that are in need of minor (or major) updates to bring them up to a modern standard.

Some common renovation issues you might run into include:

• - Cosmetic updates
• - Improving energy efficiency and insulation
• - Replacing underground clay or cast iron pipes that have deteriorated
• - Replacing corroded galvanized plumbing
• - Adding more electrical outlets and replacing outdated electrical panels
• - Updating windows

As investors, you need to account for these costs when analyzing a deal. Some houses may have been recently updated, and only require minimal (or no) work. But others might need a complete renovation, which could add thousands to your initial investment cost.

Your neighborhood class will also determine the types of tenants you get (check out our article on “How Property Type Determines Tenant Type for a more detailed explanation). This is important, as the quality of your tenants will impact your rental’s profitability more than any other single factor.

Quality of Life in the Neighborhood: B

Before you buy any property, it’s important to be familiar with its location first. This is because the kind of neighborhood your property is located in will also indicate the kind of tenants you’ll likely attract.

If you want to have a stable and successful rental business, you ideally want to invest in areas that are in demand amongst high-quality applicants.

So, here’s a summary of how life is in Harper Woods:

Local Economy

Harper Woods has changed a lot in recent years. Three years ago (2017), they adopted the Neighborhoods Improvement Plan (NIP) to foster better civic engagement and connections with neighboring communities. Since then, several local volunteer committees have sprung up to help advance the plan’s goals.

Some of these goals include:

• - To improve Harper Woods’ neighborhoods by dealing with unkempt properties
• - To implement better homeownership programs and community cleanups
• - Most importantly, to announce Harper Woods as a partner for redevelopers at Eastland Center mall

These plans show that Harper Woods wants to grow its community. They are actively working towards enhancing the local area, as well as bringing in more residents and real estate investors to buy homes here.

School Rankings

Based on GreatSchools.org’s criteria, the top schools in the area are:

• - Charles A. Poupard Elementary School
• - Chandler Park Academy - Middle School
• - Chandler Park Academy - High School

Crime and Safety

The majority of residents here say that they feel pretty safe, as they find their police very visible and responsive.

Tenant Class and Demographics: B+

The quality of tenants in a rental plays a big part in the performance of your investment property because the type of tenants you attract will directly impact the amount of maintenance needed for your property (and the stability of its rental income). This is why it’s important to know what kind of tenants live in an area before buying.

So, we’ve assessed the tenant pool of Harper Woods based on these key factors:

Income

Areavibes.com shows that Harper Woods’ average yearly income is $49,306 per household or $22,857 per individual. This is higher than the average income for the surrounding areas, as census figures show that Metro Detroit’s Metropolitan Statistical Area (MSA) has an overall average income of $39,562 per household and $19,897 per capita.

Unemployment

Though the rates might still change as the nation continues to recover from the economic effects of the coronavirus, the U.S. Bureau of Labor Statistics has reported an improvement in the national unemployment rate from a record-setting 14.7% (in April 2020) to 6.7% (as of November 2020).

This improvement can be seen in Metro Detroit’s MSA, where the unemployment rate improved from 24.2% (in April 2020) to 6.3% (as of October 2020). However, in Harper Woods, the unemployment rate is still slightly higher (9.2%) - meaning you should be thorough when screening tenants for their income stability.

Education

The educational attainment your tenants have will have an impact on their current and future level of income. Because of this, there is a correlation between their educational attainment and the amount of rent they’ll be willing (and able) to pay.

The average education attainment in Harper Woods is slightly above the national average, with 59% of residents holding at least a college or associate’s degree:

Source: Niche.com

Diversity

Here’s a breakdown of tenant demographics in Harper Woods: 

Based on diversity, income, unemployment, and education, the tenant class of Harper Woods falls in the middle of the Metro Detroit spectrum. This means that there’s a fair chance of finding responsible tenants, but you will have to conduct thorough screening (as with any rental area!) to verify things like applicants’ income stability.

Overall Score: B

Taking all of these factors into account, we gave Harper Woods an overall rental investment score of B. With affordable house prices, increasing value appreciation, and strong cash flow opportunities, the city makes for a relatively safe investment. There is, however, some variation across the different areas of Harper Woods, with some C+ neighborhoods closer to the City of Detroit, and some B+ neighborhoods closer to the Pointes, so keep this in mind when choosing where to buy your investment property here.

It’s all about the money at the root of every investment—that’s why we put more emphasis on the financials when calculating the overall score. But it should be said that every property scoring system is somewhat subjective.

Nevertheless, based on our experience of the area, Harper Woods is a solid investment neighborhood. But don’t just take our word for it—go out and screen the area yourself!

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This is part of our ongoing deep-dive series on Metro Detroit neighborhoods. We’ll be creating more guides in the weeks to come until we’ve covered every area in the metro area.

Any specific areas that you’d like to know more about? Comment below and tell us which neighborhood you’d like us to tackle next!

Image Courtesy of Michael Tuszynski