Is Detroit a Real Estate Investment Hub?

According to the Forbes Real Estate Council, yes, Detroit is an American hub for real estate investing. On October 26, 10 members of the Council “shared[d] their insider secrets” on “unconventional signs that a region or city is about to become a great place to invest in real estate” — and all signs point to The D. Below, we dissect.

1. Millennials Moving In

While millennials often have lower disposable incomes, they definitely love coffee, food and fun boutiques. Cheaper rents and walkability will bring them to a neighborhood initially, and the retail usually follows — increasing the “hipness” of the neighborhood along with the property values. – Lisa Fettner, ReferralExchange

A recent LinkedIn survey revealed that millennial interest in mid-size cities has grown 25% faster than interest in larger cities, with Detroit at #3 nationwide. Fueling their interest are the City’s 44,000+ jobs in the internet technology, marketing, advertising and automotive industries.

Indeed, in an Op-Ed this summer, Techstars Managing Director Ted Serbinski, an ex-Silicon Valley entrepreneur and startup investor now living in Detroit, called Detroit the next Silicon Valley. And he isn’t alone.

“There’s an infusion of young, civic-minded strivers. Innovators. Disrupters. Dreamers. Risk-takers. Consensus builders,” says Ron Fournier, former AP Washington bureau chief.

Elite Daily, the preferred platform for today’s hottest issues and trending topics, has called Detroit a “millennial paradise.”

Happy couple buys first home in Detroit

2. Presence of Cultural Vanguard

Follow the cultural vanguard. Artisanal chefs, artists, musicians and authors may have a lower price point, but their preference for amenities such as bars and cafes, yoga studios and mass transit is the same as the broader bourgeoisie that has revitalized metro real estate markets. Once the cultural vanguard arrives, the rest will follow. – Larry Solomon, TheGuarantors

Silicon Valley entrepreneurs and job-hungry millennials aren’t the only ones setting up shop in The D. The tastemakers came first, and their migration continues.

For example: earlier this year, Jack White of The White Stripes opened up a vinyl pressing plant and record store here; Mark Wahlberg is expanding his Wahlburgers franchise; and Adweek‘s “coolest brand in America,” Shinola has expanded to audio and recently opened its first boutique hotel in Detroit.

Even before Detroit’s Great American Comeback, the City was known for its music. It’s the home of Motown, the birthplace of Techno, and the location of multiple mainstream music festivals to this day.

Detroit’s city core also houses 33 art galleries, 22 theaters and performance venues, and 11 museums and libraries. And on December 11, 2015, Detroit became the first U.S. city to receive a UNESCO City of Design designation.

This month, Lonely Planet, the world’s largest travel guide book publisher, named Detroit a top-10 urban destination in the world, and the only American city worthy of inclusion on the prestigious list.

The Revitalization of Detroit, featuring artwork from Shepard Fairey

3. Corporations Relocating

Check the headlines for corporations relocating and invest in those areas. Rental properties will be top priority, as people will need temporary housing until they are ready to purchase. Following areas with corporate relocation is key. – Angela Yaun, Day Realty Group

Fortune, Brookings, CNN Money, Tech Republic, The Verge, AOL Finance and Forbes have all called Detroit “The Next Silicon Valley,” but before the recent influx, Detroit was known as the Motor City. And The Big 3 aren’t going anywhere.

In the first half of 2017 alone, GM, Ford and Fiat Chrysler — all still headquartered in Detroit — announced $2.7 billion in new domestic investments.

Other major corporations with headquarters or major office centers in the City include Ally Financial, Little Caesars, HP, Ernst & Young, OnStar, and Blue Cross Blue Shield.

And now Detroit is in the running for the new Amazon headquarters.

Detroit auto industry innovation

4. Airbnb Price Hikes

Track the price hikes and also the demand versus supply of inventory on Airbnb. If you track this information for a few months, you would get to know whether the prices are consistent, seasonal, plummeting or rising. This also gives you a general idea of inventory available in a certain region. – Nikhil Choudhary, Zenith Engineers Inc

The growth of the Airbnb sharing economy in Detroit is well documented — and with Lonely Planet joining The New York Times, Travel+Leisure, National Geographic and others in lauding the The D as a leading travel destination, vacationer interest and owner pricing are sure to continue to increase.

A subscription to AirDNA delivers the analytics:

[Rental Prices – Full Home (US$)]

Detroit Airbnb Rental Price Growth (2014-2017)

[Market Grade]

AirDNA Market Grade - Detroit Airbnb

Case closed.

5. New Construction Work

Attend planning and zoning meetings in areas around you and watch the new applications. This can often tell you if there is a shift in an area. Also, if you are in an area that looks like it has seen better days but there are one or two new construction projects nearby, that could be a sign of a shift. The other obvious sign is road widening projects. Easier accessibility means increasing values. – Michelle Ames, HorsePower Team Texas/Independent Realty

Detroit is in the top 10 nationwide in construction job growth, and the City is widening roads, bike lanes and sidewalks throughout the metro area.

Apartment renovations and construction continue at fast pace in Detroit

6. Population Growth

Investing in bad neighborhoods is not bad but often good investing, as long as you can stick around long enough to watch the demographics change. Key things to look for are business and population growth. If this bad neighborhood is in close proximity to a downtown district that is growing, it’s only a matter of time before you see the real estate rise. Many fortunes have been made this way. – Chris Ryan, Luxury Lifestyles Group / RE/MAX Crest Realty Westside

We all the know the story of Detroit’s decline and rebound. In fact, home values in Detroit have grown at a faster pace than in any other city in the U.S. — at more than 21%. But Forbes still recently called The D the most undervalued housing market in the entire country.

Further, while the total population of the metro area may not be increasing, yet, Detroit now has more renters than homeowners, and there is a major apartment shortage: two signs of opportunity for the real estate investor looking for passive income.

7. Thriving Culinary Scene

A thriving culinary scene (restaurants, craft breweries, wine bars) is a key signal. – Maureen Waters, Ten-X

According to Lonely Planet, Detroit is the number-one food city in the world! Yes, more so than Paris, New York City or nearby Chicago.

Detroit is one of Zagat‘s hottest food cities, made National Geographic‘s list of unexpected food destinations, and has appeared on Man vs. Food, Diners, Drive-Ins & Dives, Bizarre Foods America, Best Things I Ever Ate, Parts Unknown with Anthony Bourdain, and Burgers, Brew & ‘Que with Iron Chef Michael Symon.

The new Detroit Foundation Hotel also opened in May with flagship restaurant The Apparatus Room from multiple Michelin star-rated chef Thomas Lents.

Need we say more?

Takoi Detroit

8. Off-Record Gentrification

When you can see gentrification happening on a local basis before media picks up on it, it usually indicates that either big employers or city government are pumping money into the region/city.

While we can’t say certain members of the media haven’t reported on Detroit’s slower recovery outside of the downtown core, it’s undisputed that the government and big employers are pumping money into the City. And now, with the QLine public transport system extending into the metro area and the forthcoming Inner Circle Greenway bike and pedestrian path to encircle the city, the cultural renaissance and real estate boom are only going to expand in breadth and depth.

Not to mention the monumental growth in home values already seen across the metro area.

9. Legalized Marijuana Use

Think green: I’d look at what states recently legalized or are looking to legalize marijuana. While this might be a very Colorado answer, there’s no doubt that legalized marijuana skyrockets business development and, as a result, drives neighborhood development and increases home prices. Investing in real estate right before the smoke rises will likely prove to be a good investment. – Joshua Hunt, TRELORA

As a September 2017 Alternet article explains, “The legalization of cannabis for medical and recreational purposes is having a positive impact on states’ economies in ways that go well beyond tax revenue. From job creation to increased tourism, marijuana legalization is driving economic markets.”

In Michigan, in 2008, 63% of voters approved a ballot initiative legalizing medical marijuana for patients suffering from serious health issues: 272,000 registered patients who now either grow their own pot or buy it from one of 43,000 registered caregivers. In some municipalities, the State law has gone unchecked; in others it’s been blocked.

This week, Michigan regulators said medical marijuana businesses can stay open while seeking a state license as long as they have been operating with the approval of their local community.

“The long money is on cannabis,” writes Larry Gabriel for the Detroit Metro Times.

As a matter of fact, in October, the Coalition to Regulate Marijuana like Alcohol officially submitted to the State of Michigan ballot language that would legalize all adult consumption and establish a system whereby marijuana would be regulated and taxed like alcohol. If enough signatures are collected, the voters will be able to decide on this matter in November 2018.

Legalizing Marijuana in Detroit

10. The Ace Hotel Effect

This may sound strange, but when I hear an Ace Hotel is coming, that is a sure sign of an up-and-coming city or neighborhood. It’s like the Whole Foods effect, but trendier! – Elizabeth Ann Stribling-Kivlan, Stribling.com

Detroit’s already got its Whole Foods; and, instead of an Ace Hotel, there’s the Detroit Foundation Hotel, built in the old Detroit Fire Department headquarters, the forthcoming Shinola Hotel, and many other boutique spots to lay your luggage so you can tour the City unencumbered.

Detroit Foundation Hotel

Looking for more?

Email us for a copy of our report, The Top 5 Reasons Michigan is the Next Booming Rental Market.

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