Today I’m analyzing a 3 bedroom Detroit investment property in Redford,MI. Redford is a working-class suburb located west of the city of Detroit. Take a look at my analysis of this property and let me know if you agree. You can also send me an email with additional questions or to learn more about this property.
Detroit Investment Property Overview – Redford,MI
- Market: Metro Detroit Area
- Listing Price: $99,900
- Rehab Estimate: $5,000
- Address: Leverne, Redford, MI 48239
- Beds / Baths / Sq Ft: 3 beds / 2 bath / 1,102 sq ft
- Property Description: Opportunity awaits with this solid brick ranch that is situated just a skip and a jump from Thurston High School in the heavily sought after Ridgemont Homes sub. 3 bedrooms upstairs with 1.5 bathrooms and a full finished basement with a rec area and a den or 4th bedroom. Large spacious lot with a 2 car garage. Ceiling fans in all the rooms. Hardwood underneath the carpeting and much more.
Neighborhood Grade: C
- Median Income: $50,113
- Poverty Rate: 14%
- Unemployment Rate: 15%
- % with Bachelor’s Degree: 19%
- % of Renters: 18%
The zip code 48239 is in-line with the average for the metro area on key economic factors and the median annual income is higher than average at $50k.
Rental Price Expectations: $1,050/mo
The vast majority of rental properties in this area are 3 bedrooms and typically range in size from 1,100-1,250 sq feet. These homes generally rent for $950-1,200 per month with a median of $1,100. This investment property offers average square footage for the area, we have assumed rent of $1,050 per month.
$1,050/mo is very affordable when compared to the area’s median income which is over 47.7x the monthly rent. There should be a large group of area residents who can comfortably afford the proposed price.
Annual Expense Expectations: $7,136 (57% of gross rent)
- Property Taxes: $1,973
- Insurance: $1,050
- Property Management: $1,838 (assumes 1.75x monthly rent)
- Vacancy: $700
- Maintenance: $1050
- Other: $525
The expenses for this property are generally in-line with industry standards with the exception of property taxes, which are below the typical 1.9x rent. Since this is a C-level neighborhood I have a assumed one month of vacancy every 18 months and 0.5 month of cushion for unexpected expenses.
Property management is set at ~1.75 months rent. This factors in regular monthly management fees along with various other new tenant and lease renewal fees that companies may charge.
|At Listing Price
||At Recommended Price
I have analyzed this Redford investment property assuming a financed purchase. With a neighborhood grade of C, I would normally target a minimum annual return of 12% with an additional 3% margin of safety. I think 2% annual appreciation of ~$2,100 is a reasonable expectation. I would recommend an offer price of $90k.
Note that this property will also benefit significantly from deducting annual depreciation of more than $3,428/yr. That should make the annual income tax-free.