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.
