Detroit is among the most popular investment markets in the United States, attracting real estate investors from all over the world. Having been in the spotlight for about 8 years now (since the mortgage crisis), Detroit has become the most researched investment market in the country. The first question investors face is: Where is the best area to invest in? This dynamic is not unique to Detroit, however the importance of choosing the right Detroit neighborhood for real estate investing is magnified here. The city is over 140 sq miles and used to be home to about 2 million people. Over the past few decades the city’s population has declined and now has a population of about 700,000 residents. This left pockets of the city with a surplus of housing stock and not enough demand.
Price should not be the single determining factor
Many of the houses in these areas are sold for prices which are hard to fathom for an investor unfamiliar with the city and its dynamics. Companies from all over the world flocked to Detroit to snap up these houses, with hopes of rehabbing them and selling them for a profit. However, rental demand in these neighborhoods is not very strong, and property values are very low. This creates many problems for investors. US Investor Group makes it a priority to conduct extensive research on every neighborhood we operate in, including evaluating property values, rental rates, population demographics, schools, and nearby businesses.
Research is important
Beware of sales companies that try to lure investors with really cheap properties and exceptionally high returns. While these returns may look appealing on paper, they often to not materialize in reality. At US Investor Group we provide all of our clients with a clear and concise explanation of risks, costs, and advantages of investing. If you purchase in the right neighborhood and the property is managed effectively, the benefits far outweigh any potential pitfalls. Among the many advantages of working with USIG is that we are market experts, so our clients leverage our expertise and market knowledge to make sound, profitable investments.
Each neighborhood in the city looks different aesthetically, with different styles ranging from brick colonials to vinyl sided bungalows. However, we suggest looking past the aesthetics and focusing on important data like property value trends, average rental rates, and vacancy rates. The other important point is that the nicer neighborhoods don’t necessarily offer the best returns. For example, the University District is among Detroit’s most beautiful areas, however property values have steadily risen which brings down the monthly yield. So investing in an area like Bagley which is just west of University District, would provide you with a higher return on investment.
We strongly advise against buying properties through online auctions without advising with market experts on the viability of the investment. Many investors make the mistake of purchasing in the wrong area. By working with professionals that understand the market you take the guesswork out of the equations and mitigate many risks. Call US Investor Group today for an in depth discussion about Detroit’s neighborhoods.