Buying Investment Property in Detroit | Own It Detroit (2024)

FAQs

Is buying property in Detroit a good investment? ›

Investing in real estate in the downtown area of Detroit can provide a great opportunity for long-term growth and rental income. Properties in the area are likely to appreciate in value over time as the area continues to grow and attract more businesses and residents.

Is it harder to get a mortgage for an investment property? In general, it is more challenging to get a loan for an investment property than an owner-occupied property. That's because lenders often require a higher down payment and more financial stability than they do for a primary home purchase.

What Is The 1% Rule In Real Estate? The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

FAQ About Investment Home Loans

In general, investment properties require at least 15% of the purchase price as a down payment.

Detroit is an excellent place to invest in for both cash-flow and property appreciation. Local, out-of-state investors, and even international investors are targeting the incredible opportunities of the Detroit rental market.

She recommends homebuyers consider the development happening in and around New Center, the North End, and Milwaukee Junction. “There are a lot of great restaurants and retail places and bars that have opened up," she says.

The ideal time to invest in real estate is when a person is between the ages of 30 and 35.

Investment Property Loan Requirements

Most fixed-rate mortgages require at least a 15% down payment with a 680 qualifying credit score for a one-unit investment property. Your credit score should be at or above 620 if you're applying through Rocket Mortgage®.

Investment property loans are more difficult to get than traditional mortgage loans, but they aren't impossible. You have to do some planning and make sure that you're financially ready. However, it's best for you to work towards a high credit score and low debt-to-income ratio anyways.

Like many rules of real estate investing, the 50 percent rule isn't always accurate, but it can be a helpful way to estimate expenses for rental property. To use it, an investor takes the property's gross rent and multiplies it by 50 percent, providing the estimated monthly operating expenses. That sounds easy, right?

What is the 80% investment rule? ›

The 80/20 rule can be effectively used to guard against risk when individuals put 80% of their money into safer investments, like savings bonds and CDs, and the remaining 20% into riskier growth stocks.

One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.

How Much Down Payment Do You Need to Buy Investment Property? Lenders typically have stricter guidelines when it comes to rental properties. Though you can buy a primary home with as little as 3% down, most borrowers need to put down 15% to 20% to buy a rental property.

The One-Percent Rule

It's a tool that you can use to determine if a property deserves a closer look. All the one-percent rule says is that a property should rent for one-percent or more of its total upfront cost. For example: A property that costs $100,000 should rent for at least $1,000 per month.

With an effective tax rate of 3.77%, Detroit's property taxes are among the highest in the nation.

The richest city in Michigan is Birmingham. This lively, pedestrian-friendly area is a Detroit suburb and sits about thirty minutes from downtown. Home to roughly 22,000 people, Birmingham attracts a diverse crowd who are interested in shopping, eating, and all things urban living.

Detroit is 11th, with 116,200 wealthy residents and a total wealth of $468 billion.

“Key factors like retirement, wanting to be closer to family and lifestyle changes influenced by the pandemic along with current housing prices drove moving patterns in 2022,” said Michael Stoll, economist and professor in the Department of Public Policy at the University of California, Los Angeles.

It could be Michigan's affordability, especially housing affordability, and accessibility that motivates millennials to move to Southeast Michigan, Detroit Regional Chamber Senior Director of Community Engagement and Learning Development Devon O'Reilly says.

Is it too late to invest in real estate at 50? ›

It's Never Too Late to Start Investing in Real Estate

The beauty of real estate is that you can own actual property. It is not like owning stocks, where ownership doesn't seem so tangible.

Buying a home after 55 is a major decision that is sure to impact your retirement. While some financial companies will give out loans to older buyers, most are wary of this for several reasons. According to personal finance expert David Ning, it's unwise to get a new 30-year fixed mortgage in your 50s.

Although it is advisable to start investing at 20s, there's no such thing as too late in real estate. It's all about mindset. Just make sure to invest in your health because real estate is a long term investment.

The only way to get 100% financing for the purchase of an investment property which will not be significantly improved during the loan term, is with cross collateralization. This means you need to have another investment property with a sufficient amount of equity to use instead of cash.

Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.

The amount will depend on your specific situation, but a good rule of thumb is to aim for at least 10% profit after all expenses and taxes. While 10% is a good target, you may be able to make more depending on the property and the rental market.

Savvy real estate investors often pay no more than 100 times the monthly rent to purchase a property. In the case of the couple above, an investor following the 100 times monthly rent rule wouldn't pay more than $750,000 because the monthly market rent was $7,500.

What is the 4% rule for retirement? The 4% rule states that you should be able to comfortably live off of 4% of your money in investments in your first year of retirement, then slightly increase or decrease that amount to account for inflation each subsequent year.

The 500 shareholder threshold was a rule mandated by the SEC that required companies to publicly disclose financial statements and other information if they achieved 500 or more distinct shareholders.

The Rule of 69 states that when a quantity grows at a constant annual rate, it will roughly double in size after approximately 69 divided by the growth rate.

What are the 4 C's in real estate? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

They evaluate credit and payment history, income and assets available for a down payment and categorize their findings as the Three C's: Capacity, Credit and Collateral.

Opportunistic is the riskiest of all real estate investment strategies. It is also synonymous with 'growth' in the stock market, like 'value-add,' but it is even riskier. Opportunistic investors take on the most complicated projects and may not see a return on their investment for three or more years.

A sizable down payment is standard when you take out investment property loans. But you may be able to buy an investment property with as little as 10%, 3.5%, or even 0% down. Loan programs like HomeReady and Home Possible make purchasing an investment property with 10% down or less a possibility.

By asking about your down payment (20% or more is often the minimum to qualify for a mortgage), the seller will get a sense of how likely you are to be qualified as a buyer.

Now that you know how to calculate your cash on cash return, you are probably wondering “what is a good rate of return on rental property on a mortgage financed rental property?” Investors consider anything between 8% and 12% a good rate of return on rental property that is financed by a mortgage.

The Cheapest Option: REITs—$1,000 to $25,000 or more

A REIT offers the investor a relatively high dividend as well as a highly liquid method of investing in real estate. Most real estate investments are not easy or quick to get out of. An exchange-traded REIT is. Moreover, you can start small with a little bit of cash.

Despite the common misconception that you need a lot of financial capital to begin investing in real estate, you can start with as little as $5,000. Your chances of success can increase if you diversify your investments — especially should some deals not go as planned!

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

How do you know if a house is a bad investment? ›

Detroit's economy will continue growing at a steady pace, showing resilience post pandemic despite projections of a mild national recession, according to the Detroit Economic Outlook for 2022-2027 released this week by the University of Michigan.

Fewer jobs in the City eventually resulted in fewer people able to live there. This means there are now more houses than people who want them, so the law of supply-and-demand drives prices down.

Detroit's seasonally adjusted resident employment count actually edged down by nearly 1,300 from December 2021 to October 2022. We estimate that employment within the city of Detroit increased by 8,000 jobs in 2022, nearly keeping pace with 2021's 8,400 job gains.

Centerville Township in the Glen Lake Community Schools district has the lowest rate, at 16.447 mills. The map below shows 2021 homestead millage rates across Michigan.

$65,823. The average Detroit home value is $65,823, up 3.1% over the past year and goes to pending in around 27 days.

Detroit is worth moving to. Detroit is rated as one of the most innovative cities in the United States. More so, Detroit's robust business atmosphere makes it one of the best places for startups. If you're considering moving to Detroit, you'll be glad to know that the city is worth moving to.

The forecast maintains a faster recovery for Detroit than the State overall through 2023. Jobs at establishments within city boundaries are projected to surpass pre-COVID pandemic numbers by the end of 2023.

Lists of reasons to live in Detroit often include the Low Cost of Living. Affordable housing remains one of the strong points for making a home in Motor City. If you're more concerned with the practical, then the cost of living in Detroit should win you over. Detroit is among the lowest in the nation!

Is Detroit a buyers market? ›

Sale-to-List Price Ratio: 95.96% Detroit, MI is a buyer's market in April 2023, which means that the supply of homes is greater than the demand for homes.

In 2021, in the middle of the COVID-19 pandemic, the U.S. population grew by just 0.1%, the smallest growth in the nation's history. Population growth rebounded only slightly in 2022, growing by 0.4%.

The Detroit region is the epicenter of the global automotive industry and home to other high-tech industries, including defense, logistics, health care, and information technology.

Detroit is changing so fast that its transformation over the last decade was visible from outer space. In the last 10 years, Detroit has turned many of its longtime problems around — and attracted jobs in industries that will shape the future.