Deep Dive into Metro Detroit Neighborhoods: Pontiac

Source: Zillow listing

The Metro Detroit area has always had an excellent real estate market, especially with a growing demand for single-family properties and wildly affordable investment options. There are only so many markets in the United States where you can purchase properties for under $100,000—and Metro Detroit is one of them.

Nevertheless, while the real estate hotspot is full of lucrative opportunities for you, the metropolitan area of Macomb, Oakland, and Wayne counties are also overwhelmingly confusing and diverse in multiple aspects. So much so that even seasoned investors need insider knowledge and expert guidance to reap the famed rewards in Metro Detroit.

This is why we have this ongoing Deep Dive series, evaluating each city and neighborhood's rental property investment potential in Metro Detroit. We have more than two decades of experience operating as a property management company in the area, and we’re more than willing to share our knowledge with investors like you.

For this installment, our featured area is Pontiac, a city near the City of Detroit. Pontiac is known for having General Motors automobile manufacturing plants, which is the basis of its economy and primary wealth contribution to the region.

Let’s see if Pontiac is an excellent city for you to invest in rental properties today.

Source: Google Maps

Pontiac

The City of Pontiac is in Oakland County, Michigan. It has a population of 61,606 in a total area of 20.25 sq mi (52.46 km2), resulting in a density of 3,098.11 per square mile.

The city is roughly 20 miles north of the City of Detroit, so none of its borders touch the main city of Detroit. Because of this, we don’t consider it a “Ring City,” which refers to the cities surrounding the City of Detroit with high rental demand and affordable properties. Nevertheless, you still won’t find many of the investment risks that are commonly associated with the Detroit market in Pontiac.

Here’s a map to help you visualize where Pontiac is in Metro Detroit:

Source: Georgetown Public Policy Review

We’ve also listed all the cities in Metro Detroit below for your convenience. Any names you see highlighted in green are Ring Cities—the best spots for rental investments in our book—while the ones with hyperlinks will take you to other Deep Dives:

Pontiac in a Nutshell

The City of Pontiac was founded in 1818, and it was the second European-American organized settlement in the state after Dearborn. Its name comes from a war chief of the Ottawa Tribe, who established headquarters in the area before the European settlers arrived. Eventually, the state legislature officially recognized the small village in 1837 and incorporated Pontiac as a city in 1861.

Since its existence, Pontiac’s centric location has been one of its greatest appeals. Pontiac is served by the Oakland County International Airport, which is one of the busiest airports worldwide and has access to multiple state and county highways—where Interstate 75 serves as a direct route to the city.

Its location attracted professionals and businesses that needed woolen and first mills—often leveraging the Clinton River for their power source. There is also an abundance of natural resources, leading to the establishment of carriage manufacturing companies that thrived until self-propelled vehicles came into the picture, and manufacturers merged under General Motors Corporation.

Pontiac was home to the Oakland Motor Car Company which was eventually acquired by General Motors in the early 1900s. Pontiac became the new automotive industry capital of the area and was described to be “the third fastest growing city in the state” with the “largest truck factory” from the book called Michigan’s Thirty-Seven Million Acres of Diamonds.

In its heyday, the city was where the primary automobile assembly plant was for the production of Pontiac cars—a brand named after the city itself. The Pontiac brand was eventually discontinued in 2010.

By the 1960s and 1970s, there was an urban renewal of Pontiac’s downtown area, where the “Pontiac Plan” of C. Don Davidson was in full swing. The revitalization plan included two office buildings, a high-rise residential complex, and even the Phoenix Center.

With its impressive history and plans for future developments, does Pontiac have a good rental real estate market? Should you consider it a place to invest in the famous Detroit market? Let’s inspect the details of this city.

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

Niche shares that the median rent in Pontiac is $815 across all property types. If we break this figure into different bedroom sizes, Best places shows that rent in Pontiac is significantly lower than in Metro Detroit, Michigan, and the nation:

Source: Bestplaces

Still, lower rent doesn’t automatically mean bad news for you. You may still be able to generate strong rental income streams depending on how many properties are in Pontiac, which we’ll analyze further later.

For now, let’s check if Niche and Bestplaces’ numbers are accurate by using an actual Zillow listing:

Source: Current listings on Zillow as of June 2022

Aside from the fact that two- and three-bedroom homes seem to be more popular in Pontiac, the rent estimates of Niche and Bestplaces are actually lower than reality. This is great news for you as an investor because it means that you’ll potentially be able to charge higher rent per home.

So, let’s use the rent-to-price ratio to see if Pontiac properties will generate positive cash flow. Keep in mind that the industry standard is to ensure that the monthly rent is at least 1% of the property’s total purchase price, including all repair costs, closing costs, and others.

We’ll use this recently sold Zillow listing as an example:

Source: Recently sold listing on Zillow

With a rent estimate of $1,050 from Zillow and a purchase price of $65,000, the resulting ratio is an impressive 1.6%. This figure not only reflects the rest of Metro Detroit cities near the City of Detroit but actually surpasses the usual 1-1.5% range for strong cash flow.

You can certainly be confident in investing in Pontiac properties, as you can very well earn back your investment in a short matter of time, and continue reaping returns for years to come.

House Value and Appreciation

According to Niche, the median home value in Pontiac is $67,100. This may be significantly understated, though, because Zillow reports that Pontiac properties are actually worth $115,182 on average instead. Its figure is seasonally adjusted and only includes the middle-price tier of Pontiac properties, but you can certainly observe the 23.3% growth in the past year:

Source: Zillow

Moreover, Redfin reports an even higher median sales price for Pontiac properties, indicating that the figure is around $120,000 and has been increasing 8.1% year-over-year. Homes are also selling pretty well, considering that the number of homes sold has grown 22% year-over-year.

Given that, Redfin calls the Pontiac housing market “very competitive” based on their Compete Score, where many homes get multiple offers with waived contingencies and call sell 1-5% above the asking price.

Source: Redfin

Regarding property type and size, NeighborhoodScout reports that the most common homes in Pontiac are single-family homes (61.1%) and three-bedroom properties (39.3%). Next to this, apartment complexes are also popular (24.2%) and two-bedroom properties take a third of all sizes (29.8%).

Other home types include small apartment buildings (9.2%), townhomes (3.4%), and mobile homes (2.0%). And home sizes include one-bedroom properties (16%), four-bedroom properties (9%), studio units (4.5%), and five- (or more) bedroom properties (1.5%).

Pontiac properties are generally evenly priced across the city, but we can see that some homes ‌get a bit more expensive when it’s closer to the center. Still, there are many affordable properties scattered everywhere, falling around the $ 100 mark that the Detroit real estate market is known for.

Overall, Pontiac is an excellent area with plenty of affordable housing to take advantage of while avoiding all the usual risks of the market, giving you a sweet investment spot:

Source: Current listings on Zillow as of June 2022

In terms of appreciation, Pontiac properties have an impressive track record. Its properties have appreciated 91.56% over the past decade with an average annual home appreciation rate of 6.72%. This figure puts Pontiac in the top 20% nationally for real estate appreciation, which means the city is a great place for investing long-term equity gains.

Even short-term investors can take advantage of Pontiac’s appreciation rate, where properties have appreciated 18.11% in the past year—higher than the national average rate. In the last quarter, the appreciation rate has also been 6.99%, annualizing to a rate of 31.03%.

Here’s a heat map for you to see the highest appreciating areas in Pontiac, where many neighborhoods fall on the higher end of the spectrum:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

With the financial viability of investing in Pontiac out of the way, let’s now dive into the other crucial factors that rental property investors like you should consider. We’ll look at the tenant quality, property conditions, and overall appeal of Pontiac to know what type of tenants you’ll have to manage, the property maintenance you’ll need to prepare for, and the number of new residents that you can attract.

Average Property Class and Condition: B-

Average property age: 60 years

Bestplaces shows us that the average property age in Pontiac is 60 years old. This is roughly 10 years older than what the industry deems as “old homes,” which means Pontiac properties are leaning toward the older end of the spectrum.

Check the chart below to see how the average property age in Pontiac is compared to its greater areas:

Source: Bestplaces

Now, having older homes doesn’t automatically mean bad news. It only means that you’ll have to be more thorough in your inspection and more knowledgeable about your maintenance works to ensure that you don’t deplete your funds.

Here are a few examples of what to watch out for in an older home:

• - Lead-based paint concerns
• - Outdated outlets & electrical systems
• - Obsolete plumbing systems
• - Old windows & poor insulation
• - Pest infestations lurking within the walls

This list is non-exhaustive but should give you a glimpse of what to expect. You’ll have to take your time inspecting the home, budgeting properly, and working with professionals to bring the property up to rental standards.

Quality of Life in the Neighborhood: B

Next, let's talk about the quality of life in Pontiac as the more attractive it is, the more quality tenants who pay rent on time, take care of the property, live in your rental for years at a time, and guarantee your cash flow for the long haul.

Here’s a snapshot of what life in Pontiac is like:

Local Economy

Pontiac is experiencing significant economic revitalization and growth in the past years. Geographically, it’s always been a good spot for businesses to find industrial properties and lands for lease or purchase. it also offers excellent housing opportunities for any of them who wish to reside locally.

A large portion of Pontiac’s redevelopment is in its historic downtown area, where buildings have been converted into condominiums and residential lofts. Plus, retail spaces are filling up and going through a significant transformation, creating an environment that is comfortable to work and live in for residents, employees, and business owners alike.

Plus, Amazon even opened a new warehouse on the former site of the Silverdome, the previous home of the Detroit Lions football team. This alone is a great sign as there will be hundreds of jobs created by them alone

Recently, property developments in Pontiac have also become landmarks gaining national attention.

For example, the M1 Concourse was established in 2015, which is a $63-million car condominium complex with storage, recreational facilities, and a driving track for car collectors and enthusiasts. And Challenge Manufacturing and Ultimate Soccer Arenas are also expanding in Pontiac to become iconic venues worldwide.

New businesses are also hinging on the excellent railroad transportation for industrial uses and passenger service in downtown Pontiac, and the accessible freeways that connect to multiple neighboring communities in Metro Detroit from all directions.

The local economy in Pontiac is attractive to employees and business owners alike, further expanding its economic contribution to Michigan and the nation.

School Rankings

As a rental investor, you want to invest in an area that has excellent schools to attract families. Thankfully, based on GreatSchools’ evaluation, Pontiac has above-average schools like Great Lakes Academy and Walton Charter Academy, both of which families with younger children may find ideal.

Here’s a handy map that shows where all the good schools are in Pontiac:

Source: NeighborhoodScout

The area surrounding Rotary Park is undeniably the best place for you to invest in larger homes that can cater to families with children still studying.

Crime and Safety

Pontiac isn’t the safest area, unfortunately, but it’s also not the most dangerous city out there. In fact, you might find a neighborhood that’s completely safe next to one that’s deemed “unsafe,” since Metro Detroit is diverse even in terms of crime rates. So take your time to scout your options, visit the block yourself, and you might realize that the area is safer than most reports will say.

Here’s another heat map that shows you where the safer spots in Pontiac are, where we see that the side that’s farther away from the City of Detroit is relatively safer and will attract more responsible tenants:

Source: NeighborhoodScout

Livability

Niche awarded Pontiac for being one of the most diverse suburbs and places to live in Michigan where the cost of living is considerably lower than nearby cities. These are all good factors that will certainly attract new residents to your property:

Source: Niche

Areavibes also shows that the cost of living in Pontiac is 4% lower than the Michigan average. Here, Bestplaces gives us a breakdown of all the associated costs:

Source: Bestplaces

Tenant Class and Demographics: C

Finally, let’s evaluate the tenant pool in Pontiac. As a rental investor, you want to invest in an area that has a large number of quality tenants who’ll pay their dues, keep the value of your property, and directly contribute to the stability of your cash flow.

Here are the highest contributing factors to Pontiac’s tenant pool:

• Income: Unfortunately, the average income per capita in Pontiac is significantly lower than the average of Metro Detroit, Michigan, and the nation. This means you might not be able to earn as much as you can elsewhere (unless you invest in affordable properties!):

Source: Bestplaces

• Unemployment: The unemployment rate in Pontiac is also significantly higher than its greater areas, but we’ll have to take this figure with a grain of salt, given that Pontiac might still be recovering from the negative effects of the global pandemic. Fortunately, it still doesn’t discount the fact that Pontiac will see impressive future job growth similar to other areas:

Source: Bestplaces

• Education: A large portion of Pontiac residents are high school graduates. However, this also means that most of them don’t have a degree and might not be able to secure higher-paying jobs. With the future job growth posting improvement though, even high school graduates in Pontiac will likely find stable jobs that’ll help your investment stability:

Source: Bestplaces

• 
  
• Diversity: Here is a breakdown of the racial diversity in Pontiac:

Source: Niche

In a nutshell, Pontiac residents have lower income, potential future job opportunities, and high school education, and are a mix of mostly White and African-American locals compared to other areas in Metro Detroit and Michigan. Whether this supports your personal investment goals will be up to you.

As always, you’ll have to conduct thorough tenant screening to ensure that the renters you secure have stable job that earns them enough income to pay monthly rent and maintenance needs.

Source: Google Maps

Overall Score: B-

We’re giving Pontiac a rental investment score of B. Our evaluation is based on all the information we’ve gathered above, and our personal experience as a local property management company in Metro Detroit. Here’s a summary of the key factors that contributed to our ‌conclusion:

• * Pontiac properties have an impressive rent-to-price ratio of 1.8%, where you can generate positive cash flow and earn back your initial investment relatively fast.
• * Pontiac properties are increasing in price and appreciation, all while offering many affordable options for you to choose from. You’ll gain equity on top of stable cash flow—an ideal investment combination.
• * Pontiac properties are within a growing economy that’ll provide massive job opportunities in the near future. Moreover, there are a couple of good schools that’ll attract tenant families.

We have to say that we might be a tad bit biased when it comes to Metro Detroit cities. After all, they’ve been our bread and butter for more than two decades, and we’re quite familiar with the location.

We highly recommend that you take the time to visit Pontiac yourself to see the investment opportunities in person. We guarantee that you’ll be pleasantly surprised with how many properties offer a good balance of cash flow and equity gains, clearing the path for you to come out of your real estate investment financially and personally successful.

*Please keep in mind that all comments & grades are relative to Detroit and are subjective.

_

This isn’t the last city or neighborhood we’ll analyze! We plan to cover every single spot in Metro Detroit so it’s easier for you to invest in the lucrative, complex market of the City of Detroit.

Should there be a specific Metro Detroit area that you want us to prioritize, leave a comment below or with our team today. We’re more than willing to share our trade secrets for your ultimate success.