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OUR INVESTMENT STRATEGY >>  DETROIT  MI

REGIONS OF FOCUS

Detroit, MI

Detroit’s current unparalleled renaissance is the very reason that now is the time to invest. Detroit’s real estate market offers huge capital growth profits as the property prices are, for the moment, still well below replacement value making the city a prime investment area that offers significant growth potential. Detroit’s real estate market is on the rise.

 

According to the National Association of REALTORS® (Realtor.com), Detroit is a top investment for residential real estate. The real estate tracking firm factored inventory, median list price, and days on market. Detroit's list prices have seen a 37.8% increase YoY. According to Home Data Index by Clear Capital®, Detroit led the housing market rebound.

 

Detroit has the best Price-to-Rent ratios of 6.7. (As at Feb 2016). Prices of homes in Detroit are relatively low compared to other cities in the US. According to Medium.com, Zillow statistics show that the median home price in Detroit is $55,000 with a median monthly rent of $888. This is the lowest ratio in the United States and Canada. (In Vancouver, Canada, the Price-to-Rent Ratio is “an astounding 68.5”, one of the worst in the world).

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    The basics

     

    • Detroit is the largest city in the state of Michigan and has a population of 688,701. (Source: U.S. Census Bureau)
    • The city's metropolitan area is made up of 6 counties and is the 11th largest in the USA.
    • It has a combined population of 4,724,737.
    • Detroit has 2 international airports; Detroit Metropolitan Wayne County and Coleman A. Young.
    • 6 major roads and an extensive expressway system serve the Metropolitan area.
    • Detroit is also the busiest checkpoint on the US-Canadian border.
    • It currently has 3 international border crossings; the Ambassador Bridge; Detroit-Windsor Tunnel and Michigan Central Railway Tunnel.
    • And in 2014 work began on the construction of the US$ 2.1 billion New International Trade Crossing between Detroit and Windsor in Canada.

     

    Employment levels and job creation

     

    • 161,330 new full-time jobs have been created in Metro Detroit since March 2010.(Source: US Bureau of Labor Statistics)
    • And University of Michigan economists George Fulton, Joan Crary and Donald Grimes predict another 132,600 will be added by the end of 2016.(Source: Research Seminar in Quantitative Economics Michigan Forecast)

     

    Population growth

     

    • Since 2010 the population of Metro Detroit has increased by 19,928.(Source: Southeast Michigan Council of Governments)
    • And analysts say it will grow to 6,191,000 by 2025.
    • That's an extra 1,466,263 people who will all need somewhere to live.

     

    Housing supply and demand

     

    • Housing supply (inventory) in Detroit has dropped dramatically. In fact, inventory has fallen by 64.08% since 2010.
    • So it's no surprise that 6,883 new residential building permits were issued in 2014.(Source: Southeast Michigan Council of Government)
    • What's more, building permits for rental properties increased by 78% to 1,300.(Source: Home Builders Association of Southeastern Michigan)
    • And when builders start to build again, it's a good sign that a housing market is well on the road to recovery. This is what the Marcus and Milichap Report had to say: "Construction of new apartments will likely be fuelled by tightened vacancy rates and soaring rents.
    • In Metro Detroit vacancy is expected to reach the lowest year-end rate in 13 years, falling 30 basis points to 4.1%."
    • Founder of Data Driven Detroit, Kurt Metzger, added: "Demand is outpacing the supply of desirable places to live in Detroit. Prices are just getting to the point where it makes sense to break new construction."

     

    Affordability of property

     

    • Detroit has the most affordable housing in the world. That's according to the 11th Annual Demographia International Housing Affordability Survey. The survey ranks 378 cities in Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, UK and USA. In case you don't know - you calculate affordability by dividing the median house price by the gross annual median household income. Your result is known as the median multiple. And here's what that number tells you...
    • The survey puts Detroit's median sales price at US$ 112,000.
    • And the median household income at US$ 52,900.
    • That gives you a median multiple of 2.12.
    • So you can see just how affordable Detroit property is. And this is one reason companies are investing heavily in Detroit.

     

    Rental yields

     

    • Today there are 85,000 employees in Downtown Detroit.
    • By 2016 that number is expected to grow to 100,000. (Source: Downtown Detroit Partnership)
    • All these people will need somewhere to live. And they'll want to buy and rent property in Downtown Detroit and its surrounding neighborhoods.  As a result average rents are expected to climb up to 14.6% by 2016. (Source: RentRange.com)
    • What's more, many people are already being priced out of the city center. But they are not leaving Detroit. They're moving to neighborhoods close to the city center where they can rent a detached house for the same price as a small apartment.
    • Places such as East English Village, Warrendale and Morningside are all in high demand, according to RentJungle.com.
    • And this increased demand has already had an effect on prices. Because rents in these neighborhoods are rising even faster than in Downtown Detroit.
    • This is how median rents for a 3 bedroom single family home performed over the year to March 2015: (Source: RentRange.com)
      • East English Village - up US$ 55 to US$ 800. Increase = 7.38%
      • Warrendale - up US$ 40 to US$ 790. Increase = 5.33%
      • Morningside - up US$ 50 to US$ 850. Increase = 6.25%

     

    Current investment

     

    • Local companies are investing heavily in Detroit.
    • Dan Gilbert's company, Rock Ventures, has invested over US$ 1.7 billion in Downtown Detroit.
    • What's more, US$ 1 billion has also been spent on Detroit's riverfront over the past 5 years. (Source: Detroit RiverFront Conservancy)
    • Other current developments worthy of your attention are:
      • The new US$ 650,000,000 Red Wings Arena. This will transform a 45-block area into an entertainment district. It includes US$ 200,000,000 of new retail, residential and office space. Completion is scheduled for 2016.
      •  The US$ 137,000,000 M1-Rail Network. This will be integrated with a US$ 500,000,000 rapid bus and rail system. They will link Detroit, its suburbs and Wayne State University to Detroit Metropolitan Wayne County Airport. Due for completion in 2016, it will create over 2,000 jobs.
      •  The US$ 2.1 billion New International Trade Crossing to Windsor in Canada.  This huge project will create over 43,000 jobs in construction and related industries alone.
      •  The new high-speed passenger railway between Detroit and Chicago. Construction is well underway and it will be operational by 2016.
      • On top of these, there are over US$ 1 billion of construction and renovation projects underway in the city.

     

    • But as you know, Detroit is famous for its motor industry. And the recession left the 3 largest car makers, Ford, Chrysler and General Motors (GM) in deep trouble. The good news is they have all come back strongly. In fact all 3 made big profits in 2014:
      • Ford made US$ 6.3 billion
      • GM made US$ 6.49 billion
      • And Chrysler made US$ 1.3 billion. Its 4th consecutive year in profit since bankruptcy in 2009.
      • So you won't be surprised they are also investing in Detroit.
        • GM is spending US$ 449,000,000 upgrading manufacturing processes at its Detroit-Hamtramck and Brownstown Battery plants. This brings total investment in the Detroit-Hamtramck plant to more than US$ 1 billion over the past 5 years.
        • GM is investing US$ 240,000,000 at its technical center in Warren. This will create 1,750 new jobs.
        • GM is also spending US$ 174,000,000 on a new stamping line in Lansing This will create 145 full time jobs.
        • Ford is investing US$ 550,000,000 on a new production line for the Ford Fusion at its Flat Rock Assembly Plant. This will create 1,400 new jobs.
        • Chrysler is spending US$ 198,000,000 at its engine plant in Mack Avenue and US$ 63,000,000 at its Warren Stamping Plant. This will create 250 new jobs.

     

     

 

 

Kansas City, MO

 

According to Wichita State University Center for Real Estate for Kansas City market, there's good news for investors wishing to cash-in on the investor friendly state of Kansas. Home sales in 2016 so far has risen from 2015 6.6 percent to over 42,000 units.

 

Kansas City area’s new home construction continues to rise and is expected by end of 2016 to be up 11 percent to 5,260 units.

 

Tight inventories of homes available for sale have resulted in strong home price gains in the Kansas City area. Average home values are expected to have risen by 8.4 percent by the end of 2016.

 

Price-to-Rent Ratio is 17.4 (As at Feb 2016).

 

 

Memphis, TN

 

Memphis is located on the Mississippi River and the metropolitan area has a population of more than 1.2 million. The city is known as the birthplace of rock 'n' roll. Elvis' estate, Graceland, is in the area. FedEx, AutoZone and International Paper are headquartered there.

 

The Memphis real estate market is described by Allan Woods of Movoto, as a hot 2016. With cost of living below the national average and affordable housing prices, this Southern gem is primed for a big year. While forecasters have been predicting a housing boom for Memphis for a few years now. Inventory keeps declining, people are rediscovering the south, and Memphis remains one of the most affordable cities in America. Memphis real estate is booming. The median list price for Memphis real estate is $87,000. That's around 62 percent lower than the national median.

 

Price-to-Rent Ratio is 12.26 (As at Feb 2016).

 

 

Tampa, FL

 

Currently, Tampa is considered one of the hottest real estate investment destinations in the country. Tampa’s economy continues to heat up, and population growth is driving real estate prices. Tampa Bay’s economy is growing and diversifying at an impressive rate. Tampa is the transportation center and economic hub of Western Florida. So as industry continues to grow, Tampa’s economy will continue to thrive. OSI Restaurant Partners and WellCare Health Plans are headquartered there. Many new residents are better economically positioned to enter rental markets than ownership markets, and rental markets are heating up at a faster rate than other markets in the area.

 

Price-to-Rent Ratio is 16.55 (As at Feb 2016).

 

 

Orlando, FL

 

The Orlando metro area, in central Florida, has a population of more than 2 million. Orlando's economy relies heavily on tourism from Walt Disney World, Universal Studios and SeaWorld amusement parks.

 

In addition to strong home price appreciation forecasts for the Orlando market, Orlando is experiencing the highest household growth in the U.S. In 2015, households grew by 3.4%, which compares to the U.S. average of 1.4% year-over-year. In conjunction with more people moving to the area, employment is also increasing. Orlando ranks #5 in terms of employment growth across the U.S. - Orlando employment increased 4.3% in 2015 vs. the U.S. average of 2.6% over the same period 3. Another factor that makes Orlando a great Single-Family Rental investment market, is that it has above average gross rental yields relative to other U.S. markets. Gross yields in Orlando averaged 10.4%, which is well above the national average of 9.2%.

 

Price-to-Rent Ratio is 16.62 (As at Feb 2016).

 

 

 

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