When investing in Detroit real estate, you often think of the risks associated with the payoffs. Many factors most likely go through your head before you decide to pull the trigger and make a real estate investment in the city of Detroit, with one of the biggest risks being that of renting to a non-paying tenant.
This is a risk in any market across the world, not just Detroit. But is investing in Detroit more likely to lead to bad renters? To be honest, the answer to this question isn’t straightforward.
There are true issues from both the perspectives of tenants and landlords. In fact, there is an ongoing battle between tenants and landlords. This battle must end, and as a community, both parties need to work together to make a better Detroit.
Detroit’s Tenants and Landlords Share a Common Goal
Both landlords and tenants’ objectives are the same when it comes to housing. As a landlord, the pure goal is to maximize returns on a property investment. Therefore, a landlord thinks with their wallet first and their emotions second. Plain and simple, a landlord wants their rent to be paid consistently and on time.
On the tenant side, the goal is to live on a safe and hazard-free property. They want the ability to enjoy personal space without having the hassle of running into any major repair issues.
Both tenants and landlords share a common goal, and sometimes they don’t even realize it. Landlords want a better community so their property values can shift up, and good landlords will go the extra mile to contribute to doing what it takes to get there. Tenants also want a better community so that they can live in a safe and stress-free area. The common goal is a better community in the city of Detroit.
Tenant Issues in Detroit Real Estate
When you look at the history of how the residents of Detroit were treated, you will understand the bad taste in the mouths of tenants that are still there. Maybe you are a new investor entering the Detroit market, and you aren’t like those who have come before you; you’re committed to providing quality housing and property management. However, unfortunately, many investors before you in Detroit provided extremely poor housing conditions.
Detroit was once filled with low-quality slumlords attempting to exploit low-income housing by putting far too little money into a property and trying to maximize returns. Houses were fixed in the worst conditions. Mechanicals weren’t touched. While gut renovations weren’t (and still aren’t) able to be facilitated due to the cost vs. value of properties, landlords generally wouldn’t even attempt to fix major repair issues, leaving Detroit tenants to suffer the consequences of problems far beyond their control.
Another major issue is the lack of true consequences for tenants who take advantage of the Detroit Court System, knowing that an eviction process takes such a long time. They do everything they can to find ways to cut corners and occupy a property, knowing they wouldn’t have paid to begin with. The problem is that there are no major consequences for non-paying tenants, many of whom often leave a house in shambles after leaving.
Repair and Eviction Issues
When tenants did not pay their rent due to the lack of repairs being done in their homes, they were generally faced with eviction. Eventually, tenants decided to fight back in the only way they knew how. They simply stopped paying rent and decided that if a landlord wasn’t going to address their issues, then they would hold their funds in escrow until landlords addressed the issues in a property.
Still, that wasn’t strong enough to combat the slumlords that ruled the streets on the east and west sides of Detroit. The area was full of flooded basements, roofs that needed to be replaced, plumbing that didn’t work, and electricity that needed serious updating.
Inflated Detroit Economy
The second issue is the continuous issue of the rise in costs relative to the pay that most Detroit residents receive. Property values and rental rates are on the rise, but income for Detroit tenants is not. As a result, tenants are often so desperate to find a place for them to live that they convince themselves that they can afford the rental rates being advertised.
The issues are that even though on paper they make enough, the unexpected costs of life get in the way. Because it is so tight to begin with, tenants sometimes find themselves missing payments. And when one month of missed rent turns into two months, tenants realize coming back from all the backpay would be near impossible, often leaving them in a place of non-payment.
Tenant Issues and Solutions
Due to these many recurring issues, here are some solutions for tenants to help them avoid getting into the problem of not being able to afford rent and how to best deal with lousy landlords.
Ensure Affordability
If you aren’t absolutely certain you can afford the property, tenants should avoid renting it out. Tenants should be very realistic about the responsibility of paying rent. For example, if you cannot fathom paying $1300 per month in rent, even though you can afford it on paper, then don’t rent it.
The reality is that when a loss in rent occurs, a landlord is less likely to maintain the properties in which you and your neighbors live. If the goal is to make Detroit better, then both parties need to be kept in mind.
Maintain the Rental Home
Tenants should maintain their houses as if they were the owners. Leaving the house in shambles after you leave does a lot of damage, and you can’t expect living conditions to get better in the city if you treat your own home in such ways. For the streets to be clean, they must first come from within.
Tenants should act ethically throughout their rental contract. For example, in addition to maintaining a property, if you sign a lease that tells you to change electric and water to your names, tenants should do this in a timely manner.
Dealing With Lousy Landlords
If your landlord is not doing the repairs you think are necessary month after month, instead of occupying a property and not paying rent, simply find a new place to live. Eventually, the landlord will be forced to make these repairs to avoid continuously falling into the trap of losing tenants.
This action will force them to do the necessary updates, bringing a better Detroit. What I recommend is finding a place that you deserve and that welcomes you as much as you welcome it. Therefore, start your search for a new property to live in and come up with a reasonable timeframe to inform your landlord you are moving out.
Ultimately, landlords need to ensure they are making the necessary repairs in a timely manner. By not doing this, landlords are not considering the decrease in property values that is causing damage to the community, along with the inconsideration of tenants’ health.
Landlord Issues in Detroit Real Estate
Landlords often enter the market expecting cheap housing with low monthly costs. What landlords often don’t realize is that the costs of maintaining “cheap” older homes are far more expensive than expected. If you can’t afford to maintain a property, it’s best to simply not enter the marketplace at all.
Landlords are not just hurting their tenants and their own pockets, but also the city as a whole. An extremely important step before purchasing real estate is running repair costs into your numbers prior to buying to ensure you can afford to keep up with all the maintenance costs.
Tenants holding landlord homes as hostages have left a bad taste in investors mouths. Therefore, instead of working with one another, a landlord will generally go straight into the eviction process. Additionally, tenants who have left properties in terrible shape after moving out have sparked landlords to not want to put much money into these properties because they suspect they will have to dump a lot more after the current tenant moves out.
Landlord Solutions
Investors should ensure they’re ready to take on all the responsibilities of being an excellent landlord. If you are an investor and are unsure if you can handle a midwestern market like Detroit, do not buy a property in the city.
Know When to Part Ways
Just as tenants should understand that holding a home “hostage” because they are unsatisfied with what they’ve picked shouldn’t be an option, landlords also shouldn’t hold tenants hostage if they refuse to make necessary repairs. Both parties should mutually and respectfully part ways. Nobody wants to go through an eviction court case; it’s a waste of time and money.
Be Informed Before Investing
Investors should make sure they work with people who will explain all the risks and costs before investing in Detroit real estate. You need to know what you are entering into so you can mentally prepare for it.
Truthfully, the city of Detroit needs to put more consequences in place for tenants who exploit the system. The city has already put a lot of consequences on landlords who exploit the system through fines, certificates of compliance, and more.
Conclusion: Detroit Rental Issues
I love Detroit. Detroit has given me a second chance at life and has provided me with so many opportunities, and I am forever thankful for this. But what I will say is that if I could leave the city behind with one message, it would simply be: We need to start working together instead of against each other.
In a city that has seen the lowest of lows, it is up to us to stop beating each other up and start working together to make things better. It is a long, difficult road, and I know eventually we’ll all look back at this and see how far the city has come. You do not need to be a huge success to make a change. Every change starts with people changing one bad behavior toward a good one.
The city of Detroit is growing, and sooner or later, people will have to adjust to all the changes that are happening. And at the end of the day, nobody wants to go through eviction. Nobody wants to argue or fight. Right or wrong does not trump peace of mind.
So to the tenants, I hear your issues, and I am with you. To the landlords, I hear your issues, and I am with you. There is no overnight resolution. Just know that we are all on the same team.
