Why Should I Invest in Detroit?
A city that has a history peppered with triumph, record-setting professional athletic organizations, and a tendency to constantly innovate the automotive industry is now becoming an internationally recognized leader in the property investment market. With more square mileage than Manhattan, Boston, and San Francisco combined, along with a downtown apartment vacancy rate under 5%, it has become a haven for landlords, and tenants alike. Although the most recent years have shined the spotlight on Detroit’s bankruptcy, and the government bailout of the automotive industry, the City and the major corporations housed in the city are now on the upswing, and the future looks brighter than ever.
The housing crash of 2008
The housing crisis of 2008 was a huge blow to the economy, and it left many families in Metro Detroit out of a home. According to Foreclosure.com In October of 2008, the highest repossession rate for a major city in the USA was reported as Detroit, MI. A struggling housing market echoed through other industries, nearly crippling the automotive industry. Although things seemed to be all doom and gloom in the city, and home prices plummeted due to the widespread foreclosures, investors from around the world flocked to Detroit, and bought up blocks of homes at a time.
Although buying homes, with extremely low occupancy rates seemed like a gamble at the time, it proved worthy for many investors who eventually worked to rehab entire blocks of dilapidated neighborhoods. Rebuilding the communities that families fled during the housing crash of 2008 gave hope that the sun would maybe shine again on Detroit. Followed by the automotive industry’s slow rebuild from the government bailout of 2009, families began to trickle back into the once vacant neighborhoods, as job opportunities in the city began popping up again.
In the years following the housing market crash, (and government bailout of the automotive industry), the City of Detroit filed for the largest municipal bankruptcy in the United States. The bankruptcy was officially filed in 2013, and since then, the housing market along with the commercial real estate market has been taken over by investors looking to catch a ride on the comeback train of Detroit City. House prices are increasing, once abandoned downtown skyscrapers are being snatched up by billionaires (foreign and domestic alike), and the growth of small businesses in the city seems exponential. While investors are capitalizing on the profits available in Detroit Real Estate, residents of the city have become witness to the proliferation of safe, desirable, family friendly communities once again.
How does Detroit compare?
The City of Detroit makes up a landmass of 140 square miles, that’s enough room to fit Boston, Manhattan, and San Francisco. With all that real estate potential, it’s impossible to truly categorize the homes and buildings in Detroit under one heading. It’s important to appreciate the diversity of the city, as there are historic neighborhoods with sprawling estates, high-rise trendy apartment buildings, and cookie cutter urban neighborhoods. Contrary to popular belief, there are even gated communities within the city limits that provide shelter to some of the cities athletes, prominent businessmen and women, and high ranked city officials. Southfield, which is neighboring suburb even houses offices for 100 different “Fortune 500” companies!
39% Tax Credits
Because of the diversity of real estate in the city, different types of investors are attracted to capitalize on the revival of Detroit. Attracted by the New Market Tax Credit (NMTC), big money is buying up downtown buildings, thereby bringing thousands of jobs to the city center. The NMTC program works to catalyze the growth of commercial and mixed-use real estate in the city, by offering up to a 39% tax credit on the value of an investment. There are certain criteria that have to be met, regarding the minimum investment, time commitment, and location in the city.
In addition to the growth of business in Downtown Detroit, established investment firms, along with first time investors are purchasing single-family homes in the urban and suburban Detroit neighborhoods. In addition to making a decent profit, investors buying and renovating homes in the city are helping to reestablish families in the neighborhoods they once fled during the housing crash, along with welcoming new residents to the city. The revival of urban neighborhoods across Detroit is helping to change the public image of living in the city, as once uninhabitable and dangerous neighborhoods have been cleaned up, with great leadership by the most recent, and increasingly popular mayor, Mike Duggan.
Although national opinion dubs Detroit as the motor capital of the world, the downtown/financial district has grown immensely as of late; with some of the greatest contributions coming from a businessman that has invested over $1.6 billion in the downtown district. Dan Gilbert, owner of the Cleveland Cavaliers, founder of Quicken Loans, and internationally recognized philanthropist, has become a highly respected and admired figure for the people of Detroit. In August of 2015, Gilbert, teamed up with Mayor Duggan, to announce a new project, “Rehabbed and Ready”. The R&R project involves a 5 million dollar grant from Gilbert to help rehab (restore) homes in Detroit neighborhoods. Along with clearing blight from certain neighborhoods, this project is helping to increase the overall value of homes in the area, attracting individuals to move into the city, and giving residents something to really be proud of.
Days and Nights in the D
There’s always something to do in Detroit, as it is home to nationally recognized athletic clubs; the Detroit Tigers, Detroit Red Wings, and the Detroit Lions. Three casino-resorts, along with countless pubs, restaurants, theaters, and nightclubs line the downtown avenues, providing ample nightlife for all walks of life. During the daytime, residents of the city, along with tourists, and individuals from nearby suburbs enjoy attractions in the city, ranging from Belle Isle Park, the 982 acre island state park (within city limits), to the Detroit Institute of Arts, home to one of the largest and most significant collections of art in the United States. District Detroit, an ongoing project, includes 50 blocks connecting the midtown and downtown areas of Detroit, with city parks, bars, condominiums, a new sports arena, and other businesses. This most recent project has become the talk of the town, with everyone looking to get a piece of the action!
City residents proudly flock to the sporting events downtown, and the close proximity of the stadiums (they’re all within walking distance of each other) make for an exciting atmosphere when multiple events are simultaneously scheduled. Mike Illitch, who was born and raised in Detroit, is a billionaire who is recognized as one of Detroit’s most notable investors/entrepreneurs. Illitch is the founder of Little Caesar’s Pizza, owner of the Detroit Red Wings, and Tigers, and is often thought of as the most notable name in Detroit redevelopment. His organization, Olympia Entertainment, is leading the District Detroit Project.
With two major international crossings within city limits, the import/export industry has always been stable in the city. A third crossing into Canada from Detroit has been approved, and is estimated to require over ten thousand employees for completion of the project. No doubt, these employees will come from across the United States to find work, and it’s more than likely that they’ll be looking for homes to rent! The increased traffic through the area will also undoubtedly help to boost income for local restaurants, gas stations, and other small businesses.
Jobs on the Rise
As of the end of 2015, the unemployment rate in Detroit was notched at a 15 year low, which may be coincidently linked to the drastic increase in vehicle sales reports from Chrysler and Ford, both of which have multiple assembly lines and production factories in the region. Together, Ford and Chrysler employ 70,826 individuals. Simply said, it’s a domino effect. More individuals are able to afford vehicles, ramping up the need for production, inevitably, providing more employment opportunities in the city. According to data from the US Labor department, the city of Detroit and surrounding suburbs saw an increase in over 45,000 jobs between 2014 and 2015. It’s clearly evident that business is booming in the city, new small businesses are opening their doors to customers every day, most of them offering niche items, and appealing to the areas of the city they service. The health industry is also a major employer in Metro Detroit, providing an income to over 50,000 employees. Additionally, nationally recognized names, such as Buffalo Wild Wings, have opened doors for business in the city, adding to the diversity of options.
The City of Detroit has been through a roller coaster of sorts in the most recent years, but judging by the solid growth of employment, and decline of neighborhood vacancy, the future holds much promise. With a lower than average entry price on homes, and high rental demand across the city, the Metro Detroit investment property market has truly become a haven for investors looking to make it big. New businesses, revitalized neighborhoods, and the history of a tough city that never gives up are just a few reasons to look into the potential of Detroit.