What it’s really like to invest in Detroit

Detroit by the numbers:

Average home price: $76,340 (down 1.4% YoY)
Homes that sell over list price: 28.8%
Homes that sell under list price: 54.1%
Average rent: $1,200

Lay of the land: After filing for bankruptcy in 2013, Motor City was offloading vacant properties for less cash than a used car. A few intrepid investors swooped in and helped turn this run-down metropolis into what the WSJ calls “America’s most unlikely real-estate boomtown.”

“Detroit can be a great place to make returns that beat the stock market,” says Sergio Aguinaga, a software engineer who grew up there and currently owns five rental homes. But deals are much tougher to find today. “Downtown Detroit is expensive now,” Aguinaga adds. It’s also still hit or miss, riddled with “squatters and theft of appliances and plumbing.”

To unearth true bargains, Aguinaga shops further out, reasoning, “People are looking to stabilize in the suburbs,” which reduces tenant turnover. In Taylor, he recently purchased a three-bedroom, one-bath house for $80,000. After renovations, he rents it out for $1,700 per month.

His advice: “Stay away from areas where houses are worth less than $100,000 and invest in the better neighborhoods such as Bagley, Russell Woods, Southwest, Morningside, and Grandmont,” Aguinaga says. “Check Investorlift or local Facebook groups for posts from wholesalers. Many of the ‘deals’ are not actually deals, so always run your numbers.”

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