Michigan has a reputation as cheap Midwest cash flow, and that reputation is wrong at both ends of the state. Here is what the numbers actually do in Detroit, the suburbs and Grand Rapids, and the tax line that catches almost every out-of-state buyer.
Start here, because it is the most expensive thing to learn late.
Michigan taxes owner-occupied homes and rentals differently. A house lived in by its owner carries the homestead exemption; the moment it becomes a rental it is assessed at the non-homestead millage, which is materially higher. The seller's tax bill, the one printed on the listing, is very often a homestead bill. Yours will not be.
Put a number on it. A three-bedroom ranch in Wyoming or Kentwood at $345,000 carries roughly $4,761 a year at the non-homestead millage — about $397 a month, sitting inside the DSCR payment before insurance. An investor who modelled that property off the seller's homestead figure is short by a wide margin at underwriting, not at closing.
Detroit is harsher still. The effective rate there runs around 2.8 percent, the highest of any major Michigan city. On a $75,000 property that is roughly $2,100 a year — on a house renting for $1,100 to $1,300.
Whatever else you take from this page: get the non-homestead figure for the specific parcel before you write the offer. Michigan has a working assessment appeal process, and it is one of the few operating costs you can argue down, but you argue it down from the correct starting number.
The state gets described as affordable Midwest cash flow. That is half true, and the half that is false costs people money.
Detroit looks better than it is. Median home prices of $85,000 to $105,000 against rents of $1,100 to $1,300 produce headline cap rates around 11 percent, among the highest in the country. Then the 2.8 percent tax rate takes its cut, and so does insurance, and so does the maintenance profile of housing stock that has been standing a long time. The gross figure is real. It is not what you keep.
Grand Rapids looks cheaper than it is. Median around $325,000 to $345,000 against rents near $1,640 gives an estimated cap rate of about 3.23 percent — below the Michigan average of 3.87 and below the national 3.81. That is not a cash flow market at median prices, whatever the state's reputation says. It is a value-add and appreciation market, and it should be underwritten as one.
So "investing in Michigan" describes a spread from a $75,000 house at an 11 percent gross yield to a $625,000 house at 5 percent. One state, one search term, two completely different businesses.
Entry as low as $75,000 in neighbourhoods like Chadsey Condon and Warrendale, with citywide medians of $85,000 to $105,000 and rents of $1,100 to $1,300. Corktown has drawn particular investor attention since Ford's Michigan Central Station investment.
Two cautions. First, Detroit requires rental registration and periodic inspections through the Buildings, Safety Engineering and Environmental Department, so a property cannot quietly operate unregistered. Second, and more important, the appreciation data genuinely conflicts: Redfin has citywide prices up about 2.1 percent year over year while Zillow has average values down about 3.9 percent over a comparable window. When two reputable sources disagree by six points, the honest conclusion is that citywide averages are not telling you anything useful about your block. Pull sourced comparables for the specific street before you underwrite an exit.
Royal Oak, Ferndale, Berkley and Birmingham run $295,000 to $625,000 with rents of $1,850 to $2,800 and gross yields of 5 to 7.5 percent. Thinner than core Detroit, but paired with strong schools, lower tenant turnover, and an exit that includes retail homebuyers rather than only other investors. For a first Michigan deal financed on DSCR, this tier is the most forgiving.
Median sale prices around $325,000, up roughly 3 percent, at $208 per square foot, with homes taking about 55 days to sell against a national median of 42. Vacancy is 5.2 percent and the metro's median household income is $52,400, which is the ceiling on what the broad rental market can pay. Insurance is reasonable by Michigan standards at $1,100 to $1,500 a year — noticeably better than Detroit.
The tenant pools do not overlap, and treating them as interchangeable is the local mistake: a ranch in Wyoming or Kentwood will not rent for what a Heritage Hill carriage house rents for, and it should not be underwritten as though it will.
Anchored by the University of Michigan and its 53,488 students. Reliable occupancy on a fixed academic calendar, at prices that reflect everyone already knowing it.
Workable, and better than Maryland without matching Texas. Seven-day demand for possession on nonpayment. Eviction through the district courts — in Detroit that is the 36th District Court, and four to six weeks from filing to judgment is a realistic expectation. No rent control anywhere in the state. Security deposits capped at one and a half months' rent.
Detroit's rental registration and inspection requirement is the compliance item to budget for, both in money and in calendar time before a unit can legally produce income.
Fix and flip and bridge from 10.99 percent with 1.99 points, up to 100 percent of cost and 70 percent of value, minimum loan $50,000, terms to twelve months, minimum credit score 600. Ground-up construction from 8.5 percent on non-owner-occupied single family, $100,000 to $3 million. DSCR rental loans from 5.99 percent, $75,000 to $2 million, up to 80 percent of value, no minimum credit score, cross-collateral allowed across two or more properties. Commercial to $5 million at up to 75 percent of value, covering multi-family, mixed use, self storage, office, retail and industrial.
All non-owner-occupied, business purpose, held in an entity. There is also a rate match: a fully executed letter of intent from a competing lender, no contingencies, meeting the same underwriting, and the interest rate gets matched. Rate only, and not a commitment to fund.
The minimums bind hard in Detroit. With entry-level stock at $75,000 to $105,000, a single house frequently falls under the $50,000 flip floor or the $75,000 DSCR floor once you account for what is actually being lent against it. The cross-collateral provision is the usual route through: two or three houses financed together clear a minimum that none of them clears alone. If you are building a Detroit portfolio, plan the financing in groups rather than one door at a time.
Taxes taken from the seller's homestead bill. The signature Michigan error. Your rate is the non-homestead rate and the gap is hundreds a month.
A Detroit ARV built on a citywide average. With two major data providers six points apart on direction, block-level comparables are the only defensible basis for an exit price.
An unregistered Detroit rental. Registration and inspection are required, and the calendar time belongs in the loan term.
Grand Rapids underwritten as a cash flow market. At a 3.23 percent cap on median stock, the deal has to come from value-add. If the numbers only work on projected appreciation, that is a different risk than the one you think you are taking.
A primary residence. We cannot lend on a home you intend to live in. Federal law, not preference.
Yes, statewide — Detroit and the Wayne County suburbs, Grand Rapids and West Michigan, Ann Arbor, Lansing, Flint and the smaller markets.
Yes, and it is usually the right structure. DSCR allows cross-collateral across two or more properties, which is how most Detroit portfolio buyers clear the per-loan minimum on low-basis stock.
Gross, yes. After a 2.8 percent effective tax rate, insurance, vacancy and maintenance on older housing, the net is a different and much more sober number. Underwrite the net and the deal still often works — just not at eleven.
Days rather than the forty-five to sixty a bank takes. On Detroit stock that will not pass a conventional appraisal until after the rehab, hard money is frequently the only route in.
Answer these and we will tell you whether it is fundable, on what terms, and how fast it could close. Investment property only — we do not lend on a home you will live in.
We will run the numbers and come back to you. If it is time-sensitive, call 903-636-7511.
Dominion Hard Money arranges private and asset-based real estate financing for business purposes only. Not a commitment to lend. All loans subject to underwriting, property review, and approval. Terms vary by property, borrower experience, and exit strategy.
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