Posted about 3 years ago

Metro Detroit Cities Deep Dive: St Clair Shores

The Metro Detroit area has long sparked the interest of property investors with its affordable housing stock. This interest is only growing, as buy-and-hold investment opportunities here are some of the best-performing in the country.

However, for an investor to be successful in this market, they need to know the personalities and features of each of the 185 cities and 290 neighborhoods in the area. With such a wide variety of locations on offer, Metro Detroit is notorious for confusing even the most experienced investors!

To solve this problem, we’ve created this “Deep Dive into Metro Detroit Neighborhood” series to guide all investors in choosing their Metro Detroit area of choice. As residents and local property management companies in the area, we’ll help you identify the strengths, weaknesses, and rental investment potential of each city and neighborhood.

This simple yet comprehensive overview highlights the factors that most influence your ROI and the kind of management that a property will require if you choose to invest here.

St. Clair Shores

In this article, we’re visiting St. Clair Shores—a suburban city nestled along the banks of Lake St. Clair in Macomb County, Michigan. It’s part of the Metro Detroit area and is something which we like to call a “Ring City”, meaning it borders onto the City of Detroit.

With a population of around 58,984 people and 23 individual neighborhoods, St. Clair Shores is the 23rd largest community in Michigan, according to NeighborhoodScout.com. It has a population density of 5,133 people per square mile but is still one of the most “suburban” of the cities close to Detroit.

St. Clair Shores is generally accepted as one of the nicest communities in this area to live in, where there are plenty of restaurants and parks, as well as access to the lake. Most residents are young professionals and retirees who own their homes and tend to lean conservative.

The city’s workforce has both white- and blue-collar employees quite equally. Generally, their jobs are for office and administrative support (14%), sales (10%), and management (8.6%). Primary industries include manufacturing, healthcare, and retail.

Interestingly, residents here work in computers and math more than 95% of the country. They’ve also achieved a higher level of education than the national average, and have public schools that are above average.

The average income in St. Clair Shores falls in the upper-middle level relative to Michigan and the nation. In reality, the locals are a mix of both extremely wealthy and poor people.

So, is St. Clair Shores a good city for investors to start buying rental properties in? Let’s go through the factors you should consider, starting with the most important one: money.

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

According to Census.gov, the median gross rent in St. Clair Shores is $984 per month, based on data from 2015-2019. This rate is 11.35% less than the average market rent of Michigan, according to NeighborhoodScout.

BestPlaces provides an overview of the median monthly rent by housing size:

Source: Bestplaces.net

Compared to the surrounding areas, St. Clair Shores’ average rent for a 3-bedroom home is higher than the City of Detroit but lower than the likes of Grosse Pointe Woods.

Source: Bestplaces.net

Additionally, you should run a quick rent-to-income calculation to see if the average tenant will be able to pay rent consistently. The industry standard is “income = 3x rent”, which means tenants should only be spending a third of their income for rent, ideally.

In St. Clair Shores, with an average annual income of $60k per household and an annual rent average of $11,808, the rent-to-income ratio is a favorable 19.6%. This assures you that the average tenant only needs to set aside a fifth of their income every month for rent payments (which means you’ll likely be able to collect rent consistently every month).

House Value and Appreciation

In the last decade, real estate in St. Clair Shores has appreciated by a whopping 80.62%—putting the city in the top 10% of the country in terms of rising property values. Furthermore, NeighborhoodScout tells us that the average appreciation rate of St. Clair Shores homes in the last quarter has been 1.98%, resulting in an annual appreciation rate of 8.17%. This makes the city appealing for investors looking to invest in equity gains, as there is a real indication of investment strength.

Zillow shows the average home value in St. Clair Shores to be $175,309. This number is an increase of 10.6% over the past year and is predicted to grow 2.8% more in the coming months.

Source: Zillow.com

Redfin data also shows that, with a median sale price of $172,000, the YOY home value growth of St. Clair Shores is at a healthy +7.5%. This makes it a highly competitive real estate market.

The majority of the homes in St. Clair Shores are single-family homes (82.4%) with a couple of apartment complexes (9.5%) and townhomes (4.9%). Most of them have three bedrooms (60.7%) or two (21.3%). Popular upgrades for these properties include an office, a den, being near a lake, having a basement, or a family room.

Redfin even gave St. Clair Shores a Compete Score of 84 for being “very competitive”. The properties get multiple offers, some with waive contingencies, and sell a few days faster than the average Macomb County home. Properties that sell at 1% below the list price go pending in around 13 days, which is a confirmation of how competitive this market can be.

As home values continue to increase, properties in St. Clair Shores will become more and more appealing to those looking to invest for appreciation.

Quality of Tenants, Properties, and Living

As a rental property investor, you also need to know the kind of tenants you’ll likely attract, the condition of the properties you’ll acquire, and the general livability of the city. These factors heavily influence the success of your investment.

The scores you’ll find below are based on multiple data points and our experience as a local property management company. It should be said that these scores are not “official” ones, and should be taken only as a guide to help you assess and understand the overall area.

Average Property Class and Condition: B+

Average property age: 67 years

Looking at Niche’s survey, residents of St. Clair Shores said there is a good variety of homes in the area, with quality exterior and interior features. Along the water, you’ll find $1M+ mansions, whereas closer to the City of Detroit, you’ll find more Class C-type properties, and many Class B properties on the blocks in between.

NeighborhoodScout says that the majority of the houses were built around 1940-1969, which means that you may run into older homes that require maintenance and costly fixes. As an investor, you need to take these costs into account when analyzing a deal.

Common problems for homes built between 1940-1969 include:

1. Lack of insulation
2. Water damage (especially due to pipes made of clay and cast iron)
3. Outdated electrical systems (e.g. the number of outlets and energy capacity of the home)
4. Lead paint on the walls, which can be toxic when they start to flake and crack
5. Asbestos in fittings, such as weatherboarding, pipes, cement, and insulation

To spot these early on and include them in your investment budget, hire a professional to screen the structure and inform you of any possible problems and required renovations prior to investing in a rental property here.

Quality of Life in the Neighborhood: A

You’re not going to live in the area yourself, but knowing the quality of life in the neighborhood determines the type of tenants you’ll attract. This could be the difference between you getting tenants who can’t pay rent and refuse to comply with your agreements and tenants who’ll pay full rent on time and take care of your rental like the asset that it is.

Right off the bat, you want to choose neighborhoods that are in demand amongst high-quality applicants. The higher the quality of life in the area, the more chances you’ll have of locking in good tenants.

So, here’s an overview of life in St. Clair Shores:

Local Economy

There were many projects on the agenda for St. Clair shores even prior to the Coronavirus pandemic. In January 2020, leaders in the area mentioned the following initiatives to improve life in the community:

1. Completion of the driveway to the south of City Hall
2. Multiple road construction projects
3. Reconstruction of the parking lot and library behind the City Hall
4. More preparation for possible upcoming floods in the area
5. Replacement of lead service lines in the city
6. Possibly adding a new pumping station on Jefferson Avenue
7. Openings of a new bathhouse, memorial, and baseball fields

Despite all these projects, local leaders said they’ve managed their resources well enough that they foresee zero financial challenges in accomplishing them. The city has also welcomed new businesses, such as:

1. Two new breweries
2. A credit union
3. Wild Bill’s Tobacco store

According to Bestplaces.net, St. Clair Shores has experienced a slight job market increase of 0.2% over the past year, with forecasted growth to be 36.4% over the next decade. This is higher than the national average of 33.5%. This means the area will likely increase in population (and tenant quality) as people flock to where new job opportunities arise.

School Rankings

GreatSchools has ranked three elementary schools and one middle school in St. Clair Shores to be above average. They are the following:

1. Greenwood Elementary School
2. Ardmore Elementary School
3. Rodgers Elementary School
4. Jefferson Middle School

This makes St. Clair Shores a good choice for families with children ages 5-13, in particular.

Crime and Safety

According to Areavibes, St. Clair Shores has a crime rate far below the national average.

The city has a reputation for providing excellent safety for its residents and businesses, with nearly a hundred police officers in the city alone. Niche shows surveys where locals said they generally feel pretty safe, as there is some crime, but it doesn’t impact them very much. They also confirmed that the police are very visible and responsive.

Liveability

In terms of overall livability, Areavibes lists St. Clair Shores as the #78 city in the state of Michigan and #1,690 in the entire country—better than a whopping 94% of all areas. The cost of living is also 9% lower than the national average.

Life in St. Clair Shores is particularly attractive to families with kids under the age of 18, due to the good schools and safe neighborhoods here. In fact, Areavibes shows that 74% of locals are married and 64% have young children. Families can lay down roots in this city, with many local amenities and interesting things to do. Most people get around by car, with a few who still choose to carpool or take public transit.

Tenant Class and Demographics: A

Tenants are the bloodline of every rental investment property. They are one of the biggest factors that contribute to the success of the investment—as your income and assets are dependent on them paying rent on time, and taking good care of your property during their tenancy.

Because of this, it’s crucial to know what kind of tenants are in the area prior to investing.

Using data from Niche, BestPlaces, and NeighborhoodScout, here is an overview of the tenant pool in St. Clair Shores based on several key factors:

Income - The average annual income for households in St. Clair Shores is $60k, which is just slightly lower than the national average of $62k. However, the area also has a larger percentage of high-income households than in other cities in Metro Detroit.

Here is a breakdown that compares St. Clair Shores’ income brackets to the Detroit-Warren-Dearborn Metropolitan area and Michigan state as a whole:

Unemployment - Unemployment in St. Clair Shores is at 4.8%—not far off the national average of 3.7%. The poverty level is also reportedly at 8.4%.

Education - There are more people with a bachelor’s or associate’s degree in St. Clair Shores compared to the national average, with 24.7% of residents holding one. There are also more high school graduates here than the rest of the country, with 92.6% of residents having high school diplomas.

Diversity - See below:

Based on this information, tenants in St. Clair Shores tend to lean on the higher end of the spectrum, compared to the rest of Metro Detroit. This makes St. Clair Shores a low-risk investment area for landlords, as quality tenants are typically more financially responsible and easier to manage.

Overall Score: A

Based on our research, and our personal experience living and managing rental properties in the area, we’re scoring St. Clair Shores with an A for rental investing overall.

This conclusion is mainly due to the fact that:

1. Rent amount can be ideal for cash flow, with the majority of tenants able to pay rent consistently.
2. Appreciation rates in the last quarter continue to indicate great equity gains on the horizon.
3. The local economy is thriving and will attract new, quality tenants into the city.

Overall, we see St. Clair Shores as a good option for rental property investors to consider starting or expanding their portfolios. Our evaluation is largely based on the financial viability of the average property in the city, seeing as St. Clair Shores has covered the factors that make an investment successful.

Nevertheless, it should be said that every property scoring system is inevitably a bit subjective. Our advice is to take the information you’ve learned in this article, and evaluate the city yourself!

Your goal is to have a good balance of cash flow and appreciation—which the majority of properties in St. Clair Shores provide, seeing as the rent-to-price ratio is .5%, but properties here give you an annual appreciation rate of 8.17%.

We see St. Clair Shores to be an impressive investment neighborhood for investors to buy, rent, or invest in the Metro Detroit area. If you need any further help, get in touch with me directly and I’ll be happy to offer any guidance I can.

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If you’ve found this article helpful, look out for our upcoming dives into other Metro Detroit cities in the coming weeks. Our goal is to cover the entire area—one city and neighborhood at a time.

Any specific places in the Metro Detroit area (or the City of Detroit) that you’d like to know about? Drop a comment below and I’ll make sure to prioritize your request in the next installments.