Detroit Real Estate Investment Mistakes to Avoid: Not Looking at the State of Neighboring Properties

Detroit is one of the hottest real estate markets in the country right now, and new investors are flocking to the area not just for the deals, but for the chance to be a part of a great city’s resurgence. But Detroit isn’t like other markets, and new investors need to ask some questions here that may not be necessary in other cities.

In our conversations with hundreds of investors, we’ve identified seven of the most common Detroit mistakes. In this series, we’ll be taking you through each one of them. Today: not looking at the state of neighboring properties.

Here’s an example of the kind of email I get all the time:

Hey Max! I live in Caledonia, and I’m looking at investing in Detroit. I have my sights set on an awesome property at 100 Magic Lane. It’s a single-family home that looks beautiful (see the picture below) and was just rehabbed. Plus, 100 Magic Lane is just a few miles from anchor institutions like the University of Detroit. Sounds like a great investment, right?

Pop quiz: Can you spot what’s wrong with this email?

Okay, that was a trick question: there are actually two things wrong with that email. The first is that Caledonia isn’t a real place—it’s a fictional country from the hit tv show Scandal.

But the second (and more important) problem is that this hypothetical investor has completely failed to consider the state of the neighboring properties.

100 Magic Lane may be a nice house, and it may be in a good neighborhood overall, but if its next-door or across-the-street neighbors are in bad shape, it could be extremely difficult to rent.

In other words, if 102 Magic Lane looks like this…

…then it doesn’t really matter how great 100 Magic Lane is: it’s still a terrible investment.

The best way to analyze a neighborhood is to go there yourself and take a look, or, if you can’t, to send a trusted friend to take a look for you. But if the property you’re looking at is in Detroit, there’s a great resource called Motor City Mapping that you can use to get some insight into this stuff from afar. (Check out our blog post about using Motor City Mapping here.)

So don’t get stuck with a bum property: make sure to take a look at the state of the whole block before making a purchase.

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