I hear ya. however, would it be safe to say that even though Michigan’s economy is in bad shape, would past homeowners be driven into the rental market because of foreclosures on their properties, bad credit, etc…?
You are correct in your trend spotting; as rates increase and affordability is still out of reach, the resulting see saw effect is that the rental market blooms (commercial finance applications rose 24% last month nationwide as a result).
Another plausible alternative to a buy and hold (if you think the floor is going to drop in MI) is to buy and condo convert.
See that’s the whole purpose of the quesiton. Michigan’s housing market is being destroyed by the auto industry and other factors, thus causing property values to depreciate.
With that being said, please critique my reasoning to buy in Detroit.
First, Detroit’s economy depends largely on the auto industry which is undergowing a complete restructure right now. After this restructuring I beleive Detroit will bounce back because it can’t get much worse than it is right now and in the very near future.
Second, I believe that with all the foreclusures, climbing interest rates, now is a good time to purchase rental buildings due to the fact alot of people can’t afford to purchase homes or find financing.
Third, since the real estate market is cyclical, I’m sure MI will bounce back and when it does, convert to condos.
Would you still see value in an apartment building with the characteristics mentioned in my first post and above?
If you let me know the specific numbers (purchase price, appraised value, NOI, current rent roll and current market rents for similar properties), I crunch the numbers and give you my opinion on the same.
On the surface, it appears to be a good deal; property is fully tenanted at below market rents (you could raise rents to improve cash flow), it appears to cash flow and the demand for rentals in your area seems to support the investment.