Deep Dive into Detroit Neighborhoods: Morningside

Source: Zillow listing as of April 2022

Are you looking to invest in the City of Detroit? You’re probably tempted to do so because of the area’s affordability (you can find properties below $100k here!) and increasing demand for single family homes.

But the investment potential doesn’t come without complexities, given that the City of Detroit is exceptionally diverse with many neighborhoods and characteristics to consider.

Well, look no further. This is your ultimate guide.

With more than 2 decades of experience as a local property management company, we’ve written these articles as part of our ongoing guides into Detroit investing. We’re also local residents of the area, so we know the city inside and out. We have all the information you need to unpack all the details you need to know before throwing your hard-earned money in a deal, helping you navigate the market with full confidence to earn the famed returns of Motor City.

We’ll go through the key evaluating factors like:

1. - The expected investment returns from rental properties
2. - The types of tenants to expect and manage
3. - The types of property management required

For this installment, we’re looking at the up-and-coming neighborhood of Morningside (sometimes stylized as MorningSide) beside the beautiful East English Village in the City of Detroit.

City of Detroit

Let’s begin our analysis with the big picture of the City of Detroit. The city is divided into 11 regions, as you can see in the map below:

Source: Wikipedia.com

These regions have their own distinct features and characteristics. For example:

• ● Southwest Detroit is a vibrant area with thriving businesses and colorful buildings.
• ● New Center is a diverse and dynamic region with a mix of entertainment and history.
• ● Midtown is the city’s cultural center with a university and revitalized business areas.
• ● Downtown Detroit is the city’s central business and residential area.

Morningside is part of the upper east side of the City of Detroit. The neighborhood is bounded by Interstate 94 and Harper Avenue on the north, Whittier on the east, Mack Avenue on the south, and East Outer Drive and Alter Road on the west.

Are you finding it hard to visualize where Morningside is? Here’s a map that shows where the neighborhood is located in relation to all the other neighborhoods. 

Source: Loveland’s Detroit Neighborhoods Map

Morningside Neighborhood

According to City-data, Morningside has a population of 18,634 within 2.133 square miles. This means that it has a population density of 8,736 people per square mile, which is 80.91% higher than the density of the overall City of Detroit. Why is this important? Because it shows people want to live in this neighborhood and the resulting higher demand puts pressure on rents to increase!

Source: Google Maps

Morningside used to be a French settlement full of ribbon farms back in the late 1700s, with only Lake Saint Clair and the Detroit River as its main travel routes. The area was part of Grosse Pointe Township, where its long, narrow strips of farmland stretched inland and provided access to waterways for drinking, fishing, farming, and more.

By the end of the 19th century, the City of Detroit grew in response to its auto manufacturing industry, and it annexed large portions of Grosse Pointe Township. Ribbon farms were redeveloped into subdivisions for middle-class housing, and Morningside blossomed as a neighborhood.

In recent years, the governments of Grosse Pointe Park and the City of Detroit created a gateway to separate Morningside as its own community. Plus, the city is revitalizing its east side, allowing real estate in Morningside to develop, local organizations to emerge, and a plan for long-term growth to be in place.

Walking through Morningside, you’ll see wide streets lined with many red-brick Tudor-style homes. You’ll also see the historic Alger Theater movie theater with its Art Moderne style, representing the city’s past. There are plenty of amenities, a good cost of living and housing remains to be widely available.

Moreover, Morningside is in close proximity to East English Village and Grosse Pointe. Residents and investors who were priced out of these established and expensive areas are looking at Morningside for more affordable options, further growing the neighborhood’s overall appeal and housing market.

Today, Morningside seems to be an up-and-coming area that’s ripe for rental investors like you to get a slice of the Detroit real estate market. Let’s take a closer look at the numbers and see if Morningside is the right neighborhood for you to invest in.

Investment Opportunity

There are many factors that determine if an investment opportunity is good or not. But out of all of those, the most important one is the stability of Return On Investment (ROI). So, let’s discuss the average property conditions, average rent, and home values and appreciation rates in Morningside to see if it’s to your advantage, and will point you towards profitability.

Property Condition

Based on City-data, properties in Morningside were either built in the last 15 years or earlier than 1950. The rough average is 50 years old, which makes Morningside homes “old” based on industry standards.

Source: City-data

When buying a property that’s more than 50 years old, you need to be aware of the common problems that may come with older homes, such as the following:

• ● Harmful lead-based paint
• ● Outdated outlets & electrical systems
• ● Obsolete water supply & drain systems
• ● Damaged to foundations, sills, and roofs
• ● Unacceptable previous repairs & alterations

These are especially important if you plan to purchase a distressed or fixer-upper home and turn it into a rental investment property. If you don’t have the experience and knowledge to properly evaluate a property for these issues, it’s probably best to hire a professional inspector to assess the entire condition of the property before buying.

Average Rent and Rent-to-Income Ratio

According to Niche, the median rent in Morningside is $963 per month, which is 16.87% greater than the $824 average of the City of Detroit. City-data, however, reported that most of rent paid in Morningside is largely below the $1,000 mark:

Source: City-data

Still, keep in mind that City-data’s figures are already over 3 years old. The landscape has shifted dramatically over the last few years, so we’ve pulled up some current listings for rent from Zillow for more accurate numbers:

Source: Current listings on Zillow as of March 2022

As you can see above, all of the listings above are asking for over $1000 in rent per month, so this paints a more optimistic picture than the current data.

While some of these numbers may be outdated, a breakdown of average rents by housing sizes like this one from Weichert and the US Department of Housing and Urban Development (HUD) helps us compare the level of rent difference from one size to another:

• - Studio apartment: $554
• - One-bedroom unit: $630
• - Two-bedroom unit: $754
• - Three-bedroom unit: $903
• - Four-bedroom unit: $930

Now, we have to compare these average rents to the average household income to see if Morningside tenants will be able to keep up with monthly payments.

Data from Niche says that the median household income in Morningside is $32,868. As a rental investor, you may be impressed by the high amount. But take note that City-data also reports that households in Morningside have an average of 9.4 people, which is significantly more than the city’s average of 2.5 individuals. In other words, the high household income isn’t because of high individual earnings but because of larger households.

In fact, Nearly half (49.1%) are also family households, compared to the city’s rate of 37.2%, which also implies that Morningside is more attractive to families.

Given the average rent of $936 per month (that seems to be understated) and a median income of $32,868, most households in Morningside must set aside roughly 34.2% of their income for monthly rent. This is a good number, as the industry standard is “income = 3x rent” for you, the investor, to have stable cash flow.

Home Value, Price, and Appreciation

According to Niche, the median home value in Morningside is $55,103, which is 12% greater than the city’s average property value of $49,200. Morningside properties are also increasing in value, which means that this figure is highly likely to continue to rise in the coming years.

You can see the median listing home price vs. median home sold price here, provided by Realtor:

Source: Realtor.com

City data from 2019 also breaks housing prices into different housing types. We see that Morningside properties were more affordable than the rest of the City of Detroit in 2019. Larger properties such as townhouses are significantly cheaper, too. In fact, attached units and 2-unit structures are 52% and 73.6% cheaper, respectively.

Source: City-data.com

Now, sales prices are important, because not every investor has a lot of savings or capital to use. But, as a rental investor, you should also consider the rent-to-price ratio when deciding which property to purchase.

The industry rule says that the estimated monthly rent should never exceed 1% of the total house value, which includes the purchase price and all renovations necessary to bring the property up to standards. Anything below the 1% standard will likely reap slower returns while aiming for 1% and above will reward you with positive, strong cash flow.

With an average rent of $963 and an average home value of $55,103, the ratio in Morningside is an impressive 1.7%. This result means you will see healthy cash flow from Morningside rental properties, and easily earn back the money you’ve invested.

Morningside properties’ favorable rent-to-price ratio is also a reflection of the Detroit market, where the typical ratio is 1% and above. It’s this advantage that attracts many investors to the area, where the City of Detroit has one of the best ratios in the nation.

Take a look at the prices of the Morningside properties sold in the last 3 months on Zillow, and you’ll see that these properties do fall into a similar rent-to-price ratio:

Source: Properties sold on Zillow in the last 3 months *Based on current listings on Zillow

Unfortunately, there isn’t a lot of information about the appreciation rates of Morningside. However, NeighborhoodScout did provide a heat map with all the highest appreciation rates in the City of Detroit, where we can see that Morningside leans towards the higher end of the spectrum:

As we all know, with high appreciation rates comes potential equity gains. This means rental investors looking to hold their properties for the long haul will find great opportunities in Morningside.

Potential Tenant Pool

With the average rent and property prices in mind, let’s discuss the potential tenants you’ll get in Morningside. Knowing what kind of tenants you’ll have will help you prepare management needs beforehand, like hiring a property management team or choosing to do it yourself.

Remember that your goal as an investor is to find quality tenants that’ll take care of daily maintenance, won’t cause extra wear and tear, or have missed payments and disputes. Prioritize these things to increase your end profits and overall success in the business.

Tenant Demographic: A

Average Income: Areavibes reports that the household income distribution of Morningside residents falls in the $10,000 to $40,000 range. The income per capita is $17,027, which is slightly higher than the city’s average of $15,562. Note that Morningside has a lot of big family households, however, where the median household income is a whopping $38,814.

Source: Areavibes

As always, ensure that you screen well and only accept the tenants with steady income streams that are 3x the rent you’re charging. That way, you can be confident that they can pay their dues, and directly help your cash flow returns.

Unemployment Rate: Areavibes also mentions that the unemployment rate in Morningside is 10.2%, which is slightly lower than the city’s 11.9% rate. Still, the recent pandemic may have affected this figure, so take the rate with a grain of salt.

Diversity: Here is the racial diversity breakdown based on Niche’s data:

Source: Niche

Neighborhood Livability: B-

Closely linked to the tenant demographics is the overall livability of the neighborhood. After all, good tenants will naturally be attracted to good neighborhoods. So you’ll want to focus on the areas that will attract them today and for the years to come.

Prioritizing quality tenants and neighborhoods will increase your chances of having high occupancy rates, and allows you to secure renters who’ll take care of your property, pay rent on time, and abide by all the terms in your lease agreement.

So is Morningside an attractive place to live in? Here’s a glimpse of the neighborhood:

Crime and Safety: Niche reports that the crime rate in Morningside is higher than the national average. But we see from CrimeGrade that the neighborhood’s crime rate can differ from one street to another:

Trulia also shared its survey results, where locals have said that “​​[Morningside] is pretty safe,” and “It's so nice and safe and friendly.” At the end of the day, we encourage you to visit the area yourself to get a better sense of Morningside’s overall safety. You might find a perfectly safe property just a street away from one that’s deemed “unsafe” by real estate websites.

Transportation and Walkability: According to Areavibes, nearly three-fourths (73.6%) of Morningside locals drive to work, while 10.3% turn to carpooling. There are also more people here taking public transit than in the rest of the city, which means rental properties close to transportation stations will be attractive.

In terms of walkability, Trulia surveys show that 96% of respondents said sidewalks are available. And for those that have their own car, 86% of respondents said parking is easy in Morningside.

Schools: Based on Realtor, Morningside hosts 25 public schools that are rated good and higher by GreatSchools. There are also 3 private and charter schools, making the area ideal for families with younger kids. Here are the best public schools in the neighborhood:

• - Bates Academy (PK-8)
• - Clippert Academy (5-8)
• - Foreign Language Immersion and Cultural Studies (PK-8)
• - Edward ‘Duke’ Ellington @ Beckham (PK-8)
• - Spain Elementary-Middle School (PK-8)
• - Detroit International Academy for Young Women (PK-12)

The fact that many households in Morningside are families also mean that there may be a lot of new locals entering the neighborhood that will look for good schools. As such, it’s worth considering investing in bigger homes near school areas to attract Morningside tenants.

Overall score: B+

Based on all the research points we’ve pulled up and our industry knowledge of the area, we’ve given Morningside a score of B+ for rental property investing. This score is driven by the following:

1. - Morningside properties have an impressive rent-to-price ratio of 1.7%, which means you’ll easily find opportunities to reap strong cash flow, earning back your investment in no time.
2. - Morningside properties are more affordable than the rest of the City of Detroit. Most notably, larger properties such as townhouses and 2-unit structures may now be within your budget.
3. - Morningside households will likely pay their rent on time and in full, given that they only have to set aside 2.85% of their collaborative income to keep up with payments.
4. - Morningside is an up-and-coming neighborhood attracting new residents and investors priced out of more expensive neighborhoods like East English Village and Grosse Pointe.

Based on our experience as a local property management company in Metro Detroit, we’re expecting Morningside properties to increase in price in the next few years. We see all the factors that are working in its favor and highly encourage investors to get in the game while the values are steadily climbing.

Still, we have to say that all property scoring systems are inevitably subjective. So we suggest that you visit Morningside yourself to take a look at all the available opportunities. Take this guide with you and start your own evaluation of the area before investing your money in it.

It’s in areas like these where you can purchase affordable properties, get high returns, and continuously build your rental investment portfolio.

Do you need more help? Contact our team at Logical Property Management! Our inbox is always open for any investors seeking to get their slice of the City of Detroit.