Deep Dive Into Detroit Neighborhoods: Warrendale

Source: Zillow listing

Investors’ eyes sparkle in lands of plenty like Houston, Los Angeles, and Nevada, but the US real estate market seems dry and dull in places like the City of Detroit—that is, all until recently.

After years of decline, Motor City is seeing a resurgence in investment and development—you wouldn't want to miss out. There are plenty of affordable residential properties below the $100,000 mark, and demand is increasing for single-family homes.

Detroit is a hotspot for rental investors seeking to generate solid cash flow in the city’s newfound prosperity.

Still, the City of Detroit isn’t easy to invest in. With 84 neighborhoods, all with unique features, property conditions, and tenant demographics, it’s challenging for even expert investors to navigate the market and capitalize on its inevitable risks.

Our team at Logical Property Management is writing these Deep Dive reports on Detroit neighborhoods to help investors make informed decisions for real estate properties. This installment focuses on Warrendale, one of the city’s largest neighborhoods.

City of Detroit

Let’s start with the big picture. The City of Detroit has 11 regions, mapped out like so:

Source: Wikipedia.com

These regions are in different locations and have unique personalities. For example, Downtown Detroit is a central business district, and New Center is a historical region with commercial and residential areas.

The far West Side Detroit peninsula called Warrendale is bordered in the north by Joy Road, stair-steps lazily by West Outer Drive to Ford Road, then squares up snugly to Southfield Freeway.

The Big Neighborhood Called Warrendale

Warrendale used to be just the Village of Warrendale. But in the early 1990s, its residents voted for annexation so they could become part of the city’s water system. The neighborhood expanded into the community it is today, with a population of around 20,505 people. According to City-data, its population density is roughly twice that of the City of Detroit.

The map below shows Warrendale, tucked between Dearborn Heights and Dearborn. The following chart includes the full list of neighborhoods in the City of Detroit, with hyperlinks to our previously published Deep Dives:

Source: Loveland’s Detroit Neighborhoods Map

Warrendale Homes Then and Now

On cue with the big city’s story of transformation, Warrendale’s residents quote their very own version of progress from bygone hardship to recovery. You’ll find renovated single-story, wood-frame bungalows from the 1940s and 1960s dotting the streets, and the neighborhood’s old crime- and blight-ridden “copper canyon” is seeing a comeback with skyrocketing property values.

The neighborhood still has a long way to go, though.

When the state Legislature in 1999 banned residency requirements for municipal employees, Detroit police officers left Warrendale for the suburbs, resulting in an influx of crime in the neighborhood.

Today, however, Warrendale is moving towards prosperity. Property values are soaring, and hundreds of abandoned homes have been demolished to make way for new ones. A Warrendale resident said, "When the police lived here, it was a more stable neighborhood. But that was a bygone era. Things went way down after the police moved out, but we're now starting to see things get better."

The community is tight-knit today and stabilizing. Warrendale’s 6th precinct Commander, Arnold Williams, said, "The good thing about our communities, including Warrendale, is they are very vocal. They're very open about talking about the issues that affect them, and that helps us address those issues. There are also a number of radio patrols in the Warrendale area.”

Source: Google Maps

Warrendale is part of the City of Detroit’s Strategic Neighborhood Fund, which uses taxpayer money and contributions from corporations and philanthropic groups to fund local improvements. The plan includes streetscape and park developments and a mixed-income residential building in Warrendale’s commercial district.

But are there any investment opportunities in Warrendale? Is it a good place for rental property investors seeking to cash in on Motor City’s resurgence?

Investment Opportunity

Money is the root of all investments. So let’s start with the crucial factor of monetary returns. After all, financial viability will always be the ultimate goal. Read on to know the average property condition, rent amount, and home values in Warrendale to determine the market’s profitability.

Property Condition

Warrendale’s housing stock is a mix of properties built in 1960 and earlier. You can see the breakdown below:

Source: City-data

Some Warrendale homes are well-maintained (with great charm and character!) while others still need more care. Overall though, the condition of Warrendale’s homes is above average compared to other Detroit neighborhoods.

Here are some tips to estimate the renovations needed on Warrendale’s homes:

• - Inspect the structure: See if there are any structural rot, foundation cracks, pest infestations, water infiltrations, or undersized beams and posts that don’t meet current building codes.
• - Watch out for outdated wiring: Old homes tend to have old electrical systems. For example, you can check for the old “knob and tube” wiring, as those aren’t adequate for what our electrical devices require today.
• - Deal with possible old pipes: Plumbing and HVAC boiler systems might be greatly outdated or dangerously close to breaking down. You should also check the underground sewers for any potential bursts or clogs.

As always, ensure that you thoroughly inspect the home before moving forward. Should you lack experience or knowledge, opt to work with professionals—work with a knowledgeable inspector to ensure that you accurately estimate the renovations needed to avoid going over budget and never underestimate the task or you’ll spend more than you expect to overhaul the old home.

Average Rent and Rent-to-Income Ratio

According to Niche, the median rent in Warrendale is $967 per month. If we look at actual listings on Zillow, however, this “average rate” seems to fall on the lower end of the spectrum, as we see rents ranging from $900 to $1,800 a month. This is good news for you—it indicates that you can charge more:

Source: Zillow

But just knowing the average rent of a place doesn’t get us very far if we don’t study it against the average neighborhood income, so let’s compute the rent-to-income ratio. Doing so lets us know how much the tenant pool can afford so we’re not over-charging and chasing them up on payments.

Niche reports that the median household income in Warrendale is $26,584 annually or $2,215 monthly. That means that the lowest rent of $967 per month takes up nearly 50% of the income for most Warrendale residents—significantly higher than the industry’s rule of 30%. The discrepancy only increases if you charge higher rent (like Zillow listings infer).

So, you’ll need to search the market for tenants that earn at least three times the rent you plan to charge in order to ensure that you generate regular, positive cash flow.

Home Value, Price, and Appreciation

Moving on to property values, Niche says that the median home value in Warrendale is $32,307. This figure might be understated, however, as Redfin reports at the time of this writing that the median sales price for Warrendale properties is closer to $58,750—and increasing, too:

Source: Redfin

It seems that Niche’s figures reflect the lower end of the spectrum, while Redfin’s estimate shows the higher compared to Zillow listings, which have a range of homes selling for under $40,000 to nearly $100,000:

Source: Zillow

Property value is important, yes. But we need to check the bigger context and calculate the rent-to-price ratio when choosing rental properties. Doing so lets you know if the price is worth the potential cash flow you’ll generate. The ratio isn’t fool-proof, but it’s a fast and easy way to shortlist your options.

The rent-to-price ratio rule of thumb is to ensure that the monthly rent is at least 1% of the total property value, including purchase price, renovation costs, and so on. Since we’re only doing a quick calculation, we’ll take the purchase price as the conclusive property value for now. We’ll also use Niche’s figures for consistency.

So, according to the data, with an average rent of $967 and a median property value of $32,307, the ratio results in a whopping 2.9%—significantly above the industry standard for excellent cash flow.

In terms of appreciation, here’s a heatmap that shows Warrendale’s middle-of-the-road ranking—it’s not the highest appreciating neighborhood in the city, but it’s not the lowest either. You’ll likely gain equity over time with Warrendale properties, but it won’t be as significant as other areas in the city:

Source: NeighborhoodScout

So, even though you won’t find the equity in Warrendale homes like you could in the big city, you will find above-average rates right along with the City of Detroit. For the last decade, the city’s been in the top 30% nationwide for best property appreciation, so you can bet that Warrendale will consistently appreciate alongside it in the future.

Add those equity gains to your monthly cash flow, and you’re set for both short- and long-term returns.

Potential Tenant Pool

Tenants are the lifeline of every rental property investor’s venture. So you’ll want to acquire homes that attract high-quality tenants—those who’ll take care of your property, keep up with payments, and abide by your lease agreement clauses. Doing so protects your overall investment asset.

Below, you’ll see an evaluation of the tenant pool in Warrendale, so you know what tenant management to expect. We’ve based our data on income, employment, and racial diversity, as these are the key factors.

Tenant Demographic: C

Based on our experience, the best way to evaluate tenant demographics is by understanding their classes. For instance, Class C and D tenant pools require intensive property management, while renters in Classes A and B won’t need as much supervision or attention. 

In this particular case, Warrendale tenants are mostly Class C tenants. But you have to be diligent with screening them, so you only accept those with stable employment, relatively high income, and a sense of responsibility to be good renters to work with.

Average Income

According to Niche, the median household income in Warrendale is $26,584 per year. Looking at the breakdown, nearly half of the population earns $25k or lower. This figure is slightly lower than the city average of $32,498, which means you might not be able to charge higher rents.

Source: Niche

Unemployment Rate

The unemployment rate in Warrendale is 14% compared to the City of Detroit’s 11.9%. Because it’s higher in Warrendale, you can expect to run into more applicants with unstable jobs there. The financial instability is bad news for landlords, but don’t forget to take the pandemic into consideration—many of these neighborhoods might still be recovering from its effects and things could improve.

Diversity

Here is the racial diversity breakdown for Warrendale residents:

Source: Niche

Neighborhood Livability: B-

Aside from the tenant pool, you also have to check Warrendale’s livability. After all, only responsible and capable tenants can afford to live in a beautiful place—and vice versa. Plus, the property will increase in value if it’s in an up-and-coming neighborhood, which is always an excellent bonus for you.

So, here’s Warrendale in a snapshot:

Crime and Safety

Unfortunately, Warrendale isn’t the safest place in the city. In fact, it’s one of the most dangerous areas based on the heatmap below.

Source: NeighborhoodScout

Still, note that the crime rates in the City of Detroit vary greatly. You can find a perfectly safe property in one street, just a stone’s throw away from one that’s deemed “unsafe.” So, we highly recommend that you visit the area to get to know the localized crime rates before brushing a property off.

Walkability

Warrendale is extremely walkable, with nearly everybody saying that there are sidewalks to use. And even if you need a car to get around, parking isn’t a problem.

Source: Trulia

Schools

The best schools that serve Warrendale include Plymouth Scholars Charter Academy (A+), Farmington Steam Academy (A), Niji-Iro Japanese Immersion Elementary School (A-), and Hamtramck Academy (A-). Investing in properties close to these schools can attract families with younger children to the neighborhood.

Overall, livability in Warrendale isn’t too shabby. Niche even ranks the neighborhood out of 164 as the 33rd most diverse and 36th best neighborhood for young professionals:

Source: Niche

Moreover, Areavibes reports that Warrendale has excellent amenities, and cost of living, and relatively good housing options. As long as you do your due diligence, you’ll find good tenants in Warrendale and see young professionals coming into the neighborhood.

Source: Google Maps

Overall score: B

Based on the information above and our experience operating as a property management company in the area, we’re giving Warrendale a rental property investment score of B.

The crime rate and tenant demographics pulled the score down, but the financial viability of investing in this neighborhood is excellent, with an above-standard rent-to-price ratio of 2.9% for below-$80k homes.

Of course, we have to be honest and say that all property scoring systems are subjective. It’s inevitable. If you truly want to know what Warrendale and the City of Detroit are like, visit the area to evaluate the potential investment returns in this real estate hotspot for yourself.

And if you need more help, our team is here for you. Get in touch with our expert property managers—we have over two decades of experience working in Metro Detroit under our belt! We’ll help you enter, navigate, and succeed in the Detroit real estate market in no time.

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This guide is part of our ongoing series that aims to evaluate the rental investment potential of every neighborhood and city in Metro Detroit. If there’s a specific area that you want us to prioritize next, let us know in the comments below. We’re not stopping until we’ve uncovered every nook and cranny!