Real estate is an excellent way to diversify your investment portfolio. In our latest post, we will discuss how to know when you’ve found the right investment in Detroit!
When you are first beginning your investment journey, you will likely find many deals you get excited about. But don’t become blinded by the excitement, not every property will be right for you. In order to ensure the property will really be a good fit, there are some key things to take a look at. Here are a few things we look at when purchasing an investment property in Detroit, and we hope they help you too!
The 1% Rule
When buying investment property in Detroit, many investors implore the 1% rule to help make their final decision on a purchase. It is a simple and straightforward way to determine if the property you are buying is going to pay off. The rule states, that the monthly rent for the property should be 1% of what was paid for the home in total. So if you paid $120,000 for the house, and spent $30,000 on renovations, you should be able to rent the house out for $1,500 each month. If the property doesn’t meet this requirement, it might not necessarily be a bad investment, but you shouldn’t put it at the top of your list just yet either.
It’s In A Good Neighborhood
Sure, there is always the diamond in the rough, but when making an investment purchase, your odds of seeing a good return are much higher if the property is in a good neighborhood. They say it is better to have a bad property in a good neighborhood than a good property in a bad neighborhood. No matter how you look at it, even f you get great tenants, if they are living in a bad area, they will eventually want to leave too. Your tenant turnover will typically be much higher than in a good neighborhood.
Highly Rated Schools
It isn’t only families who look at school ratings. Many real estate shoppers will take school rating into account as a sign of a good area. They could also be thinking about down the road, and having a family of their own. Investing near a good school will likely attract better tenants.
Low Crime Rates
Nobody wants to live in a crime-ridden area. Make sure the numbers where you are buying are low. People want to feel safe, especially in their own homes. Check out crime rates in the area to make sure where you want to buy will be a safe place for you and your tenants to be.
There is nothing worse than buying a house, only to find out the one next door is being torn down for a shopping center. You should research all future development and proposed zoning changes. You don’t want to be blindsided when a Starbucks goes in next door and your property value drops.
Average Area Rent
This can be a good gauge to see how in demand the area is. Are there many vacancies in the area? Are rental prices going up compared to the year before? By how much? It is important to know all of these things before buying an investment property in Detroit.