Five Reasons to Invest in Detroit Rental Homes

When looking to invest in rental real estate, deciding on a particular market can seem like a hard decision. That is, until you look at Detroit. With its city-wide rejuvenation plans and mass corporate investments the city is ripe with investment opportunities for real estate investors far and wide.

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Detroit is currently undergoing a major face-lift as the local governments have kicked off their rejuvenation projects. Unsightly blight is being removed from neighborhoods. Empty lots are cleaned up and transitioned and dilapidated houses are being renovated and resold. Local companies are striving to launch urban farming movements, revitalizing empty lots as sustainable farm sites. Investments made within the city are bringing forward jobs in droves and millenials across the world are moving to the Motor City to cash in on the open job market.

The recently opened Little Caesars Arena  | Michelle and Chris Gerard

When all these factors combine it creates an opportunity for investors which cannot be matched elsewhere in the nation. Due to the previous financial state of the city properties are available at incredibly low prices while rental need is high in demand. This allows investors to snatch up properties at an extremely low rate and recoup their investments fairly quickly.

Developing Market

Right now Detroit is a developing market. Once the mecca for the automotive and manufacturing industry Detroit took a hard hit when the economy bottomed out in the early 2000s. While it may not have recovered as quickly as most of the nation the city has teamed up with multiple massive corporations, government agencies, and non-profit groups to breathe new life into the Motor City.

Their attempts are going well. The city itself has seen a massive growth and regional transplants have increased. Getting involved in the real estate market now will only show profitable returns as appreciation values continue to increase with the flow of new investments and jobs in the area.

Low Entry Point

Detroit is anyone’s market. Unlike other urban areas, such as Los Angeles or New York City, you don’t have to be a big-time, corporate investor to acquire properties in Detroit. The average price of a house in LA is currently showing as $629,900 and the average price of a property in New York City is $672,400. In Detroit, you can purchase a home for $41,500.

High ROI Rates

Detroit’s low entry point allows you to capitalize on the ROI, return on investment—an important feature to analyze when purchasing an investment home. The average rental rate in Detroit varies depending on proximity to the Metro area, so the range averages between $750-$1072. With such a low entry point, purchasing a home in the Metro area is widely affordable, allowing you to collect a higher monthly cash flow without breaking the bank up front.

Major urban markets, such as Los Angeles, New York City, and Miami, are currently seeing ROI rates in the 4.5-6% range. Detroit investors, however, are currently yielding ROI rates closer to 7-8.5%. When this is factored in with the lower entry point costs, Detroit is a clear winner for investors.

Abundant Big Names

Detroit isn’t just drawing in real estate investors. Large corporations worldwide have been planting roots in the Detroit Metro area, striving to get in on the ground floor of a cultural revolution. While the Motor City was originally named for its ties to the automotive industry, it has been flourishing in multiple other business sectors—including finance, internet, health, and aerospace.

Of course, the Motor City still earns its nickname, thanks to the large variety of automotive manufacturing plants that still call the area home. Ford, Fiat, Chrysler, and General Motors are some of the automotive businesses which can be found in the Detroit area.

Other business giants residing within the city include Quicken Loans, Google, and Microsoft.

Companies which have recently invested in Detroit include JP Morgan Chase, who recently invested $150 million, Futuramic Tool & Engineering Company plans to invest $20 million and add over 109 jobs, and the Detroit-based Urban Science Applications, Inc. is expanding operations with a $2.1 million investment and will be adding 126 jobs to the Detroit area.
Due to these increases in capital investment from large corporations and the constant presence of such industry giants, the job market in Detroit is healthy and kicking.

Low Cost of Living

One of the largest draws for Millennials to the Detroit area is the incredibly low cost of living. Recently, Glassdoor ranked Detroit as the city in which your paycheck goes further when compared to cities across the United States for the year 2016. The city comes in as #1 in ranking with a 50% cost of living ratio and a median income of $60,000. With low housing costs, this screams win-win for residents.

Realtor.com, CNBC, Business Insider and FORBES have all recently listed Detroit as 1 of the 10 best cities for Real Estate Investing.

Due to this factor, many Millennials are moving to the Motor City to capitalize on their salaries and increase their quality of life. This influx causes a spike in rental demand as the new residents are unlikely to purchase a home upon first moving into the area. For investors, this is a gold rush as their investment properties become highly sought after.
Detroit is definitely top of the list for investors who are looking to purchase rental real estate for a low upfront cost while securing a high ROI rate. Whether it is because of the low cost of living, the economic growth, or the city-wide rejuvenation underway, Detroit is definitely catching the eye of investors worldwide. If you are considering purchasing property for investment purposes now or in the future, it is definitely an investor’s market in Detroit.