The Yin and Yang of Metro Detroit Rentals
Most cities in Metro Detroit are worlds apart.
The Metro Detroit area is one of the most polarized areas in the nation. One part is populated with people who tend strongly to be low-income, low-education, and low-demographic. The other is populated with people who tend to fall much closer to the national averages in those areas. The dividing lines in the Metro Detroit rentals are fairly well-established, but that’s not really the point of this post. The point is to talk about the differences between the areas from the perspective of a property manager. We’re going to (inaccurately) call these areas ‘Low Demographic’ and ‘Average Demographic’ for now.
It Starts with Property Values
In the Low Demographic areas, property values vary from below-average in the “better” neighborhoods, to rock-bottom in blight-ridden areas that literally look like warzones. Most properties need massive amounts of repairs to make them livable and bring them up to current codes – and most of the time the repairs cost more than the property will be worth.
In the Average Demographic areas, property values vary from below-average in neighborhoods that are doing poorly to above-average in areas that are growing strongly. Most properties have values that will support any needed repairs.
…And Continues with Tenant Quality…
In the Low Demographic areas the majority of applicants are going to have issues with money – even if they currently have a job that is capable of paying the rent consistently. They’re likely to have prior bankruptcies, evictions, or judgments against them. They tend to be hard on rental properties, rarely performing ordinary maintenance (in some cases even cleaning) until something stops working. They’re often challenging to get a hold of, a struggle to schedule appointments with, and they tend to think more in terms of “how can I avoid this?” than in terms of “how can I solve this?”
In the Average Demographic areas, some applicants are going to have issues with money, but generally they will be much less prone to applying for houses that they know they can’t afford. They still won’t generally perform maintenance on rental properties unless their lease makes it clear that they’ll end up paying more if they don’t – but they will if it does, at least after they’ve run into that fact face-first for the first time. They tend to be much more reasonable when it comes to communication, and in general prefer to face and resolve problems than avoid them.
…Which Affects Rental Quality
In the Low Demographic areas, rental units that come with appliances are rare. The expectation is that if you want a fridge, stove, washer/dryer, etc., you’ll either rent one or bring it with you from your previous place. Repairs in the city are almost always performed to a very minimal standard of safety and functionality – because investing in anything better when the chances are your next tenant will trash it anyway is just a waste of money.
In the Average Demographic areas, it’s more common for units to come with the basics – fridge and stove at the minimum, sometimes washers and dryers, rarely microwaves and/or dishwashers. Repairs are generally made to a significantly higher degree of aesthetic value, even if the actual durability and value of those repairs is still held back due to the fact that it Is, ultimately, a rental and thus never going to get the kind of care an owned home gets.
Where are these Areas?
While the City of Detroit has a majority of Low Demographic areas, there are several growing Average Demographic areas. Downtown, Midtown, Grandmont, University District, East English Village, are but a few of these. The Suburbs surrounding Detroit are a mix of both demographics. To the north and west you have mostly Average or Above Average Demographics. To the south it’s a bit more Low Demographic, but improving.
Keep all this in mind when you’re looking to invest in Metro Detroit.