Quality locations with amenities buyers/renters covet is always the way to go.

Metro Detroit is a mixed bag.

Regarding single family homes, I’m in the first time homebuyer type of home niche and in the best school districts. My vacancy is zero, rents are rising 2-3%, and I can fill my vacancies in a couple of weeks. I have colleagues however that bought in the bottom school districts because the prices were so cheap (SUCH a deal!) that can’t rent them at any price.

Regarding apartments, I am having a hard time keeping my 20 unit building 100% occupied. Again, I’m not at the bottom in terms of area or quality, so there is always someone cheaper in a worse area. And with the transient nature of apartment renters and the constant stream of job losses, it seems that someone is always leaving to for less expensive rent.

The thing that the crowd is still missing here is the fact that this is the first time in history that the houses that I’m buying have sold for prices at which they would cash flow as rentals. So much so that I haven’t had a single competing offer on any of the last 8 houses that I bought. Everyone is focusing on the crap houses in Detroit and Hazel Park that they can buy for under $10,000. The crowd hasn’t realized that cheap houses in marginal or bad areas make the worst rentals. Their loss.

The take-away for metro Detroit in terms of rental property is this: buy the best houses in the best school districts that will cash flow. Your business will be on autopilot.

Rent is mostly flat (around .75 – .9/sf/month, new construction $1 – $1.10 / month for apartments). Vacancy is 5-6% maybe. SFR vacancy is still around 3%.

Softness in oil services has brought prices down 10-20% from peak in 07, especially in the high end (over $300K).

Lots of sales / new construction below $200K, smaller houses, Rural Development no money down loans.

Decent inventory in the high end, not much inventory in the low end for investors, although there is the occasional FHA / FNMA repo.

I have a house similar to the one described above in Tempe, located in a prime area of Lafayette. 1979sf, 3/2, built in 1965 or so. The house would sell for $180-190K today down from 200K in 07. Just re-rented it for $1500, took 30 days to rent, actual vacancy was only 10 days. Cap rate roughly 8% up from 7% w/o management.

This is anecdotal but probably representative of situation in oil dependent areas of East Texas, Miss, South LA.

However, I’ll hafta throw a wet blanket on your entry into a potential new RTC. You would’ve been shut out almost if not completely from the last one due to their policy of forcing buyers to take groups of properties or nothing. Gov’t tends to repeat itself.

Vacancy – 10 to 15 percent. Too many investment properties (including all the foreclosures snapped up for cash), too many vacant apartments offering huge incentives, too many first time buyers taking the $8,000 tax credit.

Rents – down 10 to 15 percent over the last year. Just leased a 3/2/2g in Tempe at $950. Last year $1,050, before that $1,095. The house would probably sell for $180-$190,000 today.

Crowd – Pay attention, folks. There is too much inventory bought for cash and/or with low cost bases. These investors will undercut your rents. Apartments are way overbuilt. They will undercut your rents. Tenant quality is garbage right now. Don’t expect much improvement until unemployment drops to half of what it is today.

Nothing really looks that appetizing right now. If things get worse, I will look at picking up some more discounted properties. If the commercial industrial market collapses and we have another RTC, I’m in!