Posted 9 months ago

Deep Dive into Detroit Neighborhoods: Hubbard Farms

The neighborhood of Hubbard Farms in the City of DetroitSource: Hubbard Farms, Wikipedia Commons

Rental property investing in the City of Detroit has never been more lucrative—as long as you know how to find a good opportunity. Luckily, there are plenty of affordable homes below $100k as well as increasing demand for single-family houses all around the city.

But while opportunities abound, it goes without saying that an expert is needed to master Michigan’s Motor City and succeed financially. It’s true that opportunities for solid cash flow are abundant in this city. Still, the diversity of 84 neighborhoods with their own characteristics, property conditions, and tenant demographics make it difficult to navigate without knowing how to capitalize on the inevitable risks.

Not to worry, however! You won't have to do much research beyond this article. Using our decades of experience as a property management company and local residents ourselves, we’ve created these reports with all information needed to buy, rent, and invest in Detroit priorities.

For this installment, we’re diving into Hubbard Farms—the neighborhood originally called Springwells Township before it was named after Bela Hubbard, who was a prominent geologist, lumber baron, lawyer, farmer, land agent, historian, and civic leader. Because of him, Detroit saw an influx of manufacturing jobs after the Civil War, creating a great housing need for executives and workers.

Let’s take a look at Hubbard Farm’s rental property investment potential.

City of Detroit

Before anything, let’s look at how the City of Detroit is divided as a whole. There are a total of 11 regions in the city, as you can see in the map below:

Contain 800x800Source: Wikipedia.com

Not only are the regions in different geographic locations, but they also have their own personality and features. For example, Downtown Detroit is a central business district, while New Center is a historic district with a mix of commercial and residential areas.

Historic Hubbard Farms Neighborhood

Our featured neighborhood is located in Southwest Detroit, which is a known destination for immigrants seeking jobs and a brighter future. Because of this, the region boasts a rich variety of cultures and a tight-knit community. The neighborhood is in constant development to preserve its history.

Hubbard Farms is actually one of the old plots for ribbon farms along the Detroit River. To its west is Clark St, to its north is W Vernor Hwy, to its east is W Grand Blvd, and to its south is W Lafayette. You can see the bigger picture in the map below. Any links you see will take you to Deep Dives previously written:

Contain 800x800Source: Loveland’s Detroit Neighborhoods Map

According to Niche, Hubbard Farms has a population of just 1,115 people. The neighborhood is much smaller than a lot of areas in the city. Here are two maps to show you exactly where it’s situated within the City of Detroit:

Contain 800x800Source: Google Maps

Hubbard Farms is a hub for artists, with an unusually high density of artists-in-residence than other neighborhoods. Just take a look at SpreadArt, El Club, Southwest Housing Solution’s Whitdel building, and What Pipeline, a contemporary art gallery. Teeming with artists and other creatives, the area is full of vibrant personalities and buildings.

Since 1876, the Hubbard family that acquired the land and other prominent Detroiters lobbied for the Grand Boulevard—a tree-lined, meticulously-landscaped boulevard around three of the sides of the city’s boundaries, the fourth one being the river. This iconic boulevard encompasses Detroit’s then-current neighborhoods around three miles from its downtown area.

The construction of Grand Boulevard soon attracted investors as they built beautiful mansions along the route. In fact, you can still see most of these properties if you drive along the boulevard today.

There’s also the Hubbard-Vernor Project, which is a $12 million mixed-use development with 53 housing units, on-site parking, and retail and community spaces for the neighborhood. Based on its timeline, the Hubbard-Vernor Project will be completed and occupied by 2021.

We can’t ignore the historic lofts opening last year either, where an abandoned landmark structure in the neighborhood is being redeveloped into 12 units of modern housing across 16,404 square feet. In total, the project will cost $4.6 million and is one of the top priority redevelopment projects in Hubbard Farms.

So, with all of the exciting new developments happening in Hubbard Farms, is the neighborhood a good area to invest in rental properties? We’ll take a closer look in the following sections.

Investment Opportunity

Let’s start with the most crucial factor of any investment: monetary returns. There are a couple of things to consider when evaluating an opportunity, but financial viability will always be the end goal.

Below, you’ll find the average property condition, rent amount, and home values of Hubbard Farms properties below to determine the profitability of its real estate market.

Property Condition

As mentioned earlier, Hubbard Farms is also home to the workforce of the burgeoning manufacturing industry after the Civil War. A large portion of its housing stock was built to give veterans and their families home, which means the architecture and design date back from the 1880s to World War I.

You can see many Victorian homes of diverse styles as you walk around. Beyond that, there are plenty of others with Romanesque, Colonial Revival, Beaux-Arts, Federalist, and Italianate designs. They look amazing—but they are on the older side.

The majority of homes in Hubbard Farms are well beyond a hundred years old (ranging from 104 to 142 years old), which means you’ll have to deal with major renovations if the home hasn’t been updated recently.

Here are some tips to get started:

1. Check the structure. There might be structural rot, pest infestations, cracked foundation, water infiltrations, and undersized beams and posts compared to our current building codes.

2. Look out for old wiring. Electrical systems from a hundred years ago will certainly need updating. You’ll also have to look for the old “knob and tube” wiring if the home still has it, as they won’t be adequate for what our devices now require.

3. Beware of old pipes. Just like the electrical system, the plumbing and HVAC boiler systems might be outdated, broken, or dangerously close to disintegrating. Same goes for the underground sewers. You won’t want to deal with any pipe-related bursts or backups that will significantly damage your property.

    As always, remember to conduct a thorough inspection with a certified professional to budget your project properly. It might take more money than you expect to overhaul a home and bring it to rental standards—which will deplete your profits from the get-go.

    Average Rent and Rent-to-Income Ratio

    Currently, Niche reports that the average rent in Hubbard Farms is $613 per month. But this is a huge understatement, as the two current listings on Zillow seems to indicate that you can expect around $1,650 per month for a one-bedroom, one-bathroom apartment unit:

    Contain 800x800Source: Current listings on Zillow as of January 2022

    Let’s use these rent estimates and the average income to compute the rent-to-income ratio. The industry standard is to ensure that the tenants’ income is at least 3x the rent amount, so you can be confident that the tenants will have the capability to pay each month.

    So, according to Niche, the median household income here is $31,944 annually or $2,662 per month. That means that an average rent of $613 is 23% of the monthly income, and the average rent of $1,650 is a whopping 61.9% of the monthly income—more than half of the industry maximum.

    So, how is this possible? Gentrification! This area is turning over too quickly for many syndication websites to keep up with.

    Home Value, Price, and Appreciation

    Niche reports that the median home value in Hubbard Farms is $115,700. However, this figure might be a bit low, especially when compared to the recent sales in Redfin, with a median price of $155,000.

    In fact, the difference is even greater compared to the current listings on Zillow, with properties priced at $340,000 and $360,000 for large homes:

    Contain 800x800Source: Current listings on Zillow as of January 2022


    Property value is important. But you also need to check the rent-to-price ratio when choosing rental properties, so you know if the price is worth the potential cash flow of your investment. The rent-to-price ratio isn’t fool-proof, but it’s a quick indicator to shortlist your options to a few profitable properties.

    The rule of thumb is to ensure that the monthly rent is at least 1% of the total acquisition price—the purchase price plus necessary renovations. So with the average rent of $613 and average property price of $115,700 from Niche, the ratio comes out as 0.5%—significantly lower than the 1% you can get with other properties in and around the City of Detroit.

    We can’t use the current listings on Zillow to do the same calculation, since the properties for rent and properties for sale are too different from each other. Those for rent are largely apartments, while the homes for sale are large, 5-bedroom mansions. You can do some quick math for yourself though and see a large improvement in the rent-to-price ratio.

    Unfortunately, there is no data on the property appreciation rates in Hubbard Farms as of the writing of this article, probably due to its small size.

    Potential Tenant Pool

    Tenants are the lifeline of every rental property investor’s business venture. You want to acquire properties that will attract high-quality tenants consistently, so you get renters that will pay on time, be responsible with property maintenance, and protect your overall investment assets.

    Let’s evaluate the tenant pool in Hubbard Farms to see what kind of tenant management you’ll need to have. We’ve based it on the key factors: income, employment, and racial diversity to help you budget for potential costs and foresee the type of tenants you’ll likely acquire.

    Tenant Demographic: B

    So, first up is the tenant demographics. The best way to evaluate this is by understanding different tenant classes. For example, Class C and D tenant pools will require intensive property management, while Class A and B tenants won’t need hands-on handling.

    In this particular case, Hubbard Farms’ tenants seem to be in the middle of the spectrum—which means there’s a mix of Class C+ through Class B, even some Class A. This is fairly obvious just by the relatively high rental amounts. You’ll have to be diligent and thorough with tenant screening to ensure that you only accept those with stable employment, high enough income, and will be responsible for property maintenance and payments.

    Average income: Niche shows that the median household income in Hubbard Farms is $31,944 per year. This isn’t the highest income to have (compared to the average rent), but again, the data lags behind the current reality. Many potential tenants can afford the rising rents, so you just have to be careful who you accept.

    Contain 800x800

    Unemployment Rate: There isn’t much data on Hubbard Farms’ unemployment or poverty rate. But we can safely assume that it’s probably under the average of Southwest Detroit, which is 9.7%, according to Areavibes.

    Diversity: Niche provides us with a breakdown of the racial diversity in Hubbard Farms:

    Contain 800x800Source: Niche

    Neighborhood Livability: B

    Working closely with the tenant pool is the neighborhood livability. You’ll want to invest in the areas that attract the best tenants possible, so you’ll have people taking care of your property, paying rent, and following your lease agreement. Plus, the property will be more valuable in a beautiful, expanding neighborhood as well.

    So, here’s Hubbard Farms in a snapshot:

    Crime and Safety: Hubbard Farms wasn’t the safest place to live in, but that’s changing fast with the gentrification. Even though Niche reports that its crime rates are higher than the City of Detroit and the rest of the nation, landlords wouldn’t be getting the rents they are if this was full of crime.

    Walkability: The neighborhood is extremely walkable and bike-friendly. In fact, it's one of the two Detroit neighborhoods that are the closest to "20-minute neighborhoods," which makes it easy for tenants to run errands and go to work. This also means it's easy for you to find attractive properties near groceries, restaurants, and other stores.

    Schools: Hubbard Farms residents can send their children to Maybury Elementary School, Amelia Earhart Elementary-Middle School, and Western International High School. Investing in properties near these areas will attract families moving into the neighborhood.

    The overall livability in Hubbard Farms is pretty good. Niche ranks the neighborhood as #10 Best Neighborhoods to Live in Detroit, among two other significant awards:

    Contain 800x800Source: Niche

    Nextdoor also reports the locals’ favorite businesses in Hubbard Farms, including Asian restaurants, automotive services, bookstores, and more. There’s also Clark Park which is the district’s “town square,” and Mexican Town Bakery which is one of the two local bakeries serving pastries and sandwiches.

    These all contribute to the general lifestyle one can expect when living in Hubbard Farms.

    Contain 800x800

    Overall score: B

    Based on all the information provided in this article, we're giving Hubbard Farms a score of B for investing in rental properties. The main factors that pulled the score down are the challenging rent-to-income and rent-to-price ratios. In contrast, the factors that still make it a relatively safe place to invest in are the neighborhood’s overall livability, economy, and attractiveness.

    On top of all that, the area is up-and-coming and a lot of investors are keen to invest now as the neighborhood is full of opportunities. In the last 5 years alone, prices for properties here have grown significantly.

    Still, we have to be honest and say that all property scoring systems are inevitably subjective. If you truly want to know what Hubbard Farms and the City of Detroit are like, you must visit the area yourself to check out potential investment homes.

    You may still find great deals in Hubbard Farms—contrary to what we've presented in this guide!

    Our guide ends here, but you can still learn more. If you have a burning question you'd like to ask about Hubbard Farms, comment below, and we'll get in touch. Our team of property managers is more than willing to help you invest wisely in the City of Detroit.

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    This guide is part of our ongoing series that evaluates the rental investment potential of each area in Metro Detroit and the City of Detroit. If there’s a specific area you’d like us to prioritize, let us know!



    Comments (1)

    1. Great write up Drew