DETROIT TARGET AREAS

Detroit continues to provide opportunities that are becoming increasingly difficult to find in many major metropolitan markets: relatively affordable single-family homes, substantial brick housing stock, strong rental demand, and opportunities to generate meaningful rental income while building long-term equity.

However, there is an important difference between simply buying a cheap Detroit house and buying a quality Detroit investment property.

My strategy with investors is generally to concentrate on B-, C+ and stronger C-class rental markets where the numbers can potentially provide a combination of:

  • $1,300–$1,800+ monthly rental potential

  • Positive monthly cash flow

  • Quality single-family housing stock

  • Opportunities to force equity through renovationBRRRR potential

  • Long-term appreciation potential

  • Multiple exit strategies

Detroit is extremely block-specific. Two houses located only a few streets apart can have substantially different values, rental demand, property conditions and resale potential.For that reason, I don't recommend buying a property simply because it falls within a particular ZIP code or neighborhood.

We buy the property AND the block — not simply the ZIP code.

TIER 1

RENT + APPRECIATION + STRONGER RESALE POTENTIAL

These are generally markets I consider first when an investor is willing to accept a higher acquisition cost in exchange for the potential combination of stronger rents, housing quality, appreciation and future resale options.

BAGLEY / 48221

Investor Classification: B- / C+

Bagley is one of my primary target areas for investors seeking both rental income and longer-term appreciation potential.The neighborhood contains substantial brick housing stock, including colonials and bungalows with basements, garages, fireplaces and larger floor plans.Bagley also benefits from proximity to the Livernois-McNichols corridor and Avenue of Fashion.Livernois-McNichols is one of Detroit's Strategic Neighborhood Fund areas, where public and private investment has included commercial corridors, streetscapes and neighborhood improvements.

Target Rent: $1,400–$1,700+
Cash-Flow Potential: Good
Appreciation Potential: High
Retail Resale Potential: High
Preferred Strategy: Buy & Hold / Appreciation / Selective BRRRR

Why I Like It

One of Bagley's biggest advantages is the potential for multiple exit strategies.A properly purchased and renovated property may eventually appeal to another investor or an owner-occupant, potentially creating a broader resale market.

GRANDMONT

Investor Classification: B / B-

Grandmont deserves to be considered independently from the larger Grandmont-Rosedale area.The neighborhood contains attractive single-family housing stock, including many brick homes with basements, garages and larger floor plans.I view Grandmont primarily as a long-term asset-quality and appreciation play rather than a market where the only objective is maximizing initial cap rate.

Target Rent: $1,400–$1,700+
Cash-Flow Potential: Good
Appreciation Potential: High
Retail Resale Potential: High
Preferred Strategy: Long-Term Hold / Appreciation / Selective BRRRR

GRANDMONT-ROSEDALE / ROSEDALE PARK

Investor Classification: B / B-

This portion of Northwest Detroit generally requires a higher acquisition price than Detroit's traditional C-class rental markets.The tradeoff can be better housing stock, stronger rent potential and a broader future resale market.Many properties feature brick construction, basements, garages and larger floor plans.

Target Rent: $1,400–$1,700+
Cash-Flow Potential: Good
Appreciation Potential: High
Retail Resale Potential: High
Preferred Strategy: Long-Term Hold / Appreciation / Retail Exit

NORTH ROSEDALE PARK

Investor Classification: B / B-

North Rosedale Park is another Northwest Detroit market that I particularly like for investors focused on owning a higher-quality rental asset.The neighborhood contains substantial single-family homes, including many brick properties with basements, garages and larger lots.I view North Rosedale Park primarily as an income + appreciation market rather than a pure high-cap-rate rental market.

Target Rent: $1,450–$1,800+
Cash-Flow Potential: Good
Appreciation Potential: High
Retail Resale Potential: High
Preferred Strategy: Long-Term Hold / Appreciation / Retail Exit

BERG-LAHSER

Investor Classification: B- / C+

Berg-Lahser is a Northwest Detroit area that deserves more attention from rental investors.Housing includes brick ranches, bungalows and colonials, with many properties offering basements and garages.For an investor seeking the combination of manageable acquisition cost, higher rental potential and longer-term resale opportunities, this can be an attractive market to monitor.

Target Rent: $1,350–$1,600+
Cash-Flow Potential: Very Good
Appreciation Potential: Good to High
Retail Resale Potential: Good
Preferred Strategy: Buy & Hold / BRRRR / Appreciation

EVERGREEN-LAHSER

Investor Classification: B- / C+

Evergreen-Lahser offers many of the characteristics I look for in a Northwest Detroit investment property: solid single-family housing stock, potentially attractive rent levels and acquisition prices that can remain below some of Detroit's higher-priced residential markets.

Target Rent: $1,350–$1,600+
Cash-Flow Potential: Very Good
Appreciation Potential: Good to High
Retail Resale Potential: Good
Preferred Strategy: Buy & Hold / BRRRR / Appreciation

O'HAIR PARK

Investor Classification: B- / C+

O'Hair Park is another Northwest Detroit market worth considering for investors seeking a combination of current income and longer-term value.The neighborhood contains substantial single-family housing stock and can provide opportunities for investors seeking higher rents without necessarily paying the acquisition prices found in some of Detroit's most expensive residential areas.

Target Rent: $1,350–$1,600+
Cash-Flow Potential: Very Good
Appreciation Potential: Good
Retail Resale Potential: Good
Preferred Strategy: Buy & Hold / Appreciation / BRRRR

TIER 2

BALANCED CASH FLOW + APPRECIATION

These markets can provide an attractive middle ground between acquisition cost, rental income, value-add potential and future appreciation.

EAST ENGLISH VILLAGE

Investor Classification: B- / C+

East English Village is one of the better-known East Side markets for investors looking beyond inexpensive entry-level rentals.The area contains attractive brick housing stock and can provide both rental and future resale opportunities. It also sits within the East Warren/Cadieux Strategic Neighborhood Fund area.

Target Rent: $1,400–$1,700+
Cash-Flow Potential: Good
Appreciation Potential: Good to High
Retail Resale Potential: Good to High
Preferred Strategy: Buy & Hold / Appreciation / Value-Add

MORNINGSIDE

Investor Classification: C+ / C

Morningside can provide lower acquisition costs than East English Village while still benefiting from activity around the broader East Warren corridor.For investors, that can create opportunities to obtain a lower basis while targeting rents above $1,300.

Target Rent: $1,300–$1,550+
Cash-Flow Potential: Very Good
Appreciation Potential: Good
Retail Resale Potential: Good
Preferred Strategy: BRRRR / Buy & Hold / Value-Add

CORNERSTONE VILLAGE

Investor Classification: C+ / B- pockets

Cornerstone Village deserves to be included alongside East English Village and Morningside.The City specifically identifies Morningside, East English Village and Cornerstone Village as the neighborhoods within its East Warren/Cadieux planning initiative. The plan has included neighborhood stabilization, rehabilitation of vacant houses, parks, commercial development and East Warren corridor improvements.

Target Rent: $1,300–$1,600+
Cash-Flow Potential: Very Good
Appreciation Potential: Good to High
Retail Resale Potential: Good
Preferred Strategy: BRRRR / Buy & Hold / Appreciation

CRARY / ST. MARYS

Investor Classification: C+ / B- pockets

Crary/St. Marys can provide an interesting middle ground between Detroit's higher-priced B-class markets and lower-cost C-class rental areas.For the right property, the combination of acquisition price, housing stock and achievable rent can produce an attractive buy-and-hold opportunity.This is an area where I pay particular attention to the individual block and renovated comparable sales.

Target Rent: $1,300–$1,550+
Cash-Flow Potential: Very Good
Appreciation Potential: Good
Retail Resale Potential: Good
Preferred Strategy: Buy & Hold / BRRRR / Value-Add

ISLANDVIEW / GREATER VILLAGES

Investor Classification: B- / C+

Islandview offers a different investment profile from many traditional Detroit rental markets.Its location near East Jefferson, Belle Isle and other redevelopment areas can make appreciation a larger component of the investment thesis.Islandview/Greater Villages is also one of Detroit's ten Strategic Neighborhood Fund areas.

Target Rent: $1,400–$1,800+ depending upon property
Cash-Flow Potential: Moderate to Good
Appreciation Potential: High
Retail Resale Potential: High
Preferred Strategy: Appreciation / Long-Term Hold / Value-AddInvestors need to remain disciplined about acquisition price because paying today's price based entirely upon expectations of tomorrow's appreciation can destroy otherwise good investment numbers.

PINGREE PARK

Investor Classification: C+ / B- pockets

Pingree Park is another East Side neighborhood I like for investors seeking value-add opportunities with potential appreciation.I am particularly interested in the spread between the investor's total basis and stabilized value rather than simply chasing the highest possible cap rate.

Target Rent: $1,300–$1,600+
Cash-Flow Potential: Good to Very Good
Appreciation Potential: Good to High
Retail Resale Potential: Good
Preferred Strategy: Value-Add / BRRRR / Appreciation

JEFFERSON CHALMERS / EAST JEFFERSON

Investor Classification: B- / C+

Jefferson Chalmers offers another distinct investment thesis.Its location near the Detroit River and Grosse Pointe, distinctive housing stock and ongoing neighborhood investment make it worth watching for longer-term investors.

Target Rent: $1,300–$1,600+
Cash-Flow Potential: Good
Appreciation Potential: Higher Upside / Higher Property-Specific Risk
Retail Resale Potential: Good
Preferred Strategy: Long-Term Hold / Appreciation / Value-AddFlood exposure, insurance requirements, property condition and the specific location should be carefully investigated before purchasing.

MOROSS-MORANG

Investor Classification: C+ / C

Moross-Morang provides another East Side market worth evaluating for investors focused on balancing rent against acquisition cost.I like this type of market when we can acquire a structurally solid single-family property at the right basis, complete a sensible renovation and achieve $1,300+ rent without over-improving the property.

Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate to Good
Retail Resale Potential: Moderate
Preferred Strategy: Buy & Hold / BRRRR / Cash Flow

TIER 3

CASH FLOW + VALUE-ADD

These markets generally place greater emphasis on acquiring at the correct basis and maximizing the relationship between total investment and achievable rent.

GRAND RIVER / NORTHWEST DETROIT / 48227

Investor Classification: C+ / C

Northwest Detroit contains a substantial inventory of brick bungalows and colonials where investors can potentially combine reasonable acquisition costs with rents above $1,300.The City has also completed a Grand River/Northwest neighborhood framework addressing housing, retail development, streetscapes, parks and green infrastructure through the Strategic Neighborhood Fund initiative.Target Rent: $1,300–$1,550+
Cash-Flow Potential: High
Appreciation Potential: Moderate to Good
Retail Resale Potential: Moderate to Good
Preferred Strategy: Buy & Hold / BRRRR / Cash Flow

GARDEN HOMES

Investor Classification: C+ / C

Garden Homes is another Northwest Detroit market that can make sense for investors focused primarily on value and cash flow.This is an area where acquisition discipline is extremely important.Buying correctly can create an attractive rent-to-cost ratio, while over-improving a property can quickly reduce the investor's return.Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate
Preferred Strategy: Cash Flow / Buy & Hold / BRRRR

BUTLER

Investor Classification: C+ / C

Butler should generally be approached as a property- and block-specific value-add market.The opportunity is finding single-family properties where acquisition and renovation costs remain low enough to produce attractive returns at prevailing rental levels.Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate
Preferred Strategy: Cash Flow / Value-Add / BRRRR

SHERWOOD

Investor Classification: C+ / C

Sherwood provides another market where acquisition price can potentially create an attractive rent-to-cost relationship.I generally prefer structurally solid single-family houses requiring manageable renovations rather than extremely distressed properties requiring complete reconstruction.Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate
Preferred Strategy: Buy & Hold / Cash Flow / Value-Add

RUSSELL WOODS / NARDIN PARK

Investor Classification: C+ / C

Russell Woods/Nardin Park can provide lower acquisition costs while still offering substantial brick housing stock.It is also one of Detroit's Strategic Neighborhood Fund areas, with a City neighborhood framework intended to guide future development and investment.Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate to Good
Preferred Strategy: Cash Flow / BRRRR / Value-Add

WARRENDALE / CODY-ROUGE / 48228

Investor Classification: C+ / C

For investors primarily interested in cash flow, portions of Warrendale and Cody-Rouge deserve consideration.Lower acquisition costs can potentially improve the rent-to-cost ratio, although property and block selection become particularly important.The City's neighborhood plan addresses housing, economic development, parks and transportation. The City previously announced at least $7.4 million in planned investment associated with the Warrendale/Cody-Rouge initiative.Target Rent: $1,300–$1,500+
Cash-Flow Potential: High
Appreciation Potential: Moderate
Preferred Strategy: Cash Flow / Buy & Hold / BRRRR

DETROIT INVESTOR QUICK REFERENCE

TIER 1 — RENT + APPRECIATION

Bagley
Grandmont
Grandmont-Rosedale
Rosedale Park
North Rosedale Park
Berg-Lahser
Evergreen-Lahser
O'Hair Park

Typical Strategy: Higher-quality Buy & Hold / Appreciation / Retail Exit

General Rent Target: $1,350–$1,800+

TIER 2 — BALANCED INVESTMENT

East English Village
Morningside
Cornerstone Village
Crary / St. Marys
Islandview / Greater Villages
Pingree Park
Jefferson Chalmers
Moross-Morang

Typical Strategy: Buy & Hold / BRRRR / Value-Add / Appreciation

General Rent Target: $1,300–$1,800+

TIER 3 — CASH FLOW + VALUE-ADD

Grand River / Northwest Detroit
Garden Homes
Butler
Sherwood
Russell Woods / Nardin Park
Warrendale / Cody-Rouge

Typical Strategy: Cash Flow / BRRRR / Value-Add

General Rent Target: $1,300–$1,550+

WHAT I LOOK FOR IN A DETROIT RENTAL

My preferred Detroit investment generally has as many of the following characteristics as possible:

  • 3+ Bedrooms

  • Brick Construction

  • Full Basement

  • Garage

  • Functional Floor Plan

  • Supported Rent of $1,300+

  • Recent Renovated Comparable Sales

  • Manageable Renovation Requirements

  • Acquisition Price

  • Below Stabilized Value

  • Potential Equity After Renovation

  • Multiple Exit Strategies

But the house itself is only part of the analysis.I also want to know:

  • What are renovated homes actually selling for nearby?

  • What are comparable houses actually renting for?

  • What will the investor's property taxes be after purchasing?

  • What will insurance cost?

  • What major mechanical systems require replacement?

  • How much money will actually be invested in the renovation?

  • What will the property realistically be worth after renovation?

  • What will the property realistically cash flow after ALL expenses?

  • Those questions matter far more than simply saying: "It's a cheap house in Detroit."

THE BRRRR OPPORTUNITY

Detroit can be particularly attractive for the:

BUY → REHAB → RENT → REFINANCE → REPEAT strategy.

But BRRRR only works when the investor buys correctly.

Consider a hypothetical property:

Purchase Price: $65,000

Renovation: $35,000

Total Basis Before Other Costs: $100,000

If legitimate comparable sales support an after-repair value of:

ARV: $150,000

The investor has potentially created approximately:

$50,000 IN GROSS EQUITY

before financing, closing, holding and transaction costs.

At a hypothetical 75% LTV refinance:

$150,000 × 75% = $112,500

That creates the possibility of recovering a substantial portion of the investor's original capital.

But the ARV has to be legitimate.

An inflated ARV can destroy a BRRRR strategy very quickly.

WHY I DON'T ALWAYS RECOMMEND THE CHEAPEST PROPERTY

Consider two hypothetical investments:

PROPERTY A — LOWER-COST RENTAL

Purchase: $35,000

Renovation: $45,000

Total Basis Before Other Costs: $80,000

Rent: $1,150/month

PROPERTY B — HIGHER-QUALITY RENTAL

Purchase: $70,000

Renovation: $35,000

Total Basis Before Other Costs: $105,000

Rent: $1,500/month

Property B requires an additional $25,000.

However, the additional $350 per month represents:

$4,200 MORE GROSS RENT PER YEAR

And if Property B has stronger comparable sales and a broader resale market, the investor may also have additional exit opportunities. That doesn't automatically make Property B the better investment. It means we need to evaluate the entire investment, not simply the purchase price.

APPRECIATION MATTERS — BUT DON'T DEPEND ON IT

For long-term investors, I pay attention to where Detroit is directing infrastructure and neighborhood investment.

Detroit's Strategic Neighborhood Fund encompasses ten neighborhood clusters:

  • Livernois-McNichols

  • Grand River/Northwest

  • Warrendale/Cody-Rouge

  • Russell Woods/Nardin Park

  • Campau/Banglatown

  • Gratiot/7 Mile

  • East Warren/Cadieux

  • Jefferson Chalmers

  • Islandview/Greater Villages

  • Southwest/Vernor

The City says the program includes work involving streetscapes, commercial corridors and parks throughout all ten areas.I don't consider public investment a guarantee of appreciation.I consider it one additional factor when deciding where I want to own a property for the next 5, 10 or 15 years.The investment should make sense based upon today's numbers.

Appreciation should be the upside — not the reason a bad deal becomes a good deal.

MY DETROIT INVESTMENT PHILOSOPHY

I don't believe the best Detroit investment strategy is:

"Find the cheapest house."

My strategy is:

FIND THE RIGHT HOUSE,

ON THE RIGHT BLOCK,

AT THE RIGHT BASIS.

For most buy-and-hold investors, I am looking for the intersection of:

  • PURCHASE PRICE

  • RENOVATION COST

  • $1,300+ RENT

  • CASH FLOW

  • FORCED EQUITY

  • APPRECIATION POTENTIAL

  • RESALE VALUE

The best opportunity will be different for every investor.An investor primarily interested in appreciation and asset quality may gravitate toward areas such as Bagley, Grandmont, Rosedale Park or North Rosedale Park.An investor seeking a balance of cash flow and appreciation may find opportunities in areas such as East English Village, Morningside, Cornerstone Village, Berg-Lahser, Evergreen-Lahser, Crary/St. Marys, Pingree Park, Islandview or Jefferson Chalmers.An investor primarily interested in cash flow and value-add opportunities may find better numbers in portions of Grand River/Northwest, Garden Homes, Russell Woods/Nardin Park, Warrendale/Cody-Rouge and other C+/C rental markets.There is no single Detroit neighborhood that is right for every investor.The objective is to match the:

PROPERTY + LOCATION + ACQUISITION PRICE + RENOVATION + RENT + EXIT STRATEGY

to the investor's goals.

THE BOTTOM LINE

Detroit can provide investors with a combination of rental income, forced equity and long-term appreciation potential that is difficult to duplicate in many other major metropolitan markets.But successful Detroit investing requires more than buying an inexpensive house.

Know the numbers.

Know the property.

Know the block.

Know the renovation.

Know the rent.

Know the ARV.

And know your exit before you buy.

That is the philosophy behind Detroit Buy Hold Invest.

DAVID S. RABIOR

Real Estate Investment Specialist

DETROIT BUY HOLD INVEST

Clyde Realty LLC

B-, C+ and C classifications used in this guide are informal real estate investment terminology and are not official neighborhood classifications. Rental ranges are investment screening targets rather than guaranteed rents. Property values, rents, investment returns and future appreciation are not guaranteed. Individual properties and locations can perform substantially differently. Current rental and sales comparables, taxes, insurance, financing, property condition and renovation costs should be evaluated before purchasing.