Detroit, Warren, and Phoenix: Which one is Better for Investing?
Source: Photo by Scott Webb on UnsplashRental investors often focus too much on the potential cash flow that a property can generate. However, let’s not forget equity gains that make your rental property even more valuable—all thanks to increasing property appreciation rates.
To find the best place for investing in property appreciation, it's crucial first to understand what factors affect property value. The three key factors are location, the economy, and population growth.
So, let's take a closer look at how you can take advantage of these, even as a rental investor.
3 Things That Influence Property Appreciation
These aren't the only factors that affect property appreciation, but they certainly are important elements that contribute to your success.
#1 - Location
First, the closer the property is to urban areas and amenities, the higher the demand will be for that rental unit. This means there will be fewer vacancies and more competition among renters, which will drive up rent prices. Second, properties in areas with solid job growth tend to appreciate faster than those with little or no job growth.
This is because as more people move into an area for work, the demand for places to live also increases. And so, the demand for housing drives up prices as well as the value of your investment.
#2 - Local Economy
The state of the economy also has a direct impact on property values. For example, when the economy is strong, people are more likely to move for work, driving up the demand for housing. This leads to higher rents and appreciation rates.
However, when the economy weakens, people are less likely to move, and there is less demand for housing. As such, can lead to lower rents and decreased appreciation rates.
#3 - Population Growth
Finally, population growth can majorly affect property values. As an area's population increases, so do the demand for housing. This increased demand leads to higher rents and appreciation rates—plus the added benefit of growing your tenant pool for quality renters.
Detroit, Warren, and Phoenix: Which One is Better for Appreciation?
Now that we understand the factors that affect property value, let's look at which of these three cities is the best option for investing in property appreciation.
The City of Detroit
The City of Detroit, Michigan, is an excellent option for investors looking for property appreciation. The city has seen strong job growth in recent years, with over 12,200 job gains in Detroit establishments and a forecast of at least 12,400 new jobs by 2024.
Additionally, the city showed "resilience in the face of an unprecedented downturn" during the global pandemic COVID-19. In fact, the city's population is multiplying. The city population increased by 0.7% over the last year, indicating a future job growth of 29.3% for the next decade.
It's lower than the national average of 33.5%, but it still provides ample opportunities for your tenants to secure well-paying jobs to afford to rent your place. The population growth is primarily driven by people moving to the city for work and retirees moving to the town for its affordable cost of living.
Here are the spots in the City of Detroit that offer the most incredible appreciation rates:
Source: NeighborhoodScoutBecause of these factors, the city of Detroit is expected to see reasonable rental prices and appreciation rates in the coming years—all contributing to your investment success.
The City of Warren
The City of Warren, Ohio, is another good option for investors looking for property appreciation. While the city experienced a decrease in job growth by -6.94%, the future job growth for Warren is a favorable 11.75%. Therefore, job opportunities will continue to increase as the city's economy improves.
Warren's population is growing rapidly, with the city's population reaching 38,479 in 2020 compared to only 41,480 people in 2010. This population growth is driven by people moving to the city for work and retirees moving there for its affordable cost of living.
In this heat map, you can see the hotspots for appreciation in Warren
As a result of these factors, Warren is expected to see strong rental prices and appreciation rates in the coming years. You can take your chances investing in this city, and be confident that you’ll generate positive returns quickly and consistently.
The City of Phoenix
Next up, Phoenix, Arizona, is a good option for investors looking for property appreciation. The city has seen strong job growth in recent years, ranking second among all the large US metros in terms of job growth. Phoenix, AZ reported an increase of 217.1% from 2015 to 2020, where more workers are making six-figure incomes than the national average.
Moreover, Phoenix’s population is growing at a rapid pace, with the city’s population increasing by 1.48% from 2021 to 2022, reaching a population of 4,652,000. This figure is largest due to the many people relocating to the city for work, as well as retirees moving to the city for its affordable cost of living.
Here’s another heat map showing the data of the hotspots for appreciation Phoenix:
Source: NeighborhoodScoutBecause of all these positive factors and benefits, Phoenix is also expected to see strong rental prices and appreciation rates in the coming years. Overall, it’s safe to say you won’t go wrong investing in Phoenix rental properties.
Investing in Equity Gains, Even as Rental Investor
As you can see, all three of these cities are good options for investors looking for property appreciation. Each city has strong job growth, and population growth, and is expected to see strong rental prices and appreciation rates in the coming years. In other words, if you’re looking to invest in property appreciation, any of these three cities would be a good choice.
Nevertheless, we highly recommend that you start with the City of Detroit. Our team of expert property managers has been operating in the greater Metro Detroit area and can help you navigate the infamous risks for you to reap the famed returns. We guarantee that you’ll find satisfaction in the Detroit market.
Get in touch with us to find out more.
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