Real estate investors often overlook the Metro Detroit area, and for years they’ve been missing out on one of the highest area for capital gains and returns in the United States. Many people still have a perception of the area as stricken by economic decline, but that is far from true today. In fact, the area has been home to great potential investments for years and has increasingly been attracting attention from international investors as one of the best places to buy property in the nation.
According to RealComp II, the average home price in Metro Detroit is at an eight-year high. Between May 2009 and May 2016, the median price for a home in the metro area more than quadrupled, going from $40,000 to $165,000. Where it was once difficult or impossible to find traditional financing, now there are many more attractive investment opportunities in the area that qualify. Most lenders are unlikely to finance a home under $50,000, so as prices rise, mortgage lenders are becoming more active throughout the area.
Although prices are growing, they’re still quite affordable when compared to home prices throughout the nation. For example, Zillow lists the current median home price for the nearby Chicago metro area as $209,200. Metro areas like Seattle and Denver, which are similar in population size to Detroit, are also far more expensive with median home prices at $432,400 and $380,200, respectively. The median home price in the United States is $198,000. Metro Detroit’s lower entry cost makes it the perfect market for investors just starting out or with limited funding. You can also spread your investment out over multiple properties, decreasing your risk even further.
New businesses are attracting residents to these communities, particularly in areas that were once almost completely vacant. Commercial development is happening not only in the downtown and midtown areas, but also in suburbs throughout the metro area. There are now eleven Fortune 500 companies with Michigan headquarters located within Metro Detroit. Much of the growth has been centered around small businesses, but the auto industry, once the center of Detroit’s economy, has been making a comeback as well. For instance, the once-struggling General Motors made a $9.7 billion profit in 2015, and the Ford Motor Company is building a new billion-dollar manufacturing plant in the Metro Detroit area in the coming years.
Additionally, the healthcare industry is booming as well, with the Detroit Regional Chamber listing 366,351 jobs in this industry throughout Detroit and the adjoining metro areas. This is invigorating the nearby towns and suburbs that are home to some of the best investment opportunities. While the growth has been somewhat slow going in terms of urban redevelopment, it’s been a dream for investors – prices have remained affordable, but the steady growth the area is experiencing promises strong returns in the future.
Unemployment numbers in the area have also made continuous drops over the last eight years. At the peak of the recession, in June 2009, unemployment numbers were at 28.4 percent, but by December of 2016, they were down to 9.8 percent – and they continue to drop. In total, Detroit added 69,000 jobs to the economy in 2016, with 36,000 of these jobs in the Metro area alone.
More industry jobs and lower unemployment rates are drawing young professionals and families to the metro area. These new residents need housing, and many are looking for affordable single-family homes to rent. The median rental price in Metro Detroit is $1,050, with rents increased nearly 6% year over year in 2016. The vacancy rate has fallen to below 4.00%, one of the lowest rates in sixteen years, despite the largest supply growth since 2006. For investors, this means increased property values, less renter turnover and more stable residual income for the entire metro area.
Detroit has incredible potential for real estate investors, and yet it remains relatively untouched. This is the perfect time for investors to make a move and purchase property in the Detroit metro area. Whether you’re a seasoned real estate investor or you’re just starting to build your portfolio, the wealth of affordable properties and high rental returns make Detroit a gold mine for your investment dollars.