Posted 2 months ago

Deep Dive into Detroit Neighborhoods: Boston-Edison

Source: Google Maps

If you’re a real estate investor, you’ve probably heard of the affordable properties you can snag in the City of Detroit. Low property prices (below $100k) often shock most investors from big cities like LA, New York, and Boston because of how affordable the single-family units are here.

The Motor City’s low prices and the booming demand for single-family homes in the area make it attractive to many rental investors across the nation who are hoping to reap strong cash flow returns.

But, as attractive as it may seem, the City of Detroit is exceptionally diverse. It comprises 84 neighborhoods with varying sub-areas, property conditions, and tenant demographics.

Therefore, rental investors, both experts and newbies, require in-depth knowledge and guidance to navigate the inevitable risks in the Detroit real estate market. You can only see those famed returns if you know how and where to look for properties.

That being said, we’ve created this Deep Dive series to provide local and out-of-state investors with the necessary information and an overview of the Detroit housing market. We are a local property management company in Metro Detroit with the experience and insider knowledge to guide you into the City of Detroit.

Our primary goal is to equip you with all the know-how you need before you put your money in one of the nation’s hottest real estate markets. We’ll be focusing on the following factors:

- The expected returns from rental properties
- The types of tenants to expect
- The kind of property management required

Are you ready to dive into the City of Detroit? This article focuses on one of its good neighborhoods: Boston-Edison.

City of Detroit

First, we’ll take a look at the big picture. The City of Detroit consists of 11 regions:

Source: Wikipedia.com

Each region is unique. For example:

- Downtown Detroit is the city’s central business district and residential area.
- Midtown is a mix of business, cultural, residential, and university areas.
- New Center, where our featured neighborhood today resides, is a historic district with commercial and residential spots.
- North Detroit has a blend of historical, residential, and university areas.

The New Center region is comprised of many historic neighborhoods, such as Boston-Edison, Arden Park, and Atkinson Avenue, and historic landmarks, including Grand Boulevard, Cadillac Place, and Fisher Building.

Boston-Edison Neighborhood

Nestled in the heart of Detroit, Michigan, the Boston-Edison Neighborhood is a historic and vibrant community that has played a role in the city’s history. Known for its beautiful tree-lined streets, historic homes, and rich cultural heritage, Boston-Edison is a testament to Detroit’s enduring spirit.

Today, Boston-Edison is home to 4,118 people, with a population density of 7,973 per square mile. It’s 74% higher than that of the City of Detroit. But that’s because this is a tiny neighborhood, with relatively small lots, but many large, 4+ bedroom homes.

The map below shows Boston-Edison at the center of the City of Detroit. The following chart includes the complete list of neighborhoods in the Motor City, with hyperlinks that will bring you to our previously published deep dives:

Source: Loveland’s Detroit Neighborhoods Map

Boston-Edison Homes Now and Then

The boundaries of the Boston-Edison neighborhood encompass a 36-block area, bordered by Boston Boulevard to the north, Edison Avenue to the south, Woodward Avenue to the east, and Linwood to the west.

Back in the day, Boston-Edison was the epitome of upscale living in Detroit. It was developed in the early 20th century and boasted homes that were the envy of the city’s elite. Think grand mansions with exquisite architectural details, lush gardens, and tree-lined streets that exude sophistication.

Many of these historic homes were designed by renowned architects like Albert Kahn and Richard Marr, and they still stand today as a testament to craftsmanship and elegance. Notable residents included automotive pioneer Henry Ford, the Fisher brothers, and heavyweight boxer Joe Louis.

In 1973, Boston-Edison was designated as a Michigan State Historic Site. 2 years later, the neighborhood was listed on the National Register of Historic Places.

However, the Boston-Edison neighborhood has faced various housing challenges over the years. Like many historic areas, it grappled with periods of decline, resulting in vacant and deteriorating properties. The economic shifts and population changes in Detroit led to many abandoned homes.

Nonetheless, it remains resilient. Property values continue to rise, and the community works together to keep the neighborhood thriving.

A local living in the neighborhood since 1972 shared that “[Boston-Edison] has always been a wonderful neighborly neighborhood…We’ve had a lot of block clubs [and] social events. And part of that goes back to the existence of a strong neighborhood association. They’ve always had a board, and it’s been very active in terms of enforcing ordinances and creating a lot of social value to living here.”

But, apart from history, strong community, and beautiful homes, what else does Boston-Edison offer? Does it have any potential for rental investments? Let’s dig deeper and find out.

Rents & Rent-To-Price Ratio (The 1% Rule)

According to Niche, the median monthly rent across all property types in Boston-Edison is $1,116. This figure is 24.14% higher than the City of Detroit’s median rent of $899.

Looking at Zillow, there’s currently only one listed “for rent.” However, we see that a six-bedroom property is priced over 2x higher than Niche’s average:

Source: Current listings on Zillow as of October 2023

The higher the estimated rent, the more favorable the cash flow prospects for you as a rental investor. Therefore, it appears that the Boston-Edison real estate market may be aligning in your favor.

Nevertheless, merely being aware of the average rental rates is not enough without comparing them with the average property values. Hence, it’s vital to examine the rent-to-price ratio for Boston-Edison properties. The industry standard aims for rental income equal to or exceeding 1% of the total property cost (including repair cost) to secure a positive cash flow.

According to Niche, the average house value is $189,301, with a median monthly rent of $1,116. This results in a rent-to-price ratio of 0.6%. It falls a bit short of the industry standard. To make it more accurate, we’ll use the following Zillow listing as an example:

A three-bedroom colonial-style house along Longfellow St, Boston-Edison, with a monthly rent estimate of $2,564 and a purchase price of $350,000. With the actual example, the ratio improves and comes out as 0.7%.

Still, the figure is below the 1% standard. So, you must be careful and more thorough when looking for rental properties you want to invest in in Boston-Edison. Ideally, you want a rent-to-price ratio that’s 0.8% or higher to ensure strong cash flow.

Property Values and Appreciation Trends

Niche reports that the average house value in Boston-Edison is $189,301. However, this may be understated because Zillow says the median home value in Boston-Edison is $306,349. While Zillow doesn’t show past trends or forecasts, Redfin shows that the sale price increased by 46% over the past 12 months and a higher estimate of $460,000 per property. As you can see on the graph, the property prices are steadily increasing.

Source: Redfin

If we peek into the Zillow properties sold in the past 12 months, we see that the prices are higher than Niche’s average. The prices are closer to Redfin’s report, which means that house prices are increasing in the area and will continue to rise in the following years:

Source: Zillow properties sold in the last 12 months as of October 2023

While cash flow is the most crucial thing to rental investors, rising property prices also mean you’ll have impressive equity gains in the future. It also indicates that more people are attracted to this neighborhood, giving you a larger tenant pool.

Regarding appreciation, Boston-Edison falls on the higher end of the spectrum. In the heat map from NeighborhoodScout, Boston-Edison is tagged as dark green, indicating high property appreciation rates:

Source: NeighborhoodScout

Neighborhood, Properties & Tenants

Next, we will examine the overall quality of life, the condition of properties, and the expected tenant demographics in Boston-Edison homes. These are crucial aspects to evaluate as a rental property investor since they dictate the level of property management and upkeep required and the neighborhood’s appeal for attracting potential residents.

Quality of Life in the Neighborhood: A-

The two key factors that can significantly impact your profitability as a landlord are the livability of the neighborhood and the tenant demographic it attracts. A well-maintained, appealing area tends to draw responsible tenants who pay rent on time, take good care of your property, and adhere to lease terms.

Conversely, less desirable neighborhoods may have tenants struggling with payments, property maintenance, and lease compliance, ultimately reducing profitability. In essence, your goal should be to invest in areas that naturally attract the type of tenants that contribute to increased revenue in your real estate investments.

Local Economy

Boston-Edison is a residential neighborhood, but thriving small businesses power the local economy. Since it’s only a 36-block neighborhood, many businesses are within walking distance.

For example, popular destinations include The Congregation, a coffee shop, and community event space in a former 1920s-era church. While Boston-Edison is not known for hosting significant corporations or large-scale commercial developments, the neighborhood benefits from its proximity to downtown Detroit and several prominent employers in the metropolitan area.

Here’s a glimpse of activities and notable destinations in Boston-Edison:

Cultural Institutions: Boston-Edison is close to places like the Detroit Institute of Arts, the Charles H. Wright Museum of African American History, and the Michigan Science Center. These institutions contribute to the city’s cultural vibrancy and attract visitors and tourists, indirectly benefiting the local economy.
Historic Tours and Events: The neighborhood has become a destination for historic tours and events, such as the Boston-Edison Holiday Home Tour. These activities celebrate the neighborhood's rich history and bring visitors and revenue to the area.
Proximity to Downtown Detroit: Boston-Edison’s location is a significant economic advantage. It’s just a few miles north of Downtown Detroit, which has experienced significant economic growth and revitalization in recent years. This proximity provides residents access to various job opportunities, entertainment options, and cultural amenities in the city center.

Crime and Safety

Based on the heatmap by NeighborhoodScout, Boston-Edison is among the safest in the City of Detroit.

Source: NeighborhoodScout.

The crime rate in the City of Detroit differs significantly from one neighborhood to another. Fortunately, Boston-Edison has a low crime rate, making it a safe place for residents. However, as the crime rates vary, you might come across a perfectly safe property on one street and another considered unsafe. Therefore, you must do your due diligence as a real estate investor to conduct thorough research on the block you’re eyeing to understand its crime and safety accurately.

Schools

The best schools that serve Boston-Edison include Farmington Steam Academy (A), University Liggett School (A+), University of Detroit Jesuit High School and Academy (A), and Cass Technical High School (B+). Investing in properties near these schools would likely attract tenants with kids to the neighborhood.

Overall, livability in Boston Edison is superb. Niche even ranks the neighborhood the 24th best neighborhood for young professionals and 40th most diverse out of 142:

Property Age & Condition: B+

According to City-data, properties in Boston-Edison were built in 1960 or earlier, with most homes built during 1939 or earlier. This means that most properties in the neighborhood are over 60 years old, above the industry standard of what’s considered an “old” home.

Source: City-data Contain 800x800

Now, just because a home is “old” doesn’t always mean that it has no potential or is bad. Property age is relatively subjective, and you can still find many beautiful Colonial homes well-maintained in Boston Edison. (Take a look at this Colonial-style home built in 1918 and still in pristine condition)

Still, here are the old-home problems you should look out for:

- Old windows and lack of insulation
- Failing sewer lines
- Corroded galvanized plumbing supply & waste lines
- Outdated electrical systems
- Previous alterations & maintenance not up to code
- Toxic lead paint

The list isn’t exhaustive, but it should give you a glimpse of what you should prepare for when dealing with old homes—while preserving their unique personality and heritage.

Tenant Demographics: A

Regarding real estate investments, rental properties stand apart in the need for a comprehensive assessment of the potential tenant base within a neighborhood. The last thing you want is to invest in a property only to discover that the local population lacks the necessary income or job stability to meet their monthly rent obligations. But fret not. We’ve already outlined these factors for your convenience below.

Here, you’ll find the critical elements that influence the tenant demographic and class in Boston-Edison, providing insights into the types of tenants you can expect to encounter.

Median Income

According to Niche, the average annual household income in Boston-Edison is $86,298 or $7,191 per month. This number is 148.25% greater than the City of Detroit’s yearly household median income of $34,762 or $2,896 monthly.

Looking at the breakdown, nearly 50% of residents in Boston-Edison earn $75,000 and above:

This is excellent news for you because, as you know, the higher your potential tenants earn, the more they can afford high rent. Remember that it’s crucial to follow the industry standard that your rent is not more than 30% of the tenant’s income.

Employment

Source: Weichert

Most of the residents in Boston-Edison have white-collar jobs, meaning that more potential tenants can afford higher rental prices.

Nonetheless, ensure thorough tenant screening to see if your prospective tenant has a stable job. Your tenant’s income stability will directly relate to your rental income and their ability to maintain the condition of your home.

Education

Source: Niche

Niche reports that Boston-Edison residents with less than a high school diploma only comprise 6%, compared to the City of Detroit’s 17%. More than that, Boston-Edison has more residents with a Bachelor’s degree and Master’s degree.

In short, Boston-Edison locals have a greater educational attainment than residents in other Detroit neighborhoods. This means your potential tenant pool has a higher chance of securing well-paying jobs, allowing them to afford higher rent.

Diversity

In terms of racial diversity in Boston-Edison, here is a chart provided by City-data:

Source: City-data

In a nutshell, the tenants you can anticipate in Boston-Edison tend to belong to the upper echelon in terms of income, educational achievements, and job stability. Still, it’s important to note that while the neighborhood generally boasts a well-off demographic, there may still be potential tenants who don’t belong to that group. Therefore, conducting thorough tenant screening is crucial to ensure you’re selecting individuals with stable, well-paying employment.

Rent-to-Income Ratio

Now, let’s analyze the rent-to-income ratio of the neighborhood.

The industry standard is to ensure that your tenants are only spending a maximum of 30% of their income on rent. As a rental investor, it’s best to stick to this ratio as closely as possible to ensure the stability of your cash flow.

Source: Current Zillow listing for rent

So, residents in Boston-Edison earn a monthly average household income of $7,191 based on Niche. If they were to rent a six-bedroom home for $2,600 (like the Zillow listing above), they’d have to spend 36.16% of their income on rent, which is a little above the industry standard of 30%.

However, this means tenants can presumably afford to rent houses with fewer bedrooms, primarily when NeighborhoodScout reports that most renters rent homes with only four bedrooms.

This is still good news for a rental investor because you can charge high rental prices. Still, if you want to secure a stable cash flow, you would like to look for tenants with a higher income so you can set a higher rent.

Overall Score: A

Based on all the information we’ve provided, combined with our extensive experience as a property management company in Metro Detroit, we’re giving Boston-Edison an overall score of “A” for rental investing. Our decision is mainly due to the following key contributors:

Average rent amounts in Boston-Edison are higher than in the city, meaning rental property investors like you can earn higher rent than in other neighborhoods. Still, don’t forget that you should find homes that can give you a rent-to-price ratio of at least 1%, as some properties in the neighborhood will fall a bit short of that standard.
Excellent livability, with a local community with high trust among neighbors, and the area is deemed relatively safe for residents. With an exceptional quality of life, you can expect more people to move into the area, resulting in higher demand for rental properties.
Tenants in Boston-Edison have higher incomes than the City of Detroit, potentially attracting new residents seeking better-paying jobs. Plus, this means that your potential tenant pool can afford higher rent.

Given all the information we’ve scoured for this article, we see Boston-Edison as a good neighborhood to invest in rental properties, where you can find excellent opportunities to grow your real estate portfolio - as long as you’ve got the capital to purchase a slightly more expensive home.

If you’re still unsure and hesitant to get a slice of the Detroit market, reach out to our team for more guidance. We’re more than willing to help you in your investment journey. We’ve already helped more than a handful of investors over the years to invest all over the greater Metro Detroit area successfully! Get in touch with us today to grab your share of the opportunities.