The Best Areas for Detroit Investment Properties

If there’s one question I get more than any other from prospective investors it’s what areas are best to focus on in Detroit for investment properties. There are a handful of ways to answer this question, sadly none of them are super direct.

But in this post I’m going to give you the answer I wish I could type out every time on Reddit, in forums, etc. but can’t possibly spend the time doing.

I’m going to tell you why it’s difficult to answer, some of the areas I personally own properties, and where I’m now focusing my efforts when making new investments in Detroit.

Let’s go!

What Neighborhoods or Zip Codes are Best for Detroit Rental Properties?

This is what EVERYONE wants to know.

And I get it. I’ve been there.

When I started investing in Detroit rentals in 2019 I was completely overwhelmed by the city. For starters, it has a massive footprint covering 139 square miles!

That’s hard to put into perspective, so here’s a great illustration that helps:

Yep, you can put San Francisco, Boston, and Manhattan inside Detroit and still have room to spare. Trying to analyze this much terrain is insanely difficult to begin with.

But surely you can pluck out a few zip codes or neighborhoods to pinpoint for investment, right?

RIGHT?!

Detroit is Very Block by Block

The reason I shy away from telling investors what Detroit neighborhoods or zip codes to target is due to the fact that Detroit is so block by block.

For example, I could put you in a neighborhood where I own five homes. A neighborhood I love and am confident will see strong appreciation. I could stand with you on a block that is very strong, stable, well manicured, and one you may even be able to picture yourself living on.

Then I could move you a handful of streets over, in the same neighborhood, and you would have a very different experience.

Simply put, there are extreme degrees of quality in Detroit neighborhoods and zip codes even today. Not understanding this can leave you with a mediocre investment, at best, or a potential disaster.

Finding the right spot to buy rentals in Detroit requires a bit more effort.

Where I Bought Detroit Rentals and Why

When I was trying to figure out where to buy my rentals in Detroit I finally took a hands on approach.

My real estate agent wouldn’t help me.

And while that drove me nuts I now understand that he likely had no clue how to direct me. Most agents in Detroit really don’t understand the city, especially from an investor’s mindset.

I will hold back my rant and save it for a new post.

So I fired my agent and, once my kids were in bed for the evening, I’d get in my car and drive neighborhoods. I did this for weeks, targeting different pockets of Detroit each night.

I’d also carry around a notebook and take notes on things I liked, didn’t like, etc.

Here’s a page from my notes I was taking in 2019. It’s a trip looking back on this!

Ultimately I stumbled on two areas I REALLY liked and I tried my best to focus some efforts in those pockets.

But really, I learned the best strategy to buying Detroit rentals. I’ll get into that in the next section.

Morningside

I remember falling immediately in love with the Morningside neighborhood. I stumbled across it during one of my drives and quickly found a house there. This ended up being our very first Detroit rental, the First Buy Bungalow.

I saw a lot of potential in Morningside for many reasons, and I particularly liked the section south of E. Warren and north of Mack Avenue.

Today my wife and I own five homes in that pocket of Morningside. I was extremely intentional about buying there when I could, often obsessing with finding a deal. In hindsight this was likely a net negative for our ultimate goal (more on that below).

But I no longer look for deals in Morningside. When I was buying there it just wasn’t very popular or on anyone’s radar. Now, the cat is out of the bag and you hear Morningside talked about in online forums.

And prices reflect that. It’s hard to find a decent home under the $120,000 mark in the neighborhood. And for me, buying at that price point just doesn’t make sense from a cash flow perspective.

The homes that you can buy for under $100,000 need significant rehab and, again, the numbers just don’t make sense for me and my current goals.

Russell Woods

In the second half of 2019 a friend brought me an off-market duplex in Russell Woods. He personally knew the current owner who was occupying the lower unit, going through a divorce, and moving out of state.

I’d never bought a duplex and never checked out Russell Woods before. But when I arrived I was impressed with the area. It’s an interesting pocket tucked in Dexter-Linwood, an area that has a good bit of multi-family housing but is pretty rough in a lot of spots.

This particular street was different and quite strong. A couple streets to the south and the housing stock changed to large historical homes. This area is rich in history and some of the members of the Supremes even lived in the neighborhood.

Beyond being gorgeous, Russell Woods is centrally located on the West side of Detroit. It makes a ton of sense for couples or families that might have one individual working downtown and one working in Dearborn.

I’m thrilled to see Russell Woods now has a website that details the history and brings the community together. This wasn’t around when I was getting started. Amazing!

Today, it’s not uncommon to see nicely renovated homes in Russell Woods going for $250,000 or more.

I paid a whopping $63,000 for my duplex there in 2019 and I had trouble finding anything else for sale. Duplexes just don’t go up for sale often and now, when they do, they are priced over $100,000 and still need extensive work.

But like Morningside, I refused to let that stop me. I ended up buying a duplex across the street from the one we own in 2019 from the Detroit Land Bank Authority (DLBA).

I paid $8,000 for it.

But it was ROUGH.

A hole in the left side of the roof had been there for years and the water damage throughout the duplex was extensive. I should not have purchased this property, but I let my love for the area get in the way of logic.

There’s a very long story here that is still unfolding as I work through the rehab with a close friend that lives in the area.

But the short of it is we’re invested into this duplex for about $160,000 total and nearly complete. Hopefully it will be done and rented by this summer.

How I SHOULD Have Bought Rental Properties in Detroit

I have done a lot of analysis on my Detroit real estate portfolio. And I’ve realized something that now seems obvious in hindsight.

My best performing investment properties are the ones that I stumbled on, assessed the strength of the block, decided the area in general was solid, and bought it purely for those reasons.

The homes where I allowed myself to get emotionally invested or headstrong about buying in a specific area have been good to me, but by no means my strongest performers.

And this is why I always tell people to focus on the block rather than the specific area. Even still, that’s hard for people to do if they aren’t experts in Detroit, but that’s what I’m here to help with.

Do I Have Regrets?

No, I don’t regret really any of my purchases in Detroit.

I have done everything from buying turnkey rentals with tenants to full gut rehabs. That has given me a breadth and depth of experience that most people simply will never have.

It’s hard to say I regret that.

But was my strategy optimal? Absolutely not.

And really, I should have been focusing on being more optimal considering my goal was to build our monthly cash flow as quickly as possible.

But you live and you learn, and it makes me a better steward to help others.

Focus on Strong C-Class Blocks

If I was starting all over again, and this is what I tell people looking to invest in Detroit, I would focus on strong C-Class blocks.

This is where you are going to get the best bang for your buck and optimal balance between cash flow, stability, and potential future appreciation. I believe that’s true in most markets if you’re focused primarily on cash flow.

But I also believe there’s a massive disconnect between the perception of Detroit and what’s actually happening there on the ground. Detroit offers an opportunity today that is simply unmatched anywhere else.

This disconnect results in a market inefficiency you generally don’t see. And I will continue pounding the table on Detroit until it no longer makes sense to do so (read: prices have gone up significantly).