The time to invest in Detroit is now

Detroit’s recovery has started and investment in real estate promises great returns.

For those willing to buy and hold, the potential for returns is higher than any other city in the United States. Since the city made it through bankruptcy proceedings, it has taken serious initiatives to invite investors back.

Detroit is a city where developers, investors and the city administration are all working well together to bring back the city’s lost glory. Having made significant improvements over the course of a year, Detroit is set to make a remarkable economic resurgence. This is great news and should certainly encourage investors to buy property in Detroit.

Detroit’s housing slump is an opportunity to implement the well-worn axiom “buy low and sell high”.

Out of state and even out of country real estate investors have made their presence felt in the Detroit area housing market. Estimates are that up to 80% of houses sold in Detroit are being bought by investors. One of the reasons that make the math so favorable in Detroit is the super-low prices investors pay for rather sizable homes. Investors have been getting more bang for the buck and as demand for housing has risen as a result of the city’s development and good fortune, real estate prices are climbing and investors are making huge profits by getting into the market early.

Nationwide, the average gross profit for flips in the first quarter was $72,450, the highest since 2011. The Detroit Free Press reports that Detroit is among the top metro areas for flipping houses.

This year, Detroit tops Marcus & Millichap’s exclusive Yield Index of 10 markets, followed by Cleveland, Pittsburgh, Indianapolis and Cincinnati. The city earned the top position because of the greater returns investors can get for properties- further proof of the city’s emerging economic strength.

Background

Signs of a stronger Detroit

  • The Detroit Regional Convention Facility Authority was looking for $299 million of investments to revamp its facilities, and within two hours they received $922 million worth of bids.
  • Dan Gilbert, “the saviour of Detroit”
  • The resurgence of the US auto industry – including manufacturers, dealers and suppliers – have added more than 400,000 jobs since the industry hit bottom in June 2009 and auto sales in 2014 was a whopping 16.5 million – the highest since 2006.
  • Foreign investors view Detroit as a low-cost investment opportunity with greater returns, similar to developing countries but with the advantage of a stable American Dollar.
  • Investors have spent over $1 billion in renovation of tourist attractions like its Greektown Casino, restaurants and downtown hotels. Another $650 million has been invested into building a new sports arena and into revamping the arena district. The vision is to create a more attractive city with the facilities for hosting business conferences, and the friendliness and amenities to accommodate family vacations.
  • Detroit is abuzz with many considerable investments in new programs, restaurant openings and shops, ‘riverfront’ restoration, repairs of roads among others. The reformation plan of the city is now passed and the future is running!
  • he M-1 rail line from Downtown to Midtown, running along Woodward Avenue has already been a boon for the real estate market as people are buying properties and housing developments are coming up along the route.

The investment outlook remains strong

Steady assets in Detroit will offer buyers upside potential through rent increases and should acquire added investor attention throughout 2015 and beyond. Lower-tier assets will lead rent gains as top-tier properties compete for tenants. Class B/C properties face more demand than supply in most metro areas, which will encourage rent appreciation.

Detroit’s Wayne County offers landlords the best return on their investment in the country. Investors who buy homes in the metro area can expect a 30% gross annual return from rents. That’s three times the national average of 10%. Multi-national corporations are choosing to headquarter their operations in the city which has lead to a greater influx of workers into Detroit; workers who bring their families and are always searching for a new home. The real estate market will continue to enjoy price increases as the value of houses and office space skyrocket in response to the city’s efforts to reinvent itself as an economic force to be reckoned with. Investors are encouraged to react as fast as possible to take advantage of this unique opportunity.

This is a good time to invest in Detroit’s real estate

During the first quarter of 2015, interest rates were as low as 3.91% for a 30-year, fixed-rate mortgage compared to 4.34% in April 2014.

There are more properties on the market to choose from than last year. This variety certainly enables investors to take their pick of the most suitable properties for their commercial interests.

Foreclosures are expected to play a large role and investors can look to this area for discounted properties.

Detroit’s improving economic outlook post-bankruptcy, the redeveloping urban landscape and a selection of properties with relatively higher returns compared with other markets of its size are coming together to draw new investors to the booming city.