The Midwestern housing market is known for its affordable and profitable real estate markets. As 2020 rolls in, one of the top markets in the Midwest is the Detroit housing market. What is the Detroit housing market forecast for 2020? And where should you invest in Detroit real estate? Read this blog to find out!
Related: Will Midwest Real Estate Make You Money in These Cities?
Detroit Housing Market: Mashvisor’s Real Estate Data
In order to understand a market’s forecast, we need to understand its investment performance. To do that for the Detroit real estate market, we turn to Mashvisor’s data. Mashvisor is the only tool you need for real estate investing in 2020. Using Mashvisor’s predictive and traditional analytics, real estate investors can analyze any rental market and property in the US. To learn more about Mashvisor, click here! For now, take a look at Mashvisor’s data for the average Detroit investment property:
- Median Property Price: $167,555
- Price per Square Foot: $105
- Price-to-Rent Ratio: 13
- Rental Income: $1,092
- Cap Rate / Cash on Cash Return: 4.1%
Detroit Housing Market 2020 Forecast
So, why should you consider Detroit real estate investing? There are four Detroit housing market trends that will incentivize investment in the area in 2020:
The Real Estate Market Will Continue to Offer Affordable Property Prices
The strongest highlight of Detroit’s rental market is its affordable property price tag. According to Mashvisor, the median price of a Detroit investment property is $167,550. This is considerably lower than Michigan’s median ($282,033) and the national median ($299,033).
The affordability of Detroit house prices is showcased in the best neighborhoods in the city for real estate investing. All 3 of the best neighborhoods in Detroit (listed below) have a median property price below $100,000. Detroit’s cheap property prices will drive investment demand in 2020, which we will touch upon later.
Besides being an affordable place for buying a rental property, the Detroit housing market also benefits from a low cost of living. With the 35th lowest cost of living among major cities, Detroit’s cost of living is about 13% lower than the US average. This means that not only is property cheap in the city, but it can be profitable as more and more people will be looking to move to Detroit due to the low cost of living. Even with the market’s affordability attracting newcomers, over 52 percent of residents live in a rental property.
Detroit Investment Property Will Be Profitable
Of course, we wouldn’t recommend Detroit real estate investing if it wasn’t profitable! As seen with Mashvisor’s data, Detroit’s average rental income and return on investment are $1,092 and 4.1%, respectively. While its rental income is slightly lower than the state average of $1,359, Detroit’s ROI is significantly higher than the state average of 1.78%. Single-family properties, which constitute two-thirds of rentals in the Detroit housing market, are particularly profitable.
Investors Will Benefit From Real Estate Appreciation
Detroit rental properties will also benefit from real estate appreciation in 2020. While Detroit’s appreciation rate was near the national average over the last 10 years, its rate has been increasing in recent years. According to NeighborhoodScout, Detroit’s expected appreciation rate for 2019 is 2.48%. It is more than likely that 2020 will see a higher rate for the average Detroit real estate investment due to rising demand.
Detroit Is Likely to Remain a Seller’s Market
The Detroit housing market will garner high demand for investing in 2020. According to the PwC’s Emerging Trends in Real Estate report, Detroit is high in both overall real estate prospects and homebuilding prospects. According to the report, Detroit’s revitalized economy (as evidenced by its 7.99% household income growth) and development are expected to increase demand for real estate. A slight disadvantage to investors is that, on the buyer’s market/seller’s market spectrum, Detroit is currently a hot seller’s market and will likely remain that way in 2020. However, it is one of the more affordable seller’s markets in the US where a real estate investor can still find a great deal.
Airbnb Non-Owner Occupied Rentals May Be Outlawed in 2020
September 2019 Ordinance
Currently, there are no official Airbnb regulations in the Detroit housing market. As is typical in areas with unregulated Airbnb short-term rentals, Airbnb Detroit has been subject to a number of complaints. Issues regarding noise and trash and housing inventory restrictions have prompted the Detroit City Council to propose an ordinance. The ordinance to establish Detroit Airbnb laws has been updated a number of times. The most recent version was revised in September 2019. It is expected that the ordinance will be altered and ultimately implemented in 2020.
Operating Requirements and Registration
While not official as of yet, the ordinance outlines Airbnb regulations that Detroit real estate investors should be aware of. The most notable Airbnb regulations proposed include:
- Primary Residence Requirement: An important note regarding the ordinance is that it does not apply to owner-occupied properties in which the Airbnb host is present. As such, non-owner occupied properties cannot be used as Airbnb Detroit short-term rentals. Only a primary residence, in which the owner is present or absent during the lodging, is permitted.
- 1,000 Foot Rule: Airbnb Detroit short-term rentals cannot be on a lot that is within 1,000 feet of another short-term rental. However, with permission from the city’s Buildings, Safety, Engineering and Environmental Department (BSEED), this rule may be voided.
- Definition: Short-term rentals can only be rented out for 90 cumulative days per year, according to the ordinance.
- Registration: Airbnb Detroit hosts must apply and provide proof of residency to operate an STR. Hosts must also submit an affidavit affirming requirements such as smoke alarms and fire extinguishers. The BSEED will also determine an annual fee that Airbnb hosts will be required to pay.
Related: The Trend of Legalizing Airbnb Rentals
The Best Neighborhoods in the Detroit Housing Market
So, where should you invest in the Detroit housing market in 2020? According to Mashvisor, the best neighborhoods in Detroit are Berg-Lasher, East English Village, and Five Points.
- Median Property Price: $74,864
- Price per Square Foot: $63
- Price-to-Rent Ratio: 3
- Rental Income: $2,113
- Cap Rate / Cash on Cash Return: 24.7%
East English Village
- Median Property Price: $84,704
- Price per Square Foot: $71
- Price-to-Rent Ratio: 8
- Rental Income: $898
- Cap Rate / Cash on Cash Return: 9.3%
- Median Property Price: $67,450
- Price per Square Foot: $55
- Price-to-Rent Ratio: 5
- Rental Income: $1,107
- Cap Rate / Cash on Cash Return: 7.8%
Related: Where to Find Neighborhood Data for Real Estate Investing
Overall, the Detroit housing market will be one of the top-performing markets in Michigan and the Midwest as a whole in 2020. To find profitable Detroit houses for sale, click here to start your 14-day FREE trial with Mashvisor!