I’ve been buying, renovating, and selling houses in the Motor City for quite some time—long before the rug got pulled out from under our housing market. Of course, distressed property wasn’t exactly in short supply after the housing bubble burst, but potential home buyers were. That made flipping houses in Detroit difficult for many investors. Still, I hung in there. In the last several years, however, investing in Detroit real estate seems to be gaining in popularity. But, does that mean it’s the right time to time to do so? That’s a question that a lot of new investors tend to ask me.

Thinking about how the local real estate investing market has changed, I brought it up the last time I sat down with my colleague Sami Abdallah. He’s been working in Detroit’s real estate industry in some capacity since 2007 but has been successfully investing in property as an independently owned and operated HomeVestors® franchisee, like me, since 2012. So, we’ve both been on the front lines to see Detroit become cool again—as a place to live, work, and invest in. I have to agree with Sami that now is a great time to invest—as long as you’ve got the right real estate lead generation system.

Flipping Detroit Houses in Today’s Real Estate Market

As anyone who’s been able to make a good business out of flipping houses in Detroit can tell you, it takes more than a ton of inventory to succeed. It takes being able to buy, renovate, and sell homes at the right price and, often, at the right time. And, for years—even before the housing crisis—inventory was all Detroit’s real estate market seemed to have going for it. Or, I should say, going against it.

When the “Big Three” automakers cut jobs and, ultimately, left Detroit, they left a lot of families struggling to pay their bills. Unable to make a living, people sought opportunities to make it elsewhere. Homes were abandoned and some neighborhoods started to resemble ghost towns. Without a strong tax base, the city eventually filed for bankruptcy—the largest municipal bankruptcy filing in our country’s history. Infrastructure began to crumble, neighborhoods fell further into ruin, and poverty and crime spiked. Sure, housing inventory was up. But, in the face of Detroit’s fall from glory, buyer interest was not.

The housing crisis didn’t much help matters. By 2007, the entire state was swimming in foreclosure activity and several Detroit neighborhoods ranked among the highest in the nation in foreclosures. At that time, Sami was working as a real estate agent and, when it came to REOs, he had his work cut out for him. But, just five years later, he noticed that the foreclosure inventory had started to shrink. The market seemed to be shifting. So, he figured his place in it should probably shift as well and he started investing. That’s about the time that we met.

When he took a closer look at what was going on with Detroit’s housing market and what might be driving the drop in foreclosure inventory, Sami said it was clear there were several market forces at play. The economy has gotten a long-needed boost with the help of new companies, like the high-end food chain, Whole Foods, and tech companies, like Ambassador, moving in to set up shop and provide good-paying jobs. Even Ford has moved Ford Team Edison—its electric vehicle team—and its self-driving vehicle project to the heart of Corktown. The injection of new industries, as well as the revitalization of old ones, has helped to drop Detroit’s unemployment rate down to 3.7%, according to the Bureau of Labor Statistics. And, higher rates of employment most certainly contribute to homeowners’ abilities to hang on to their houses or buy new ones.

Additionally, government programs have been introduced in recent years to reduce neighborhood blight, improve safety throughout the city, and create a better transportation system. The Detroit Land Bank Authority, for example, has auctioned over 1,700 abandoned, vacant, or decrepit homes since 2014 to investors for rehabilitation or demolition. The Public Lighting Authority has modernized the entire city’s lighting grid. In addition, the privately and publicly-funded QLine, formally known as the M-1 Rail, has served almost ten thousand riders a day since it opened in mid-2017. Sami notes that these transformative projects helped to pave the way for investors to come into the city and participate in its revitalization which, in turn, contributed to Detroit becoming a desirable place to live again.

In fact, the demand for housing in many areas is up and putting a squeeze on overall housing inventory. Neighborhoods like Indian Village, University District, and Rosedale Park are great examples. Affluent people are flocking towards these areas and paying prices up to half a million dollars for houses. Downtown, Midtown, and New Center have also grown in popularity and price. The cost of buying a home has been rising across most of the city. Last fall, Crain’s Detroit Business reported that median home sales prices experienced a 50% year-over-year increase and that by the first quarter of 2018, prices climbed another 6.6%.

The surge in home prices, however, has made it difficult for a good portion of people to buy a home and, as a result, Detroit is still known as the “City of Renters.” This fact has driven some investors to keep investment property as a hold property in addition to buying and selling homes for profit. And, as Sami pointed out, we’ve got historically high rents and a huge pool of potential tenants at the moment. So, if you want to create diversification in your real estate portfolio, Detroit isn’t a bad place to do it. Still, the growing segment of people coming into the city—especially Millennials who want to live here and can afford to do so—that we will see the trend shift to majority homeowners.

But, with housing inventory already low and median home sales prices continuing to rise, a population increase—especially of those who want to, and can, buy property—has the potential to make it harder for new investors to gain an entry point into the market. It could raise the stakes for a lot of seasoned investors too. To make a living as a real estate investor, you’ve got to find investment properties to flip on a regular basis and safeguard your bottom line by not overpaying no matter how fierce the competition is. The best way to do that is by incorporating a lead-finding strategy that motivates sellers of distressed properties to contact you—something both Sami and I have been doing for years.

Today is a Good Day to Buy, Renovate, and Sell Houses in Detroit

As independently owned and operated HomeVestors® franchisees, neither Sami nor I have had to worry that much about the state of inventory in Detroit or whether or not we could find enough deals to support our property investment goals. There are all kinds of reasons that homeowners want, or need, to sell their properties quickly, whether or not they’re in danger of being foreclosed on. And, it’s these distressed homeowners that the HomeVestors®’ “We Buy Ugly Houses®” marketing campaign reaches through television, radio, and print every day. Those leads, then, come to franchisees like me and Sami. In fact, it’s such a successful strategy for finding investment houses that, together, franchisees have bought more than 140,000 homes nationwide since 1996. You can see why we don’t spend too much time worrying; we’re too busy investing.

As Sami has said, when it comes to investing in Detroit, “the sky’s the limit” if you’ve got the work ethic and the leads. To find out how you can gain a foothold in Detroit’s real estate market, contact HomeVestors® today.

Each franchise office is independently owned and operated.