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Metro Detroit Real Estate: What the Numbers Say About Investment Opportunities

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Detroit is well known for affordable real estate, with some neighbourhoods featuring notably low home prices, although there is also typically limited availability. Overall, property costs in the region are lower compared to similar urban areas. This means there can be lucrative opportunities for property investors. The potential for lower up-front costs can make Detroit a good option, especially for first-time or inexperienced investors, as well as those aiming to avoid overextending themselves with pricey properties.

In Detroit, although residential properties are affordable generally, there is a wide range of property types and price ranges, catering to diverse budgets. 

Joe Hammel of the FIRE Realty Team notes that “Detroit has undergone revitalization initiatives which are drawing in people, businesses, and investment, while increasing property values and investment returns. Now is a good time to take advantage of the current low housing prices.”

Neighbourhoods like Regent Park, Grixdale, and Chandler Park stand out for their affordability. Meanwhile, areas such as Boston Edison West and Downtown Detroit tend to have higher prices, although still below national averages.

Within the greater Metro Detroit area, Oakland, Wayne, and Macomb counties offer diverse real estate opportunities suited to different preferences, budgets, and investment strategies. Oakland County, known for its affluent suburbs and diverse economy, offers upscale residential neighbourhoods and luxury real estate options appealing to affluent investors and families seeking top-rated schools and suburban lifestyles. Wayne County features urban areas similar to Detroit, with diverse suburban communities, presenting a range of real estate opportunities in urban revitalization projects or established suburbs. Macomb County appeals to middle-class families and offers affordable homes, including newer suburban developments, with opportunities for residential rentals and more.

According to Joe Hammel, “The Detroit area’s single and multi-family rental market is robust, providing investors with stable investment opportunities. There is a range of investment alternatives in the Metro Detroit area worth exploring, though. Economic data and market trends back this up, and indicates significant potential for successful investing within the Detroit market.”

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Real Estate Market Numbers

Affordability and Price Numbers

The Metro Detroit market trend can offer opportunities for value-oriented investors seeking properties with growth potential.

Joe Hammel adds, “Detroit real estate offers some unique opportunities. You can discover properties priced below $100,000 that yield a monthly cash flow of roughly two hundred dollars and a double-digit cash-on-cash return on investment.” 

In January 2024, for Detroit City, the median listing home price was $85,000, rising by 11.5% compared to the previous year. Homes were listed at an average of $74 per square foot. However, the median sold price was slightly lower at $77,000, suggesting that properties were selling at around 2.95% below their initial asking prices. Residential properties in Detroit typically spent a median of 55 days on the market before being sold.

Expanding to Wayne County, MI, which encompasses Detroit and its neighbouring regions, the median listing home price was higher at $129,900, remaining relatively stable year-over-year. Properties were listed at a median price of $104 per square foot, with the median sold price higher at $170,000. Homes in Wayne County tended to sell more quickly, with an average of 44 days on the market.

Housing is very affordable; multi-family housing opportunities can also be found within a wide budget range. This enables more investors to take advantage of the Detroit and Metro Detroit markets. There are significant negotiation and potential investment opportunities currently. A strong demand indicates interest in the area for retaining or increasing value, potentially leading to favourable returns on investment. 

Sale-to-List Price Numbers

In 2023, the sale-to-list price ratio for all home types in Detroit stood at 80.0%, highlighting the presence of a competitive market environment for buyers. In January 2024, this increased to 97.05%. Despite this competition, prices remain comparatively low. However, the high level of competition among buyers signals strong demand and suggests that there is confidence in the long-term value in owning properties or investing in Detroit’s real estate.

Investment vs. Return Numbers: Price-to-Rent Ratio

The price-to-rent ratio is a good indicator of potential return on investment, because buying housing in Detroit is relatively affordable, but rents tend to be high. Many residents currently rent instead of buy, because of mortgage rates and other factors, so rental income can be lucrative. In 2022, the price-to-rent ratio was 5.82, which is extremely favourable for landlords.2

The cost of rent in Michigan overall increased 13.89% in 2023, the second-highest rental rate growth nationwide, with an average monthly rent of $1,505. Within Metro Detroit, the average rent is even greater $1,671 per month.3

DAR Local Market Update – 2023 (Including Detroit, Hamtramck, Harper Woods and Highland Park) as of May 2023

Local housing market statistics for may 2023, displaying year-over-year and year-to-date changes in key metrics such as sales volume, inventory, and prices.

A table displaying a local real estate market update for may 2023, comparing key indicators such as average sale price and inventory levels against the previous year and month.

Business Sector Numbers

New businesses starting up, or large ones relocating their headquarters to a city, are strong indicators of real estate investment potential. These businesses bring job opportunities, and a larger workforce that will be seeking housing nearby. Many individuals relocating for work will rent, at least temporarily. This increased demand for commercial properties can drive up rental rates and property values.

“With a growing business sector, there are going to be even more opportunities for growing real estate investments, and Detroit is in the middle of a period of significant growth,” adds Joe Hammel. 

In October 2023, over $1 million in grants supported the launch of 19 new small businesses in Detroit through Motor City Match Round 24. Additionally, $300,000 was allocated to aid 14 existing small businesses in building improvements. These grants aim to fuel small business growth across 18 Detroit neighbourhoods, including Mexicantown, University District, Milwaukee-Junction, Bagley, and Central Southwest, and includes a wide variety of business types.4

Detroit is emerging as a top destination for startups, with tech fueling economic growth. Named the top emerging tech ecosystem by Startup Genome in 2022, and second globally for VC growth by PitchBook in 2023, Detroit is undergoing a period of significant change. This move towards new directions in business and focus on the technology industry will likely result in positive impacts on real estate investments.

Population Growth Numbers

The Detroit population is growing; currently, in 2024 it is 3,528,000, increasing 0.2% from 2023. Projections indicate a further rise in the next five years to 3,647,000 for an increase of 0.83% by 2029. This expected growth means future demand for rentals or home ownership. 

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Employment Numbers

An improving labour environment and employment rate help ensure real estate investments retain and increase in value, and provide a more reliable pool for rentals. Compared to December 2022’s rate of 3.2%, Detroit has experienced only a very slight increase in unemployment as of December 2023, holding relatively stable at 3.3%. For context, this is lower than the overall average for the United States, which rose from 3.3% in December 2022 to 3.5% in December 2023. Wages are on par with US average wages, as well.

Numbers for Success 

When investing in real estate, it’s crucial to thoroughly analyze all available information beforehand. Having an investor-friendly realtor who knows the local market well and relies on analytics can give you a significant edge. 

Detroit has several pro-investment policies, and is also welcoming to Canadian investors, who can benefit from its close proximity to the Canadian border, which is only ten minutes away. This makes Detroit an exceptional option, providing more cost-effective investment opportunities that are scarce in Ontario’s present real estate landscape. An expert realtor can help investors leverage the investment opportunities that Detroit has to offer.

The FIRE Realty Team offers this advantage, being skilled at analyzing ROI and identifying deals based on price, location, and market trends. Their expertise makes them invaluable for investors aiming to maximize returns and minimize risks for their Metro Detroit area real estate investment. Their success is backed by numbers, as well, with 464 successful transactions in 2023, and $59,987,216 in volume, including single family investments and small and large multi-family investments.

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