Several factors determine whether a market is considered primary or secondary, including population, rental activity, and more. Typically, a market is known as primary or secondary based on its population, but there are other factors in play including forecasted growth, the housing market, and more. What many people don’t realize is that secondary markets offer several advantages to real estate investors. While you may have assumed that the most successful real estate investors are those who own properties in primary markets, that’s not necessarily the case. Instead, finding success as a real estate investor is about knowing how to maximize the market that you’re working in. Discover more about the four benefits of investing in a secondary real estate market.

Finding More Affordable Properties

As a real estate investor, it’s important that every dollar that you spend has a purpose. Whether it’s the ongoing maintenance costs associated with your property or the money that you pay for a property, you need to have a plan in place for every dollar. One of the biggest advantages of investing in a secondary market involves finding properties at a lower price than you can find similar properties in a primary market.

Based on current market trends, a three-bedroom home in Detroit currently has a median selling price of $89,000. Meanwhile, the median sell price for a three-bedroom home in New York is a staggering $843,200, a difference of $754,200. Unless you’ve already achieved significant financial success, you probably don’t have access to that sort of money, especially if you’re just getting started in the world of real estate investing.

When you can find a home for a lower price at the beginning, you’re set up for success, regardless of what you want to do with the property in the future. If you opt for renting, you’ll start turning a profit earlier than you would if you had to pay for a more expensive home. If you want to flip the property, a lower sell price is a great first step in maximizing profits in the future. Secondary markets may present a smaller pool of buyers due to lower population, but they provide a worthwhile, more affordable option.

Greater Opportunity for Growth

The opportunity for growth presented by secondary markets is two-fold. Let’s start with the ability to grow your portfolio using the numbers that we just discussed about New York compared to Detroit. If you look at the median sell prices for both markets, you’ll notice that you can buy nine one-bedroom homes in Detroit for the same price as one one-bedroom home in New York. Admittedly, this is more appealing if you’re looking at the big picture and plan on adding multiple properties to your portfolio over time. Even if the idea of owning nine homes seems like too much for you, it’s easy to see that you can purchase three homes in Detroit for a fraction of the price of a single home in New York.

However, portfolio growth isn’t the only growth aspect that you should consider. Several studies indicate that many people are leaving cities that are classified as primary markets, and choosing to live in smaller cities, including those that are classified as secondary markets. Many experts agree that this became a reality at the height of the COVID-19 pandemic, during which many employers started letting employees work from home. As many businesses have continued to operate on a work-from-home model, people no longer had to be based in the cities where they used to work. Many of those people didn’t want to move to rural areas, which made secondary markets even more popular, a trend that is still ongoing. With this in mind, it’s completely feasible that secondary markets will continue to see an uptick in population, meaning more and more people will be looking for homes in these secondary cities. Owning one or more investment properties in Detroit now will allow you to take advantage of this relocation trend.

Based on a January 2024 housing report, Detroit is the fastest-appreciating housing market in the US. With this in mind, while Detroit’s current population may not be enough to make it a primary market, its rate of growth makes it a great option.

Knowledge is Power

If you’re just getting into real estate investing and are in the market for your first Detroit investment property, it’s safe to assume that you’re going to make some mistakes along the way. While there are plenty of books you can read and seminars that you can attend, no one manages their first rental property perfectly. While you need to be responsible with your investment property since it’s your most important asset, learning on a home that you paid less for is better than learning about a more expensive home. When you’re able to work out the kinks that every first-time investor experiences along the way on a home that doesn’t cost as much, you’re not as likely to make an expensive mistake.

In addition to learning about what it means to be a successful real estate investor, you can also look at what’s happening in bigger markets to get a better idea about what you can expect to happen in a secondary market.

Minimizing the Effects of Recessions

There is no such thing as a recession-proof investment. In some instances, the real estate market gets hit hard when our nation is hit by an economic recession. However, it’s a proven fact that smaller markets are less impacted than larger markets when those recessions come. While recessions have the potential to have an impact on every market, secondary markets typically suffer less than larger, primary markets. Depending on the circumstances surrounding the recession, some secondary markets experience an uptick during a recession, making them even more attractive.

Let Us Help You Find Your Detroit Investment Property

The team at Upside Investments has an intricate knowledge of the Detroit housing market, and we are committed to helping you take advantage of the benefits provided by a secondary market. Thanks to their lower cost of entry and several other benefits, secondary markets like Detroit are a perfect place for you to begin your career as a real estate investor. Contact Upside Investments today to find out more about how we can help you find, buy, and manage your Detroit rental property.