The Risks and Rewards of Advertising in the Detroit Rental Market

by | BiggerPockets.com

Our company operates out of the Metro Detroit area, which, as of this writing, contains the second-least-expensive housing market in the U.S. That means we’ve got a solid perspective on low-cost rental markets for which you won’t find much advice about online. Over the course of this month, we’re going to talk a bit about how operating in a high-risk, high-reward environment affects the property management process. Today, we’re talking about how the Detroit rental market affects advertising efforts.

Switching it Up (by Necessity)

Properties follow a predictable cycle—tenants move out, the property gets spruced up and possibly renovated, marketing pictures are taken, the property is advertised for rent, it’s shown, and finally someone signs a lease and moves in. There’s a good reason for this process: usually, you only want to market a house that is immaculate—because immaculate houses tend to rent faster and for more money.

But if the market you’re operating in is a high-stakes economic environment like Detroit, there are several factors that can play into altering this order:

  • Incentive to get the property on the market more quickly
  • Inability of the owner to pay for further repairs or cleanup
  • The neighborhood’s blighted state making cleaning up the property a bad investment

Related: 25 Single Family Rental Markets Predicted to See the Largest Growth in 2017

The Race to the Market

Getting a property on the market quickly means a lot more in a high-stakes economy—both avoiding risks and amplifying rewards can be challenging. Because several of the risks can be summarized as “jerks will abuse the house for their own profit,” any steps you can take to speed up the transition from move-out to move-in acts to reduce the risk of the property getting stripped, squatted in, or vandalized.

This means it’s commonplace around here to show a house that is still partway through its repair process, hasn’t been meticulously cleaned, or has boards or metal security panels up over the windows. In other markets, showing a house this way would be a death sentence—around here, it’s common sense. Most property hunters are accustomed to it. It’s also normal to show a house that has no power, water, or even a furnace or water heater in place—they’d just get stolen, so we hold on to them and install them once the lease is signed.

Related: Buying a Rental Property: A Step-by-Step Guide

Blight and Marketing

This may actually be a problem nearly unique to Detroit, but it still contains valuable lessons for property managers everywhere. There are simply large areas of Detroit (about a third, if you remember the first article in this series) that look like this:

A satellite view of the line between a blighted neighborhood and a normal one.
Two street views: one normal, and one blighted and nasty.
(Yes, those two street views are literally just above and below the white line—in the same place looking in the same direction!)

If your property is in the Misery and Sadness zone, the rent you will be able to collect, no matter how excellent it is as an individual house, will be severely limited. North of that line, perfectly legitimate 3-bedroom/1-bath ranch homes rent for $650; below it, a nearly identical home rents for $800 or more. If you can’t collect enough money in rent to cover the basic maintenance costs of the house, you shouldn’t market it as an immaculate abode in the first place. Go ahead and take as-is marketing pictures and hold as-is showings.

By doing things you’d never consider doing in a traditional market, some of the risks associated with the Detroit market can be mitigated (or even turned into upsides)—but few people understand how it works. That’s why we decided this series of posts would be useful in the first place.

So, now you’ve seen one way in which the unique Detroit market can flip the usual property management logic on its head. Next time, we’ll look at what this market does to the next stage of the game: tenant screening.

Do you have any tips for advertising in tough markets?

Let me know in the comments below!

About Author

Drew Sygit

Drew is the manager of Royal Rose Property Management, a fairly high-tech solution for Detroit Metro area property owners & investors.

7 Comments

  1. Estelle Angelinas

    We are interested in the East Side of Detroit. They have some nice houses and the neighborhoods seem to be kept up. Not too expensive yet. As far as advertising, an “as is” listing with some photos and an honest description is preferable to one with no photos or very little information. As long as the work needed isn’t too much, I wouldn’t mind buying something like that. We’re a DIY family, and can do a lot as far as repairs and renovations.

  2. Stay away from 48205 highest insurance rates in the country if you need landlord insurance in the Detroit area give me a call (248) 813-1000 this article was spot on. I think you were very conservative in your approach however lol. You forgot to touch on the issues with squatters. I have witnessed people from out of town sink tons of money in a rehab and not be able to collect a penny because the house was gutted. Invest in a good alarm system and some mean dogs to protect your investment. There is lot’s of money to be made in the Detroit market if you are prepared with a great game plan. Getting a tenant in the property is the easiest part as far marketing. Collecting rent on the first of the month is a whole different animal. Great article

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