When searching for where to invest in real estate, many will consider the Midwest housing market for its affordability and profitability. One of the best states to invest in real estate in the Midwest is non-other than Michigan. Although the state of Michigan was hit pretty hard by the economic recession back in 2008, it has been staging a major comeback. The state’s focus on repairing its reputation, coupled with a new wave of real estate investors, means there’s nowhere to go but up for investment opportunities in The Wolverine State! But which cities have the highest return on investment potential in the Michigan housing market 2020?
Related: The 5 Hottest Cities in the Midwest Real Estate Market
In this blog, we break down why the housing market in Michigan is a great place for buying rental properties. We’ll discuss the Michigan real estate market trends and forecast for 2020 as well as list the 5 best cities for you to consider investing in according to Mashvisor’s data and predictive analytics. Let’s get started.
Michigan Housing Market is Affordable
Just like many states in the Midwest, the first thing that attracts investors to the Michigan housing market is its affordability. According to Mashvisor’s real estate data, the median of currently listed Michigan homes for sale is $302,420 ($162 price per square foot). This is lower than the national median of $311,254 according to Redfin. Michigan is also one of the top ten states with the lowest cost of living and one of the cheapest states to buy a house. This attracts people to the state and, in turn, is increasing the demand for housing.
With home prices lower than the national median, Michigan is a great option for both experienced and beginner real estate investors due to its affordability and strong rental market. Furthermore, experts forecast that while the housing market in Michigan will slow in the coming months due to the effects of the coronavirus pandemic, they’re positive that it’ll stabilize and grow at a more normal pace. Based on these Michigan housing market predictions, now is a good time to buy a Michigan investment property while prices are still affordable and before they start growing.
Read more about The Impact of the Coronavirus on the Michigan Housing Market
Michigan State Economic Overview
An important indicator of whether any real estate market is a good location for investors is its economic performance. As mentioned earlier, Michigan’s economy was hit back in 2008. However, the state is now focused on revitalizing and recovering its strength as an economic heavyweight and socio-cultural hub in the US. Michigan’s economic base consists mainly of manufacturing, agricultural production, and tourism. This diverse economy kept Michigan’s fortunes afloat and will keep doing so as the state undergoes a resurgence in 2020.
According to the WalletHub state economy ranking, Michigan is currently listed among the top 13 in terms of economic output. Moreover, it’s also ranked 4th in terms of innovation potential. This proves that the state leaders’ effort to boost its economy and GDP is working. Still, it’s important for Michigan real estate investors to keep in mind that the local economy, social life, and quality of living vary in different parts of the state. For example, the Detroit housing market is prime for investors since new jobs and steady wages are driving real estate demand.
Michigan Rental Properties are Profitable
Another reason to invest in Michigan rental properties is the fact that it’s a strong rental market. What makes Michigan a strong rental market? Well, Michigan is home to nearly 10 million people – 3.8 million of which live in the Detroit metro area alone. However, fewer entry-level or starter homes are being built across the State of Michigan. Combined with the lack of homes for sale on the market overall, this makes it difficult for young and first-time buyers to find homes that they can afford. Moreover, Michigan real estate, like most places in the US, has been a seller’s market in the past few years.
But while the Michigan housing market is notably inexpensive, the moderate price to rent ratio of 18 indicates that home prices are rather high compared to rental prices, so it’s probably better for residents to rent instead of buying a house. This could be one of the reasons for the decline in Michigan home sales volumes in 2020. In turn, this tells real estate investors that there’s a large pool of renters in Michigan. Because the demand for rentals is strong, investing in rentals is also profitable. Mashvisor’s data show that the average rental income you can expect from traditional, long-term rentals in Michigan is $1,369.
Keep in mind this is just the state average. With the best real estate investment tools, you can find investment opportunities that will generate higher rental income and return on investment. You can start analyzing Michigan rental properties for sale right now using Mashvisor!
Best Cities for Investing in the Michigan Housing Market
Now that we covered why the Michigan housing market makes for a good investment location in 2002, let’s explore the best cities here for owning a rental property. Below is a list of the 5 cities in Michigan where traditional, long-term rentals have the highest potential for profits in terms of cash on cash return according to our data. The metrics below are estimated using our Investment Property Calculator – the ultimate tool for analyzing investment opportunities anywhere in the US housing market. To learn more about how we’ll help you make faster and smarter real estate investment decisions, click here.
#1 Redford, Wayne County
- Median Property Price: $123,208
- Price Per Square Foot: $105
- Price to Rent Ratio: 10
- Average Days on Market: 79
- Monthly Rental Income: $1,059
- Cash on Cash Return: 2.8%
#2 Livonia, Wayne County
- Median Property Price: $244,042
- Price Per Square Foot: $159
- Price to Rent Ratio: 13
- Average Days on Market: 47
- Monthly Rental Income: $1,544
- Cash on Cash Return: 2.4%
#3 Detroit, Wayne County
- Median Property Price: $168,392
- Price Per Square Foot: $107
- Price to Rent Ratio: 14
- Average Days on Market: 114
- Monthly Rental Income: $978
- Cash on Cash Return: 2%
Related: What’s the Deal with the Detroit Housing Market in 2020?
#4 Auburn Hills, Oakland County
- Median Property Price: $251,976
- Price Per Square Foot: $161
- Price to Rent Ratio: 13
- Average Days on Market: 103
- Monthly Rental Income: $1,559
- Cash on Cash Return: 2%
#5 Ypsilanti, Washtenaw County
- Median Property Price: $255,188
- Price Per Square Foot: $154
- Price to Rent Ratio: 15
- Average Days on Market: 104
- Monthly Rental Income: $1,367
- Cash on Cash Return: 2%
The Bottom Line
As you can see from the Michigan housing market trends and forecast, the state is poised to take off as development projects and initiatives push for redevelopment and revitalization. You can be a part of this growth by putting your investment dollars where they’re bound to generate a good ROI. To make sure you find such opportunities, start browsing available homes for sale in your city and neighborhood of choice at Mashvisor. So, what are you waiting for? Click here to start your 7-day free trial with Mashvisor now to start and end your search in a matter of minutes.