Why is Detroit a great choice for real estate investing in 2024?

Blog March 2024

Is Detroit a good place to invest in real estate? Given the history of the location, many novice investors may be hesitant when it comes to Detroit real estate. But don’t let the past deter you! Having attracted a few impressive FDI projects in recent years, the city is being revitalized today. The budding population and cultural growth of the city are making Detroit real estate investing a wise choice for investors.

Of course, the homebuying market is not at the level that we see in areas like New York, but it’s constantly growing due to the influx of population. And while the prices for single-family homes in locations like New York are already incredibly high, the prices in Detroit are not. As of December 2022, the average housing price in Detroit was $80,000, which is significantly less than the prices in the more popular areas.

And with the Detroit real estate market offering such low prices of entry, investors can acquire distressed properties for even less, renovate them, and sell them to make a return! Detroit real estate investing may have been risky in the past, but today – a positive outcome is incredibly easy to achieve.

Why is Detroit the best location for investors?

There are numerous reasons why Detroit real estate investing is an ideal choice in 2024. But the most important ones are:

  • Growth of the population
  • Rising business sector
  • Comparatively low prices
  • Tax incentives for investing

We already discussed the first few reasons and how they contribute to investment: population and business growth encourage homebuying activity while the low prices increase the investors’ profit margins. But what about tax incentives? What sets Detroit real estate investing apart from other locations in terms of tax benefits? The short answer is depreciation!

Depreciation is the decrease in the value of a property over time due to wear and tear. It can help you achieve significant deductions from your taxable income, increasing your total returns. However, keep in mind that the value of the land itself cannot be depreciated. But the structure on top of it absolutely can! Moreover, Detroit real estate investing is even better if you are categorized as a real estate professional by the IRS, which means you spend 750 hours every year on your Detroit investment properties. In this case, your tax deduction opportunities are almost endless when it comes to income tax.

For these reasons, real estate investing in Detroit is an ideal choice in 2024 due to the growth the city is experiencing combined with the numerous tax benefits of investing in the area.

How to invest in Detroit?

Now that you know all the benefits of real estate investing in Detroit, you might be wondering how to invest in Detroit real estate properly. From our years of experience in the real estate business, we have surmised not only that Detroit is a wise choice in the current climate, but also how we can invest in Detroit real estate in order to achieve maximum results. So, what is the optimal investment method for Detroit real estate?

Real estate investing in Detroit is optimal for investing in residential properties, both single and multi-families. Single-family assets can be an effective way to also utilize the fix-and-flip strategy. This is also a short-term strategy , which means it will yield results much faster. Detroit has many distressed properties that can be refurbished and sold in a relatively short span of time, which is a major plus for anyone looking to make quick returns. Investing in distressed real estate in Detroit can yield results within a year or even less if you apply the optimal strategy.

Tax benefits

Multi-families, on the other hand, are perfect for rental projects. Detroit as a location has had a solid rental demand for a while and this trend for rental demand is not going away anytime soon. So, investing in rental real estate in Detroit can provide a significant and steady flow of income. You do need to keep in mind that rental real estate investments are a long-term strategy, so choose whichever suits your needs best. Rental real estate is also an inflation hedge as it gives you a steady source of income even in a recession and it doesn’t take as much of a hit as other types of investment do.

So, if you find yourself wondering which path to take when investing in Detroit – your needs and goals will determine the answer. If you need fast returns, opt for single-family residentials. If what you need is an inflation hedge or long-term steady income, go for rental properties.

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FAQ

Any questions

What is affordable housing?

Affordable housing refers to housing units designed to be accessible to low- and moderate-income families, typically costing no more than 30% of their gross income.

The definition of “affordable” typically varies depending on location and income levels but generally encompasses rent or purchase prices that don’t exceed a certain percentage of a household’s income.

What is Section 8 housing in the US?

Section 8 is a federal rental assistance program in the US run by the Department of Housing and Urban Development (HUD) that helps low-income families and individuals afford decent and safe housing in the private market. 

The program provides eligible households housing choice vouchers that cover a portion of the rent directly to the landlord, with the tenant paying the remaining amount. Property owners who participate in Section 8 agree to rent units to qualified individuals and families at a rate approved by the program.

How can I invest in Section 8 housing?

There are several ways to invest in Section 8 housing:

  1. Direct ownership: You can purchase a property approved for Section 8 and rent it to a qualified tenant using a voucher and receive rent subsidized by the government.
  2. Real estate investment trusts (REITs): REITs pool investor funds to purchase and manage income-producing real estate, including affordable housing.
  3. Limited partnerships: Limited Liability Companies (LLCs) offer another option for investors to pool resources and invest in affordable housing projects.
What is the difference between multi-family and single-family properties?

Single-family property: This refers to a standalone house or unit designed for and rented to one household.

Multi-family property: This refers to a property containing multiple dwelling units, such as a duplex, apartment building, or condominium complex. Multi-family properties offer the potential for higher rental income but typically require different management strategies and considerations compared to single-family homes.

What is the difference between buying and flipping houses?

Buying and holding: This involves purchasing a property to keep it as a long-term investment, generating rental income and potentially appreciating in value over time.

Flipping: This involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This is a more hands-on strategy with higher risks and rewards compared to buying and holding.

How much do I need to start investing in affordable housing real estate?

The minimum investment required varies depending on the chosen method. Direct ownership typically requires a higher initial investment for the property purchase, and renovation up to Section 8 standards, while other options like REITs might have lower minimum investment amounts.

Do I need to be a US citizen to invest and own the property?

No, US citizenship is not a mandatory requirement for investing in affordable housing in the US. However, specific restrictions or regulations might apply depending on the investment method and your residency status.

It’s crucial to consult with a professional to understand the legal and tax implications for non-citizens.

Do I need to pay US tax as an overseas investor?

This depends on the type of investment, your residency status, and any applicable tax treaties between your home country and the US.

Consulting with a tax professional specializing in international investments is highly recommended.