Investment Opportunities in Detroit for New York Real Estate Investors
For investors in popular urban areas, such as New York, real estate can be a sizeable investment. Prices for even the smallest of houses in these coveted areas are often sky high when compared to less popular areas of the nation. These high prices cause low return on investments and make it difficult for beginning investors to enter the market.
Who Should Invest in Detroit
It is for these reasons that those looking to get started in real estate investment, or those looking to capitalize on their current real estate portfolio, are looking outside of their own states. In today’s digital age, it is easier than ever to manage a successful real estate portfolio from out of area, especially with the influx of turnkey properties and experienced property management companies available to investors.
In today’s real estate market, Detroit is one of the top-rated areas for capitalizing on a rental property investment.
Detroit vs. New York Market Rates
While both Detroit and New York are considered to metropolitan/urban areas, the difference between the two real estate markets is overwhelming. Although it is believed that prices will drop in New York for 2017, it is little consolation given that prices are 91% higher than they were just ten years ago.
In Detroit, a projected sales increase is coming, however only at an average of 6.4%. Regardless of this single digit increase, the median pricing for a property in Detroit is significantly lower than any other location in the US to date—falling below national average sales price by approximately 15%.
The average median housing cost in New York for 2016 was $650,000 whereas the median housing price in Detroit comes in at $39,100 for the same period.
Economic Growth in Detroit
Current economic growth in the US seems to have slowed down by 1.9% over the last year. While this may be the case on a national level, Detroit has continued to show an impressive increase in economic development with multiple new projects underway, and many more already on the calendar. There have been 110 development deals just in the Metro Detroit area in 2016 alone. But, they’re not stopping yet.
In 2017, the brand new QLine transportation system comes to fruition and several multi-million dollar investments from private industry. These large-scale investments come from companies like Ford Motor Company and Fiat Chrysler, as they are devoting millions to increasing job opportunities.
The brand new Little Caesar’s Arena brings yet another large-scale investment to the Detroit area, adding new jobs and retail potential to the area.
Affordability for Renters
Detroit’s current claim to fame is being ranked as one of the top ten most affordable US cities to live in. Living costs in Detroit are substantially below national average, making it easier than ever for families and/or singles to live comfortably on their median income. Grocery prices have been cited at 5.5% lower than the average, with utilities, transportation, and health costs coming in at 2.6%, 1.1%, and 1.6% cheaper than elsewhere.
Currently the average rental price for a home in New York City averages at $3,000, while in Detroit average rental rates are $750. This, in addition to the increase in economic growth and job availability, is bringing in an influx of millennial migrants looking to make the most of their money with the burgeoning cost of student loans and high automobile payments.
Return on Investment Rates
Another title Detroit took home recently was top hottest markets for real estate investors. This should come as no surprise after a quick analysis of median housing costs in comparison to the national average. Detroit is currently boasting one of the largest ROI rates in the market. An ROI, return on investment, refers to a profitability measurement that investors use to judge a property’s efficiency. This is one of the top factors practiced investors will look at before making any purchasing decisions.
In New York, ROI rates have dropped from their all-time high of 7% down to a trivial 4%. In Detroit, however, ROI rates are running between 6.75-8.5%. Another profitable measurement of Detroit’s ROI rates is the area’s stability, continually running at the same ROI rates year after year in recent accounts. Other urban markets, such as New York and California, have seen huge fluctuations in ROI rates since the last economic recession. This stability shown in Detroit markets has been a draw to foreign investment, which has increased sales frequencies and property values.
In addition to higher than average ROI rates, Detroit has been meticulously planning a revitalization project. Several local agencies, private investors, and government organizations have teamed up to reduce blight and increase investment in the Motor City. As projects continue to be announced, Detroit’s average property appreciation values have begun to rise and are projected to continue for the next several years.
Entry-Level Investors are Welcomed in Detroit
The New York real estate market can be difficult to navigate with its high purchase costs, decreasing ROI rates, and influx of experienced investors. For first time investors, markets showing a constant stability, such as Detroit, are the safer choices to avoid a potential costly mistake.
Purchasing investment properties can be extremely costly, as they don’t qualify for residency exemptions. If the purchase is being made through the utilization of financed monies, such as a mortgage, setting an affordable rental price becomes limited to the cost of the monthly mortgage payment and other expenses. In high priced areas such as New York, his can make ROIs tight and decent tenants hard to come by. Purchasing property with cash can be costly, as well, as the median pricing is on the higher end of the national average.
For those looking to get involved in the real estate investment market without excessively high up-front costs, Detroit makes a great alternative. With an incursion of affordable turnkey properties, low median costs, and many tempting tax benefits for investors, Detroit is the clear choice for entry-level investors.
Non-residential investors looking to get involved in the Detroit market can rest assured when partnering with Strategy Properties. Strategy Properties offers everything needed for investment peace of mind. One of the leading providers of turnkey properties in the Detroit area, Strategy Properties is experienced in working with out-of-state or foreign investors and can handle the process remotely on your behalf.
Contact Strategy Properties for more information