32 Major Pros & Cons Of Buying Property In Detroit - REC (2023)

You consider buying real estate in Detroit but want to get additional information on the Detroit real estate market before making your final decision in this regard?

Great! Stick with me since I will show you all the pros and cons of investing in property in Detroit in the following chapters.

Not only will you learn a lot about core numbers like rental yields, but we will also talk about the city in general and what you have to keep in mind before investing in real estate in Detroit.

After reading this article, you will be much better able to decide whether you still want to buy property in Detroit or rather want to invest in real estate in a different region instead.

Without further ado, let’s get right into it!

Table of Contents

Detroit Real Estate Market – Overview

Real Estate Prices$89 per square foot on average, ranging from $42 – $221 per square foot.
Rent Prices$0.88 per square foot on average, ranging from $0.39 – $1.84 per square foot.
Rental Yields11.93% on average, ranging from 7.44% – 15.89%.
Price-to-Rent Ratio8.38.
Housing Market TrendDemand for housing in Detroit is rather low, property prices and rents are far lower than in other major cities in the US.
Level of Rent RegulationLow, no strict rent control regulations in Detroit yet.
Ratio of Income & Rent PricesAverage income is enough to buy or rent a decent property in Detroit.
Number of Prospective TenantsLimited number of decent tenants to choose from, vacancy is a big problem in Detroit since many people leave the city and overall population has been decreasing over the past decade as well.
Long-term Housing Market OutlookQuestionable future outlook for Detroit, property prices and rents may decrease even further if the trend of people leaving the region continues in the long run.

Advantages of Buying Real Estate in Detroit

  1. Property prices in Detroit are extremely low
  2. Rents are affordable for the general public
  3. Average person can easily afford to buy a home in Detroit
  4. Lots of room for price increases in the future
  5. Enormous rental yields in Detroit
  6. You can make real bargains in the Detroit real estate market
  7. Competition in the housing market in Detroit is rather low
  8. You can build decent cash flows within a rather short period of time
  9. Tenants in Detroit are not demanding
  10. Many people from more expensive regions consider moving to Detroit
  11. Detroit offers the comfort of a big city
  12. Hard to imagine that property prices in Detroit fall even further
  13. Many things to do in nature for your tenants
  14. Detroit may become increasingly popular in the future
  15. Detroit is a landlord-friendly place
  16. You don’t have to deal with strict rent control regulations
  17. Detroit is well-known all over the US
  18. Detroit may become popular among institutional investors

Property prices in Detroit are extremely low

One advantage of investing in real estate in Detroit is that property prices are extremely low and you can therefore buy real estate at a much lower price compared to most other major cities in the US.

In turn, you don’t have to make a big financial commitment and investing in real estate may therefore be interesting for your first rental flat so that you can learn without getting into financial trouble.

Rents are affordable for the general public

Not only property prices are pretty low, but also rents in Detroit are still affordable for most people out there and this is great for you as a real estate investor since it means that people might be willing to spend more money on housing in the future and you may therefore be able to increase your returns in the long run.

Average person can easily afford to buy a home in Detroit

Since property prices are pretty low, the average person is still able to buy a home and this indicates that the property market in Detroit is not overheated as in most other big cities and while the housing bubble may burst and people who buy property in San José or other expensive places may suffer great losses, you in Detroit will most likely not have to deal with this issue that much since you will buy at a relatively low level and your downside risk will be much lower.

Lots of room for price increases in the future

Another reason to buy property in Detroit is that due to low property prices, there is still plenty of room for price increases in the future and this may boost your internal rate of return in the long run.

Enormous rental yields in Detroit

You should also know that rental yields in Detroit are much higher compared to most other cities and you can therefore invest your money in a pretty profitable manner as long as you are familiar with the Detroit real estate market and know how to avoid common mistakes in this regard.

You can make real bargains in the Detroit real estate market

Since demand for housing in Detroit is pretty low, you will also be in a pretty good position as a real estate investor and will find many properties where you can make a real bargain with your investment and may be able to get outstanding returns in the long run.

Competition in the housing market in Detroit is rather low

In general, competition in the housing market in Detroit is rather low and this means that you will find many interesting properties within a pretty short period of time and can therefore build a profitable real estate portfolio rather quickly.

You can build decent cash flows within a rather short period of time

Thanks to pretty high rental yields, you will also be able to build high cash flows from your real estate investments rather quickly and you may be able to live off those investments within a rather short period of time while it would take you much longer in regions where properties are much more expensive and rental yields are lower.

Tenants in Detroit are not demanding

Another upside to investing in real estate in Detroit is that tenants are not that demanding and you will therefore not have to invest as much money in your rental apartments as in other places where tenants want to have more luxury and you will therefore be able to save lots of time and money in the long run.

Many people from more expensive regions consider moving to Detroit

Since Detroit property prices are pretty low, many people from more expensive regions like Cleveland or Chicago consider moving to Detroit to save lots of money on housing in the long run and this may boost overall demand for property in this region in the long run.

Detroit offers the comfort of a big city

Tenants will also find everything they need to live a comfortable life in Detroit and don’t have to commute to other cities to get what they need as would be the case if they lived in smaller towns or villages and tenants may be willing to pay decent rents for having this luxury.

Hard to imagine that property prices in Detroit fall even further

Since property prices in Detroit are extremely low, it is also hard to imagine that they might fall even further and this means that your downside risk will be pretty low while your potential future returns may be enormous in case Detroit becomes more popular and housing prices may explode due to that.

Many things to do in nature for your tenants

Detroit can also be a great city to live in for your tenants since it is located close to big lakes and your tenants can therefore go fishing, hunting, swimming, hiking and do many other things in nature and can really enjoy their leisure.

Consequently, if you have nature lovers among your tenants, those people may become really happy in this region and may stay with you for quite a long time.

Detroit may become increasingly popular in the future

Detroit has been a popular city in the past but has lost lots of its popularity over the past decades.

However, Detroit is still a big city and times may change and in case this happens, you can get huge returns on your investment by investing in real estate in Detroit right now while property prices are still cheap so that you can benefit from a solid long-term development.

Detroit is a landlord-friendly place

Another benefit of buying property in Detroit is that it is a landlord-friendly place where you will have many rights in case you get into trouble with your tenants.

You don’t have to deal with strict rent control regulations

Unlike people buying property in San Diego or in other tenant-friendly cities, you will also not have to deal with rent control in Detroit and can therefore raise rents as much as you want to so that you get to market level pretty quickly and can maximize your returns in the long run.

Detroit is well-known all over the US

You should also know that Detroit is well-known all over the US and this may attract many real estate investors in the long run and property prices and rents may increase significantly due to that.

Detroit may become popular among institutional investors

Detroit is not only an attractive city for private real estate investors, but also institutional investors may buy huge pieces of land to speculate on future price increases and this may boost property prices and rents in Detroit in the near future.

As you can see, there are many reasons for buying property in Detroit.

However, there are also many drawbacks of investing in real estate in Detroit that I want to address in the following chapter so that you are better able to decide whether you still want to invest in Detroit property or rather want to buy real estate in a different region.

32 Major Pros & Cons Of Buying Property In Detroit - REC (1)

Disadvantages of Buying Real Estate in Detroit

  1. Not many good prospective tenants to choose from in Detroit
  2. You may have to deal with vacancy quite a lot
  3. You may have trouble with your tenants
  4. Many dodgy neighborhoods in Detroit
  5. Detroit has a rather poor reputation
  6. High crime rates in Detroit
  7. Unemployment is a big problem in Detroit
  8. Low average income levels in Detroit
  9. Many people in Detroit live below the poverty line
  10. Many people need to work a second job to survive
  11. Population in Detroit is decreasing
  12. Tenants may mess up your rental properties
  13. Homelessness is a big problem in Detroit
  14. Social cohesion is about to deteriorate in Detroit

Not many good prospective tenants to choose from in Detroit

One problem with buying property in Detroit is that overall demand for housing is pretty low and there are just not many good prospective tenants applying for your properties.

In turn, you may have to rent out your properties to rather dodgy people and may also have to deal with rent arrears quite a lot while property investors in San José and other more popular places don’t have to worry much about those things.

You may have to deal with vacancy quite a lot

Since demand for housing in Detroit is rather low, you may also not be able to rent out your properties for a solid price and may also have to deal with vacancy in case your tenants move out and you have a hard time finding new tenants.

You may have trouble with your tenants

Since tenants are in a pretty good position in Detroit, you may get into trouble with them as a landlord quite often since tenants will not worry about losing their homes that much since they will have more than enough other housing options available to them in this region.

Many dodgy neighborhoods in Detroit

Another disadvantage of buying real estate in Detroit is that there are also many dodgy neighborhoods in this region and if you buy in the wrong areas, it may be almost impossible to rent out your properties for a decent price since nobody wants to live in those dodgy quarters.

Detroit has a rather poor reputation

You should also know that Detroit is not the most popular city and overall reputation of this city is pretty poor.

Consequently, many people don’t want to move to Detroit and this may further lower property prices and rents in the future since overall demand for housing may decrease as well.

High crime rates in Detroit

You should also be aware of the fact that Detroit has pretty high crime rates compared to other major cities and many people just no longer feel safe in this region anymore and consider moving Detroit in the near future, which would further lower demand for housing in this region.

Unemployment is a big problem in Detroit

Another downside to buying property in Detroit is that unemployment is a big problem.

In fact, Detroit has one of the highest unemployment rates of all big cities in the US and this means that your tenants will be at great risk of losing their jobs and may not be able to pay consistent rent in the long run.

Low average income levels in Detroit

You should also know that average income levels in Detroit are pretty low and that most people don’t make good money. In turn, people don’t have as much money as in other regions to spend on housing and this may slow down property prices and rents in the long run.

Many people in Detroit live below the poverty line

Also the gap between the poor and the rich is pretty high in Detroit and this situation may become even worse in the future and may lead to all sorts of social tensions.

Many people need to work a second job to survive

Since many people only make minimum wage, many people also need a second job to pay their bills and are not able to pay rent in a reliable manner and this will also adversely affect you as a landlord in the long run.

Population in Detroit is decreasing

Unlike most other big cities, Detroit experiences a decrease in population and if this trend continues in the future, overall demand for housing may decrease as well and this will likely cause property prices and rents to drop even further.

Tenants may mess up your rental properties

Since you will have to accept many dodgy tenants due to a lack of good alternatives, you will also be at significant risk of tenants messing up your property and you may therefore have to spend lots of money on renovations in the long run.

Homelessness is a big problem in Detroit

You should also know that homelessness is a big problem in Detroit and crime rates may increases even further due to that in the future since people become increasingly desperate and don’t know how to survive in Detroit anymore.

Social cohesion is about to deteriorate in Detroit

Due to many people living below the poverty line and the overall poor conditions may people experience, social problems are about to get worse and social cohesion may deteriorate in the long run.

Consequently, also overall quality of life may greatly suffer in the Detroit region in the long run.

Buying Detroit Real Estate Pros & Cons – Summary List

Buying Real Estate In Detroit ProsBuying Real Estate In Detroit Cons
Property prices in Detroit are extremely lowNot many good tenants to choose from in Detroit
Average person can still afford to buy a homeMany neighborhoods are rather dodgy
Tenants have a rather easy time paying rentTenants may not pay rent on time
Lots of room for price increases in the futureYou may get into lots of trouble with your tenants
Excellent rental yields in DetroitUnemployment is a big problem in Detroit
Downside risk is rather lowCrime rates are pretty high
Detroit may become more popular in the futurePopulation in Detroit is decreasing
Institutional investors may invest lots of moneyDemand for housing may drop even further
Detroit offers the comfort of a big cityLow income level in Detroit
Living costs are relatively lowTenants may mess up your property

Is Detroit A Good Place To Invest in Property?

Detroit can be a great place for property investors since property prices are still extremely low while rental yields are excellent and you will be able to build a positive cash flow rather quickly. However, you also have to deal with many difficult and unreliable tenants and Detroit also has a rather questionable future outlook.

In the end, you should evaluate all the pros and cons yourself before making the big commitment of buying property in this region.

If you want to learn even more about investing in real estate in this region, you should also have a look at buying vs. renting in Detroit.

Alternative Cities to Invest in Real Estate

If you rather want to invest in a different region, you may also want to have a look at the following articles:

Advantages and disadvantages of Investing in Real Estate in Las Vegas

Advantages and disadvantages of Investing in Real Estate in Oklahoma City

Advantages and disadvantages of Investing in Real Estate in Boston

Sources

https://www.census.gov/quickfacts/detroitcitymichigan

Own research.

About the Author

My name is Andreas and I worked as a real estate agent.

Moreover, I am also a real estate investor and want to share all the experiences I made when investing in real estate so that you can learn from my mistakes and save lots of money in the long run by optimizing your investment decisions.

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