When it comes to real estate investment, analyzing and timing your local market is necessary. BaltimoRealEstate decided to post a series of comparisons between Baltimore and other cities that might seem attractive for investors. In this article, we compare real estate investments in Baltimore and Detroit.

As we explained in our article Why we chose to invest in Baltimore,

• Baltimore is ideally located between Washington D.C. and Philadelphia, encouraging a lot of families to buy properties in Baltimore.
• The future growth of the Baltimore job market is estimated at +36.3%, promising the arrival of many workers looking for new jobs as well as new houses for their families
• The city has a significant number of distressed (thus under-valued) properties.
• The median home value continues to rise, making Baltimore the ideal city to invest in real estate, as profits are almost guaranteed.

Detroit’s economy suffered several near-fatal blows leading the City to file for the largest municipal bankruptcy filing in U.S. history. Thousands of Detroit residents left the cities because of jobs cuts and manufacturing facilities relocations outside of Detroit. As a result, the number of Detroit families living in poverty rose, crime increased, and homes were abandoned.

With the 2007 housing crisis, 4 of the top ten U.S. zip codes with the highest number of foreclosures were in Detroit. In 2011, some of the city’s most distressed homes were even sold for $100. In 2014, the Detroit Land Bank Authority, sold vacant, abandoned, and foreclosed homes for rehabilitation or demolition—for prices starting at $1,000. However, most of those houses were in such a bad condition that it is too expensive to renovate them, so they had to be demolished. Others were had liens attached or back taxes due and were abandoned a second time.  Detroit homes are indeed often loaded with debts that must be paid before anything can be done with them, and not all sellers are particularly inclined to be forthright about what their houses come with. Some neighborhoods looked like ghost towns. Finding good investment opportunities was therefore a problem.

Baltimore also suffered from the 2007 housing crisis. Some properties had to be abandoned too but never reached the Detroit number of houses that were in such a bad condition that they could not even be renovated. Therefore, finding great deals that yield great returns is easier in Baltimore. Distressed properties in Baltimore are easily renovated before being sold to a much higher price.

Detroit housing market’s slowly recovered and by mid-2017, median home sales prices had jumped 50 percent year-over-year. Prices continued to rise throughout 2018. This means that there are now, by the end of 2019, less chance of finding deals that can yield great returns.

Detroit's recovery lured investors around the world expecting 10% to 15% annual returns renting out the houses to Detroit residents. Several foreign investors started having problems right after they paid for their property sale price and renovations: costly repairs to bring the supposedly perfect houses up to code and  high property taxes. In recent years, investors from as far away as Australia are reported to have lost money trying to buy up distressed Detroit properties and turn them around.

The city of Detroit recently declared it is now enforcing its long time ignored rental registration laws, requiring all landlords to renovate their properties up to code. For most of these homes, the cost of renovating up to code isn’t worth it.

Finally, Detroit is not as ideally located as Baltimore and does not forecast a great future growth. More families are moving in Baltimore and trying to buy properties for their family.

For all those reasons, our team chose to invest Baltimore over Detroit.

Sources :

• https://detroit.curbed.com/2019/11/8/20955085/detroit-rental-registry-ordinance-changes-renter-landlord
• https://www.freep.com/story/money/business/john-gallagher/2017/04/06/detroit-investment-belgium/99823810/
• https://en.wikipedia.org/wiki/Detroit
• https://dailycaller.com/2012/11/01/detroit-homes-still-selling-for-1/