Metro Detroit Cities Deep Dive: Oak Park

With a strong rental market scene and affordable housing stock, Metro Detroit is one of the most sought-after areas for investors to snag buy-and-hold opportunities.

However, Metro Detroit is also known to be overwhelmingly confusing. Its 185 cities and 290 neighborhoods vary widely in investment type and financial viability—boggling both beginners and RE investment moguls alike. Many search for simple, straightforward advice on which areas to invest in and which to avoid if they want strong cash-flowing rental properties.

We’ve decided to use our 20+ years of personal experience as locals and property managers in the area to create this “Deep Dive into Metro Detroit Neighborhoods” series. Our goal is to guide investors on the strengths and weaknesses of each area, enabling informed decisions for successfully investing in Metro Detroit.

The criteria we’ve developed evaluate the rental investment potential of specific neighborhoods. We focus on the factors that most influence your ROI and the type of property management required.

For this installment, we’re looking at the City of Oak Park—a Ring City (a term we developed for a city that borders Detroit directly) with an up-and-coming rental market.

Source: Google Maps

Oak Park

Oak Park is a medium-sized city with a population of 29,751 residents, a majority of whom lean liberal. The population density is 5,772 residents per square mile—which is on par with the rest of Metro Detroit as a whole.

With plenty of easily accessible grocery stores, restaurants, coffee shops, and parks in the city, families and young professionals choose to live in Oak Park for its convenience and attractions. Some residents also like to hop over to Ferndale on the weekends for its bustling nightlife scene.

Areavibes ranks Oak Park in the 63rd percentile of all cities across America in terms of livability, largely due to its abundance of amenities, ideal cost of living, and a good selection of homes. For investors, the housing market in Oak Park scored well above average, compared to other cities in the country. Most residents here own their homes, though the split is nearly even with those who rent.

Oak Park has been brimming with housing developments in recent years. Lighthouse MI—an agency formed by Lighthouse of Oakland County and South Oakland Shelter—broke ground in Coolidge Place for a $15-million project to increase affordable housing, building 64 high-quality townhomes and apartments for lower-income families. The city also prides itself in being affordable, all while being near to the City of Detroit and other burgeoning suburbs.

Oak Park is conveniently located 10 minutes away from 4 freeways—making it a prime location for companies to establish themselves in the region. The city’s Economic Development Department has been working with locals to continuously improve the living, working, and earning potential of Oak Park for individuals and businesses alike.

With the growing community and developments in Oak Park, is it a good place to invest in? Here are the factors to consider:

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

The price-to-rent ratio is a quick way of estimating the quality of cash flow you’ll get from a particular rental. Rent-to-price ratios of 1% or higher typically make for strong cash-flow generating properties.

According to City-data, the median gross rent (as of 2019) was $1,144 per month for all types of homes.

If we look at current data on Zillow, however, we can see that this is already on the rise:

According to BestPlaces, the rent average in Oak Park is higher than the rest of Metro Detroit, the state of Michigan, and the rest of the country. The overview they’ve provided of the rent for each housing size/type can be seen below:

Using the average monthly rent for a 3-bedroom house ($1,450) and the current purchase price for a similar-sized property here ($120,000 based on Zillow), Oak Park’s average price-to-rent ratio is 1.2%, which is similar to most Ring Cities, which have 1.0 to 1.5% ratios.

Properties in Oak Park, therefore, are likely to yield positive cash flow as rentals, but what about in terms of equity gains?

House Value and Appreciation

According to Zillow.com, the average house value in Oak Park is $185,633—an increase of 11.9% over the past year. Zillow seasonally adjusts this value and only includes homes in the middle-price tier.

Source: Zillow.com

Redfin’s data from April 2021 also shows that home prices in Oak Park were up 19.1% compared to the last year and sold for a median price of $190K. On average, the homes sell after seven days on the market, making Oak Park a “very competitive” real estate market based on Redfin’s Compete Score.

Source: Redfin.com

The majority of the homes sold on Zillow are considerably larger, with three to four bedrooms and an average of 1,238 square feet. Properties in Oak Park are mostly SFH properties (72.8%), with some apartment complexes (16.9%) and townhomes (6.2%).

The properties closer to Eight Mile and the City of Detroit itself tend to be cheaper, while houses towards the eastern side of Oak Park (near to trendy Ferndale), are generally priced higher:

Based on listings on Zillow as of May 2021

Oak Park listings tend to get multiple offers—some with waived contingencies, too. Houses that sell at 2% above list price go pending in 8 days, with some homes selling even higher (6% above list price) and faster (pending in 3 days), indicating a highly competitive market.

In terms of appreciation, Oak Park is an attractive place to invest in equity gains. NeighborhoodScout shows that Oak Park real estate appreciated a whopping 132.07% over the last decade. With an average annual home appreciation rate of 8.78%, Oak Park is part of the country's top 10% in real estate appreciation.

Quality of Tenants, Properties, and Living

Aside from the financial viability, rental property investors need to consider the tenants that they’ll attract, the general property conditions, and the overall attractiveness of living in the area they invest in. We’ve scored Oak Park based on these three factors, as they heavily influence the success of a rental investment.

The following scores are based on a variety of data points and our own local knowledge. It should be mentioned that the scores are not definitive by any measure—they only give an overview for you to assess and understand individual areas of the city.

Average Property Class and Condition: B

Average property age: 60 years

Best places show that half of the properties (50.1%) in Oak Park were built from 1950 to 1959. Compared to other areas in Metro Detroit with more varied property ages, Oak Park properties are heavily skewed towards 60 years old.

Source: Bestplaces.net

Age may be subjective when it comes to houses, but homes that are older than 50 years old are generally considered “old.” This means you may run into older homes in Oak Park that require rigorous maintenance and costly fixes prior to renting them out. You will need to budget the cost accurately, carefully analyzing a deal before purchasing.

Quality of Life in the Neighborhood: B+

Neighborhoods in demand amongst high-quality tenants are ideal for investing, as they will attract responsible people who pay rent and take care of the property. In other words, the neighborhood livability and class will impact your rental’s profitability more than any other factor.

Here’s a glimpse of how life in Oak Park is:

Local Economy

According to Bestplaces, the job market in Oak Park has increased by 0.3% over the past year. While this might seem small, the future job growth in the next ten years is forecasted at 33.7%—a higher rate than the national average of 33.5%.

In the past six years, Oak Park has increased in the number of commercial and industrial building investments by a whopping 260% and has not slowed down since. In 2018, Oak Park became the 23rd Redevelopment Ready Certified Community in the state.

As the city attracts new businesses and investments, the community continues to create new opportunities to grow its workforce and attract new residents.

School Rankings

Oak Park may attract families with younger children who are still studying. The schools that serve Oak Park include Berkley School District, Royal Oak Schools, Southfield Public School District, Ferndale Public Schools, and Oak Park Public Schools.

According to Niche, Berkeley and Royal Oak are on the list of the Best School Districts in Michigan.

Crime and Safety

Niche’s survey shows that half of the residents (50%) in Oak Park feel pretty safe—while there is some crime, they are not impacted as much by this as in some other Metro Detroit areas. A large majority of the residents said the police are very visible and responsive.

It must be said that the neighborhoods in Oak Park still vary wildly. Safety and crime rates aren’t consistent from one block to another.

Liveability

In terms of overall livability, Areavibes.com ranks Oak Park as the #204 city in the state of Michigan and #6,993 in the entire country, making it better than 76% of all areas.

Life in Oak Park is attractive to families and young professionals. These groups seek affordable housing near downtown areas but may have been priced out of nearby Huntington Woods, Royal Oak, and Ferndale. Residents can enjoy plenty of amenities, nightlife, and commute to work easily while staying in a place that’s more affordable than other trendy neighborhoods.

Source: Bestplaces

Tenant Class and Demographics: B+

The quality of tenants plays a big part in the performance of any rental investment property. It could spell the difference between responsible tenants (e.g. on-time payments, regular maintenance of the property) and problem ones who don’t follow lease agreements.

We’ve assessed the tenant pool of Oak Park-based on the factors that contribute the most to tenant class and demographics. It must be said, however, that some factors listed here might still be affected by the 2020 pandemic:

Income - The estimated median household income in Oak Park is $53,568, which is slightly lower than Michigan’s $59,584. The per capita income in Oak Park is $27,451. This information is from a 2019 City-data report and may have changed due to the pandemic.

Unemployment - Unemployment in Oak Park is 6.9%, significantly higher than the average of Metro Detroit and the rest of the country. This information is from a 2018 Bestplaces report and likely has changed due to the pandemic.

Education - Bestplaces shows that nearly all (92.3%) of Oak Park residents have graduated high school, compared to Metro Detroit (89.5%) and Michigan (90.2%). Based on Niche, there are also more people with a bachelor’s or associate’s degree in Oak Park (38%) compared to the national average (29%).

Diversity - See below:

Source: Niche

Based on this, you can expect the tenant class to be in the middle of the spectrum, compared to Metro Detroit as a whole. With a thorough screening of applicants, you’ll have tenants who are of good quality and won’t be too hard to manage—making Oak Park a relatively low-risk investment area for landlords.

Source: Google Maps

Overall Score: A

We gave Oak Park an overall rental investment score of A. This is based on the strong cash flow potential, consistent value appreciation, good quality of tenants and properties, and the development and growth of the vibrant community here.

At the end of the day, money is still the root of every investment. This is why we’ve put more emphasis on the financial viability of the opportunities in Oak Park when calculating our overall scores.

Nevertheless, every property scoring system is inevitably subjective. Our advice is to screen Oak Park yourself and look for properties that have a good balance of cash flow and appreciation. Investing in a Class A property would give you both while choosing a Class D property will give you barely any appreciation and unreliable cash flow.

Based on our knowledge and experience of the area, Oak Park is an up-and-coming neighborhood that rental investors should definitely consider. Oak Park sits at the high end of the spectrum for appreciation and is equally attractive to those investing for cash flow. If you’re looking to buy, rent, or invest in the Metro Detroit area, Oak Park would be a great place to start.

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We won’t stop here! We’ll be taking a closer look at other Metro Detroit cities and neighborhoods in the weeks to come until we’ve covered them all. Check back soon for the next deep dive!

Do you have a specific area in Metro Detroit in mind? Leave a comment below, and we’ll be sure to cover it in one of our next installments

Image courtesy of Pixabay