Array Management Group

Detroit is the largest city in Michigan. Many neighborhoods are clean, safe, and consist of hardworking everyday people. Because so much of the local economy tied to the struggling Big Three, many homeowners have had to leave their homes or sell at rock bottom prices. 

Because of the economic conditions, the real estate market is ripe with opportunity for any real estate investor with the money to invest in this great city. Well, for many real estate investors this is the case. However, there are still pockets of people outside of Detroit that have misconceptions about the city.

 I would like to debunk some of the myth I often hear about investing in Detroit.

1. Detroit is one big Warzone

 The perception around the country is that Detroit is a place where the houses are all abandoned, everyone is unemployed, and the neighborhoods are riddled with crime.

The truth is that Detroit is no different from any other metropolitan area. Sure there are bad areas but there are also very good areas. Detroit also has some of the best suburbs in the entire country.  My target investment area is Northwest Detroit where the homes were built for the upper class back in the 1920’s and 1930’s. They are beautiful brick houses in great neighborhoods where people have pride of ownership. Homes are in excellent condition, lawns are maintained, many homeowners reside there, many are college educated, and many make $40,000 or more per year.

2. If I invest in Detroit my property will be vandalized and I’ll be unsafe

Like any other major American city, security will be a point of emphasis in Detroit.  However, it is not a huge ghetto where drug dealers are on every corner and shootouts on every street. From my experience, most residents are adverse to crime and are committed to making there neighborhoods safer.

Your level of safety depends on the areas you are in. There are bad areas of Detroit that are not as safe as great neighborhoods in Northwest Detroit and Downtown. You need to find out what these areas are and put your focus there. Security on houses is a must with any vacant property, which includes properly securing the doors and boarding up vacant houses that are getting rehabbed. It may be different from where you invest but crime and theft in good areas of Detroit do not need to be a big concern.

3. Houses are cheap but no one is renting

The rental market in Detroit is like a hot rental market on steroids, it keeps getting stronger. Because many people are getting foreclosed on and the credit market is tightening, less people can qualify for a mortgage on a new house, and less people are buying houses just because of uncertainty in the overall economy. These conditions create more renters in the market! What that means for cash flow investors is that houses are easier than ever to get rented out. Also, as people move from declining areas of Detroit, to better areas like Northwest Detroit, there becomes even more demand for these houses as rentals.

4. I’ve heard horror stories, my experience will be bad

 When you fix-up houses and maintain them like reputable Detroit investors do, you not only get it rented easier and retain tenants longer, but you make more money. You get higher rents and you get it rented quicker. There are slumlords in Detroit and many of them work in the bad areas of Detroit. Listening to their stories is probably where most of these horror stories come from

5. The returns aren’t that great for the risk you take

The returns on Detroit investment properties are excellent when you invest in the right areas. On purely the cash flow and paying cash for properties, investors are seeing returns from 20%-25% annually. This is not taking into account equity, which is 50% on more for all properties we work with, and future growth. Rental rates in Northwest Detroit are anywhere from $850-$950 a month give or take. That’s excellent for being all in on a house less than $40,000!

There will always be skeptics who listen to the doom and gloom in the media and they won’t change their minds no matter what happens. For the rest of us, now is the time to take advantage of a tremendous opportunity. I invite you all to join me in investing in this wonderful city.

The Detroit Investing Myths by Array Management Group, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.