Over the past five years, Detroit’s labor market and economy have improved considerably. The real estate market grew at a similar rate during the same period. After the COVID-19 pandemic, property prices started to rise. It’s now one of the fastest-appreciating markets in the country. Because of the positive economic and market signs, investors are flocking to Detroit. They’re able to acquire high-potential properties at low prices before renovating them and selling them at a profit. This guide explores the real estate renaissance in Detroit and explains how you can benefit from investing in this market.
Why You Should Invest in the Detroit Market
Detroit real estate investing is suitable for all types of investors because the city offers:
- Decent population growth
- Ample tax incentives
- Lower prices than other large cities
- A rising business sector
Business and population growth mean that more people are looking to buy homes and rent apartments. The low property prices mean that investors can improve their profit margins. While Detroit’s real estate prices are low, they’re much higher than they were five years ago. As for tax incentives, investors are able to benefit from depreciation when filing their tax returns.
Key Statistics to Consider
To understand why investors are choosing to put their money in Detroit, consider the following statistics:
- Detroit is somewhat of a buyer’s market, which means that there’s more demand than supply
- In March 2024, the median price for a home was $80,000, which is well below the nation’s median sale price of $420,000
- Five years ago, the median sale price for a home in Detroit was $40,000, which means that it has doubled since then
- Around 23.2% of homes were sold above the listing price in the past year, which is a YoY increase of 2.4 percentage points
- Homes only remain on the market for 45 days, which is a drop from an average of 49 days a year ago
- Detroit is an affordable place to work and live
Why Investors Find Detroit Real Estate Appealing
The Detroit real estate market is currently performing very well. The existing trends don’t show any signs of slowing down, which is why we believe that Detroit is going to be a key market to invest in for years to come. There are several reasons why Detroit is becoming more appealing among investors and residents alike.
For example, the local government has been trying to revitalize the city. Detroit is an older city that consisted of many run-down areas and dilapidated buildings for decades. However, major improvements have recently been made to these neighborhoods. These improvements have resulted in companies choosing to invest in the area, which bolsters the city’s property quality and appearance. It’s one of the main reasons why properties are appreciating.
Many new businesses now call Detroit home. While Detroit has always been the heart of the auto industry, it’s become increasingly popular among startup businesses and manufacturers. When more businesses come to the city, a higher number of families and young people require affordable housing, which Detroit offers in spades.
The city’s housing market is also growing healthier because of increases in the tenant population. People who don’t want to spend the money to buy a house turn to apartments and single-family homes to rent. High tenant demand is a boon to the city’s economy and housing market.
Finding the Right Detroit Property
If you’re considering investing in Detroit real estate, you’ll need to find the right properties. First, make sure you understand the current market dynamics. Detroit’s real estate market is somewhat unique. While properties are affordable, their values have been increasing steadily in recent months and years. There’s also a strong demand for rentals, which makes it easier for owners to consistently raise prices and earn a higher cash flow.
Always keep an eye on local economic trends when evaluating the strength of an investment. These trends include population growth, economic data, and employment rates. Knowing about economic downturns immediately when they happen allows you to properly time your investment decisions.
Create a Budget
Before investing, set a budget. Your budget allows you to identify the quality, condition, and type of property you’ll be able to invest in. Since Detroit property prices are inexpensive, you may be able to invest in single-family homes that you can use for long-term rentals. When creating a budget, consider the long-term costs that come with property taxes, renovations, and maintenance.
Identify High-demand Areas
To get the most out of your investment, focus on high-rent areas and neighborhoods. Locations with high renter demand often have great public transportation systems and an extensive list of amenities, which is why these places are appealing to potential renters. Keep in mind that locations with high rent rates might also come with expensive property costs. Choose the investment approach that’s best for your portfolio.
Choose the Right Location
Before you buy an investment property in Detroit, choose the right location. The best neighborhoods are often near local colleges or business hubs. Consider crime rates as well to ensure you purchase in a neighborhood that will be appealing to prospective tenants.
Hire Property Managers
It’s also highly recommended that you opt for professional property management. With a property management company on hand, you won’t need to handle tasks like collecting rent, handling legal issues, marketing the property, and screening tenants. You can earn passive income without even stepping on the property.
Hiring a property management company can be highly advantageous. For example, a professional company has comprehensive knowledge of the local market, including rental rates and real estate trends. They also understand how to manage maintenance, tenant issues, and daily operations without regularly encountering problems. Management companies like ours know what it takes to maintain strong tenant relations as well.
Detroit’s market has been improving consistently for the past five years. Even though property values have doubled since 2019, they are far below the national average. While the city still has affordable housing, it’s among the fastest-growing locations in the country. If you’re interested in creating rental properties out of single-family homes, Detroit is a great place to invest. Contact Upside Investments today to discuss your goals and start searching for the right properties.
