The Great Values in Detroit Area Rental Properties
Google “rental vacancy rates” or “rising rents”. Go ahead, I dare you.
What you’ll find are a lot of articles from all manner experts predicting rents will be going up in the near future. Of course, you’ll also find articles about how much rents have already gone up in different areas of the country.
Here’s a snippet from a recent study:
… During the housing bubble, homeownership rates increased from 66% to 69%, an all-time high. Today, that number is just below 65%, according to Morgan Stanley researchers Oliver Chang, James Egan and Vishwanath Tirupattur.
The analysts expect this will decline further to 59.7%, driving multifamily vacancies down and rents up. The researchers derived this estimate by taking the number of delinquent homeowners likely to be foreclosed, and moving them into the rental category. …
Sounds like they’ve got a pretty logical argument, don’t they?
Now, it is important to acquire rentals in the right areas.
The city of Detroit is a very challenging place to invest in rentals because it’s difficult to pick areas to target. You can’t look at a map and outline an area to buy properties in. In Detroit, you have to know which streets are good and even which blocks. We see a large percentage of out of state and foreign investors buying Detroit rentals, where they have the only property on a block that’s not a burnt out husk. It’s very easy to lose your entire investment in the city of Detroit if you’re not careful.
The suburbs surrounding Detroit have less risk, but an investor still needs to do their homework and understand the different areas and their trade-offs. It pretty much boils down to a trade-off between cash-on-cash returns and risk. The suburbs closest to Detroit typically offer low prices and great rental cashflow, but higher risks of problem tenants, evictions and property damage. The further away from Detroit you go the higher housing prices climb, but the rents don’t increase as fast, so cash-on-cash returns decrease. The trade-off is more stable tenants.
With the currently available anemic rates on savings accounts and CD’s, real estate offers much more potential returns for investors.
If you need assistance acquiring your next rental property or want to get started on acquiring your first one, contact us.