Why I Chose Detroit.
About Me
I didn’t grow up loving Detroit. In fact, I was born in Buckeye territory and raised with an inherent love for the Browns and Indians [Guardians] through their good times and bad. I cheered with the masses when Lebron James was drafted in 2003 by the Cavaliers and went on to light the sports world on fire - making Cleveland, Ohio the place to be for basketball fans and more importantly, for me.
Cleveland had my heart. But in 2006, everything changed when I moved to Ann Arbor to play baseball for the University of Michigan.
As I began to explore my new home, I found that Detroit didn’t exactly hold up to its reputation. It was supposed to be littered with crime, poverty, corrupt politicians, held back by bankruptcy, and more... while it wasn’t exactly perfect (nowhere is), what I saw was different.
What I found in Detroit.
I discovered a booming renaissance. I met people who were investing every bit of their time, energy, and money in Detroit’s resurgence. People who lived and breathed Detroit and would do whatever it took just to see the city grow.
New businesses were opening in buildings that had been vacant for decades. Large organizations were moving their headquarters downtown. Investors were pledging billions towards revitalization projects throughout Detroit.
When my time at the University of Michigan was over, I decided to make the move to Michigan permanent and stick with this new city that had slowly won my heart.
I watched as Dan Gilbert’s real estate arm, Bedrock, invested and committed more than $5.6 billion to acquiring and developing 100+ properties in Detroit - on top of moving 17,500 team members to their new headquarters on Woodward Avenue in the heart of the city.
But they weren’t alone! Compuware moved their HQ from the suburbs to One Campus Martius. Amazon, Google, Microsoft, Ally, Lear (and more!) opened offices in Detroit’s Central Business District. All of the major sports teams relocated to arenas downtown.
The heart was there, the movement was happening, people were filling the sidewalks... but what about the numbers? Was this adjustment to parking in structures instead of attached lots and dealing with 100 year old properties really worth it?
Absolutely. And that’s why I was sold on not only living in, but INVESTING in Detroit.
Detroit is Booming.
Chew on this...
- Detroit is one of the 15 largest metropolitan areas in the United States.
- Business Insider recently recognized Detroit as a ‘Top 25 Boomstown.’
- Employees ages 25 and lower increased by 38% in downtown Detroit from 2010 to 2015, with approximately 50% of the downtown area’s residential population being between 18 and 39 years old.
- Companies are following the millennials and opening offices downtown in the technology, healthcare, and professional service sectors.
- Approximately $13 billion has been invested in Detroit businesses, real estate, and infrastructure since 2006.
- Startups are learning how to capitalize on growth and cater their services to Detroit’s Fortune 500 companies.
- Downtown Detroit organizations employ over 130,000 employees.
- Pipeline projects planned for the coming years exceed $12 billion and include infrastructure improvements, new factories, modernizing existing properties, and expanding educational opportunities.
- An estimated 72,600 permanent jobs are in the process of being created.
Why investing in Detroit works.
So how does all of this translate to real estate investments?
As businesses of all sizes in all sectors continue to expand their footprint in the city of Detroit, the draw to live downtown grows and the demand for housing increases. Even with the new multi-family housing developments currently under construction, quality housing options remain underserved.
On top of a limited housing supply, construction material prices are soaring - meaning that even once they are complete and ready for folks to move in, newly built housing options will demand higher rental rates for investors to recoup their costs.
How do you capitalize on this?
This is where the opportunity lies and how Dynasty Investment Partners fills the gap; we specialize in purchasing existing multi-family properties where value can be added through implementing more efficient operations and investing in renovations that improve tenant retention. This type of property provides competitive and affordable rental rates that are appealing to the masses, keeping properties full.
Even with strategic rental rate increases over time, rental rates will still remain well below that of new development housing options - making this type of opportunity in Detroit consistently appealing to renters and wildly attractive to investors.
Our work in Detroit.
Dynasty Investment Partner’s first project in Detroit was a 62-unit value-add apartment community located on the border of Detroit and Grosse Pointe Park, in the area known as Jefferson Chalmers and the East Jefferson Corridor. These neighborhoods are master planned for redevelopment, with the goal of pushing Detroit’s revitalization efforts to the east.
This property was built in the 1920s and required significant renovations along with value-add efforts due to the building’s age and previously deferred maintenance. In our due diligence, we also found other areas ripe for improvement.
The research and planning for this type of investment are significant and not for the faint of heart, but two main selling points made this a deal we could not resist: First, we bought it at a good price. Second, the value of the property will continue to increase based on its location.
This is a killer combination that we will consistently look for in future opportunities. We project that over a 4 year investment hold, this investment should yield average cash on cash returns around 7%, projected IRR of19%, and an anticipated 1.9x equity multiple.
We followed this acquisition with an $11.1M purchase of a three-building portfolio comprised of 72 units and 9,000 square feet of ground floor retail located in the Midtown neighborhood, which is arguably the most desirable area of Detroit. The location, in our opinion, simply cannot be beat.
This investment opportunity presents value-add potential in a different way than the opportunity mentioned previously. The main building is newer construction built in 2012 ,and while the second and third buildings were built in the early 1900s, they were fully renovated in 2016. The opportunity here is that the buildings had in-place rents that were significantly below market and the operations were poor.
By implementing a business plan that injects professional management and aggressive leasing efforts, we project that this investment will produce greater than a 20% IRR and double our investors’ money.
Plans for our future in Detroit.
Dynasty Investment Partners is dedicated to identifying the right opportunities for ourselves and our investors. We look for properties with low vacancy rates and the opportunity to raise rental rates. With real estate prices in Detroit up 14% on a year-over-year basis and rising multi-family rents up 10% over the last year, we know that Detroit is exactly where we need to be in order to see assets significantly increase in value over a short period of time.
Right now, we are able to acquire properties at better prices than other larger markets around the country and even with capital injections being required to improve their overall value - there is plenty of room for future growth and a healthy margin for the bottom line.
When should I start investing?
The time to invest in Detroit is now. Be part of the revitalization efforts of one of the Midwest’s largest cities and get in while prices are low and properties are available.
Our Detroit-based company is aggressively looking to capitalize on the real estate investment opportunities in our own backyard and we’d love to have you join us.
For more information about how you can get involved and start investing with us in Detroit today, please visit the Opportunities page on our website, call us at 313.312.8466 or email us at info@investdynasty.com.
