Detroit Real Estate Investing

Detroit is the 24th largest city in the United States, sitting right on the U.S.-Canadian border in Michigan. The city is known as the center of the U.S. auto industry as well as the music capital of the nation (sorry Nashville, but it's true). Of course, it’s also known as the largest U.S. city to ever declare bankruptcy and the place where Barry Sanders’ dynamic talents were wasted, but hey, nobody’s perfect. What’s important is that Detroit is a diverse city with a growing real estate market that is beginning to attract investors again.

Real estate investing used to be a game only for those with means. But thanks to innovations in the field of passive real estate investing, this market is now as friendly to new investors as the stock and bond markets. Using passive real estate investing is a great way to minimize the capital required to get started, plus avoid the hassle of hiring a property manager or (gasp!) doing the work yourself. And Detroit is currently chock full of affordable properties to get started with.

Why Invest in Detroit?

Detroit has a number of appealing features as a city:

• Location: Yes, it’s very cold in the winter, but Detroit’s location makes it a natural hub for all kinds of international and domestic commerce and travel. Some of Detroit’s neighbors include large cities like Chicago and Milwaukee, plus the Canadian city of Toronto is within driving distance.

• Industry: Detroit is home to major car manufacturers like Ford, GM and Chrysler. Additionally, several large financial firms have offices in the Motor City, like Quicken Loans, Ally Financial, PricewaterhouseCoopers and Fifth Third Bank.

• Tourism: The city has a bustling entertainment district featuring three 24-hour casinos, as well as a cultural district with the Motown Museum, Detroit Institute of the Arts and the Charles H. Wright Museum of African American History. Detroit is also home to the Red Wings (NHL), Lions (NFL), Tigers (MLB) and Pistons (NBA).

• Musical history: Detroit has been changing the face of the music industry for nearly 100 years. Rock and Roll was born in Detroit. Soul and R&B were born in Detroit.  Motown Records produced some of the most talented musicians of all time, such as Marvin Gaye, Aretha Franklin, Stevie Wonder and Diana Ross. Even techno is said to have been born in Detroit, but we’ll leave it to the readers to decide if that’s a plus or not.

• Growth and revitalization: Since emerging from bankruptcy, Detroit has enjoyed a rebirth as housing prices continue to rise. According to Redfin, the average listed home price in the Detroit city limits is $48,000, which is up 4.3% year-over-year. About 7% of homes sell under the listed price and the average time on the market is 49 days. However, Zillow’s home value index estimates the surrounding metropolitan area has a median home price of $183,941, up 4.7% from 2019.

Detroit Real Estate Market Forecast

Real estate experts are high on the prospects of Detroit’s future. Zillow considers the Detroit-Warren-Dearborn metropolitan area to be a hot market. Home prices have been steadily increasing since 2011 and the current median price per square foot is $125. Listings on Zillow are also spending less and less time on the site before being purchased.

Investors can find affordable opportunities in the city or larger, more valuable properties in the surrounding area. But like many cities during the coronavirus pandemic, buyers are currently holding the best cards. According to Realtor.com, the Detroit housing market is tipped in favor of the buyers with homes selling for only 94% of list price on average as of May 2020. 

Detroit is often unfairly labeled as a fading or high-crime city, but in recent years has done well to shake this reputation. However, job growth is still slow according to the Bureau of Labor Statistics and investors need to understand that staking claim to Detroit real estate means playing a long game. But the potential is still very promising.

Investing Passively in Detroit

Investing in real estate used to require a tremendous amount of capital and the patience to sit on an illiquid investment. Owning a rental property is a great way to enhance your personal cash flow, but getting started often meant overcoming significant financial barriers. But thanks to passive investing, real estate is no longer out of reach to the average person.

Passive real estate investing is sort of like a mutual fund for commercial and rental properties. When using passive strategies, an investor will use a FinTech platform to buy “shares” of an asset like an apartment complex or retail store. Instead of procuring a down payment and preparing for 1-2 decades of property management, passive real estate means investing a small amount in a project and reaping the benefits of both property appreciation and rental payment cash flow.

For example, DiversyFund is a FinTech real estate platform that matches prospective investors with properties. The types of property can vary — DiversyFund currently has 4 multifamily properties and a student housing facility meshed together in a Growth REIT. Learning how to invest in REITs is a skill every investor should have, or at least try once.  Investors can choose how much they wish to invest in the properties but must remain invested for a period of 5 years. Unlike most crowdfunding real estate platforms, DiversyFund doesn’t require investor accreditation and initial investments can be as low as $500. See our own DiversyFund Review for more information.

Best Passive Real Estate Investing Platforms

DiversyFund isn’t the only passive real estate investment firm currently open to investors. New FinTech firms are springing up left and right, opening up real estate opportunities to investors who previously couldn’t get access. The democratization of the real estate market will be something to keep an eye on in the future.

Here’s a list of the best passive real estate investing platforms.

Investing in Motor City Real Estate Might Not Be as Risky as You Think

Detroit has been through plenty of ups and downs as a city, but the real estate market is currently swarming with available properties and savvy investors are taking advantage of historically low mortgage rates to plant roots in the area. Home prices are increasing, although Detroit does have concerns in regard to population growth and employment opportunities. If the metro area continues its upward trend thanks to current revitalization efforts, Detroit real estate investors who get in now will be poised to profit.