Farmington Hills Real Estate and Events talk Michigan

 Kevin was right when he wrote "Once fixed up, the houses are usually eligible for the U.S. Department of Housing and Urban Development's Section 8 voucher program, which subsidies rent for struggling families."   BUT there are only so many vouchers.  Only so many people that get them.  So every landlord is going after the same potential pool of renters.

Back in 2000 only 54.9% of Detroit homes were owner occupied.  I can tell you that has dramatically changed in the last 9 years.  Much of Detroit is owned by real estate investors.  Back in 2000 26% of the population is below the poverty level.  That too has grown.  There are more people that can't make rent payments.  Being a Detroit landlord and collecting your rent isn't always easy.

Remember you need to cash flow.  And you will when you buy a home in Detroit for $10,000 - $20,000 hopefully. 

Let's do a scenario.  Let's say property taxes are $350 a month.  Detroit Homeowners Insurance is about a $100 a month.  So your total outlay is going to be about $450 a month if you don't have a mortgage.  Let's say you get $800 a month in Detroit.  Which is an average price. 

$800 a month times 12 months is $9600.  But here are some of the potential issues.

1.  Will the property be rented all the time?  Banks use the 75% rule.  They conservatively figure most rental properties are only rented 75% of the time.  Let's be gutsy and say the house gets rented 91% of the time.  Only missing 1 month rent a year. So that means you bring in $8640 a year and your basic expenses are $5400 a year.  That's $3200 a year.  A 7% return on your money if you are not borrowing any of the money.  That's not bad.

2.  But now you have figure the "OTHER EXPENSES" 

• like unpaid water bills your tenants leave behind
• or cost of maintenance (electrical repairs, plumbing repairs)
• or cost of replacing the furnace, or water heater when they get stolen
• the cost of City bills when your renters leave and leave junk cars or other people dump garbage on the property.
• The cost of fixing up the home each time your tenants move out
• The 7 - 15% management fees for managing the property
• Major repair cost such as replacing the roof or furnace.

But's let's take a few of those costs.  So if you get $8640 a year in rent then you would owe the management company $864 dollars.  Then I would say the average minimum maintenance costs per year would be $1000.  Now after your costs you are only clearing $1376 a year.  $114 a month profit!  3% return on your money without a mortgage. 

Not so good.  Now that is based on renting the house 11 months a year, 10% management costs, and a $1000 a year in maintenance costs.  Now remember this is just an example.  It is very possible to make money being a landlord in the city of Detroit.  Many people have succeeded being landlords in the City and many have failed.  Don't let me tell you can't make money.  It is just easier if you are in state and hands on.

Being out of state or out of country will make it much harder to be a successful Detroit landlord.  Just my opinion. 

Metro Detroit real estate investment information

 Investing in Detroit real estate isn't for beginners. Part I

Investing in Detroit real estate isn't for beginners. Part II