Deep Dive into Metro Detroit Cities: Melvindale

Source: Listing on Zillow

Welcome to another installment in our Deep Dive series where we unpack the investment opportunities in and around the City of Detroit. The Detroit market attracts plenty of investors in and out of state thanks to its affordable housing stock and demand for single-family homes, but the area is also highly complex.

Some cities just aren’t as conducive for real estate as others, and you must know where to put most of your effort in. The Metro Detroit area is massive with many different neighborhoods and cities—each with unique real estate market factors, including demographics, property conditions, property management requirements, and returns on investment.

This begs the need for insider guidance, which is where we come in.

Using our decades of experience as a property management company and local residents in Metro Detroit, we’ve written these comprehensive guides to analyzing Detroit real estate markets for you. Go through the details below and see if the featured area is a good spot for ideal investment opportunities, and get in touch with us should you need further help navigating the market.

Our featured city for this article is Melvindale, Michigan. This somewhat small city is the 92nd largest community in the state and has 2 constituent neighborhoods within its area.

Source: Google Maps

Melvindale

Melvindale is located in Wayne County, Michigan. It is home to 12,851 people within 2.73 square miles of land (plus 0.02 square miles of water), resulting in a population density of 4,673 per square mile. This figure is relatively equal to the density of the City of Detroit, which is 4,767 people per square mile.

Now, given that Melvindale shares a border with the City of Detroit, it’s called a “Ring City” in our book. This is the name we give all the cities surrounding Motor City in a semicircle, providing an investment balance of property affordability and reduced risks associated with Detroit investing.

Here’s a map to show you Metro Detroit, where you can see Melvindale sitting below the City of Detroit:

Source: Georgetown Public Policy Review

And if you need extra help, here’s a list of all the areas surrounding Melvindale. Those highlighted in green are other Ring Cities, while those with hyperlinks will take you to previous deep dives (so you can explore more investment opportunities in Metro Detroit!):

The “Little City with a BIG Heart”—Melvindale

Back in the early 1920s, Melvindale was a simple settlement of Oakwood Heights in Ecorse Township. The government designed the subdivision to house workers from the Ford River Rouge Plant in Dearborn, so they named the city after one of the original developers, Melvin Wilkinson.

By 1922, the City of Detroit annexed the eastern part of Oakwood Heights and the rest was incorporated as a village. A decade later, that village became a city. That area is what we now know as Melvindale.

Another decade later (during and after World War II), Melvindale saw significant growth when the commercial and industrial complex of the City of Detroit overflowed into nearby communities. Plus, the city plays a key role in railroad traffic in Metro Detroit. Here are a few examples:

1. The Norfolk Southern Railway Oakwood Yard is located within the city, dividing it into northwest and southeast sides of Melvindale.

2. The Canadian National Railway (Dearborn subdivision) is the city’s western boundary.

3. The Conrail Shared Assets Lincoln Secondary is a direct route from the City of Detroit to Toledo for trains to pass through the city’s industrial areas, which happens to also be the previous area of the Conrail Lincoln Yard.

With Melvindale being at the crossroads of the industrial corridor, the city saw a massive commercial and industrial advancement from the 1940s to the 1950s. Today, nearly all the land in Melvindale is developed, there is a good mix of blue- and white-collar workers, and there are more people living here who work with math and computers than 95% of the areas in the country.

But is Melvindale’s aggressive approach towards redeveloping its community enough to make it a good place to invest in rental properties? Let’s take a closer look.

Rent & Rent-To-Price Ratio (The 1% Rule)

Based on Niche, the average rent in Melvindale is $856 per month. If we were to break this figure down into bedroom sizes, the rent amounts are lower than the rest of Metro Detroit, Michigan, and the nation:

Source: Bestplaces

If we were to compare the data from Bestplaces with actual listings on Zillow, 2-bedroom and 3-bedroom properties can actually ask for higher rent amounts. This is good news for you, as it means there’s potential for you to charge higher rent for greater cash flows:

Source: Current listings on Zillow as of April 2022

Notice how there aren’t many studio units or larger homes with four to six rooms. Instead, most of the homes in Melvindale are one- to three-bedroom properties for rent. NeighborhoodScout reports that 39.1% of all homes in the city have three bedrooms, 38.5% have two, and 16.5% have one.

Now, let’s use the rent-to-price ratio calculation to see if these rent amounts will generate strong cash flow for you, as the investor. We know that the industry standard is to ensure that the rent amount is at least 1% of the total property price (including any repairs necessary) to generate substantial returns.

We’ve chosen the Zillow listing below, which is a three-bedroom single-family residence along Robert Street. Using the estimated rent from Bestplaces of $1,211 and a property price of $89,900, the ratio is 1.3%. This is beyond the industry’s minimum of 1% and shows that Melvindale is one of the Ring Cities with a higher ratio in Metro Detroit.

Source: Listing on Zillow as of April 2022

With an impressive ratio of 1.3%, you can invest with full confidence that properties in Melvindale will likely generate a strong cash flow every month.

House Value and Appreciation

According to Niche, Melvindale properties have an average house value of $64,300. If we look at Zillow’s reports, however, the overall home value is closer to $112,941 and has been significantly climbing over the past years. We are foreseeing that Melvindale property values will continue to grow in the future:

Source: Zillow

Redfin also provides us with more information that shows the uptrend of Melvindale property values. Check the chart below and you’ll see that the median price is $125,000, and has been increasing by 23.8% year-over-year:

Source: Redfin

Because of these factors, Redfin’s Compete Score deems Melvindale’s housing market as “very competitive,” where many homes receive multiple offers, sell for just 1% below list price on average, and have a couple of “hot homes” that will sell 2% above list price—often with waived contingencies.

According to NeighborhoodScout, single-family homes are the most popular in Melvindale, accounting for 67% of all the homes in the city. Next to these, apartment complexes, small apartment buildings, and townhomes take around 19.1%, 9.1%, and 4.5% of the market, respectively.

Going back to the listings on Zillow, there is a selection of two- to four-bedroom properties on sale in Melvindale. Prices range from $89,900 to $297,900—depending on the location and size of the property you choose. You can certainly find one that’s within your investment budget:

Source: Listings on Zillow as of April 2022

You can also notice that the property prices on Zillow reflect the affordability of the Detroit housing market—one that sits right above Melvindale. As we’ve mentioned before, Ring Cities like Melvindale offer many “cheap properties” without most of the risks commonly associated with Detroit investing.

Aside from affordability, Melvindale properties also have good appreciation rates—ideal if you’re looking to hold on to the homes for a long time. In the past decade, properties here have appreciated 127.33%, which is an average annual property appreciation rate of 8.56%. These numbers put Melvindale in the top 10% for real estate appreciation in the nation and increase your chances of gaining significant equity.

Here’s a map from NeighborhoodScout that shows where you can take advantage of Melvindale’s impressive property appreciation rates:

Source: NeighborhoodScout

Quality of Tenants, Properties, and Living

Money is the root of all investments. That’s why we started with the financial viability of investing in Melvindale. But now we have to go deeper and check the quality of tenants, property, and lifestyle in the city. These factors will determine the property management you’ll need, the property conditions you’ll have to deal with, and the overall appeal of your property.

The information below comes from multiple research points and our own experience as a property management company and resident in Metro Detroit.

Average Property Class and Condition: B-

Average property age: 61 years

Bestplaces shows that most of the properties in Melvindale (43.4%) were built from 1949 to 1950, with many properties also built just two decades ago (13.7%). The average property age, however, is 61 years old, which is 11 years above what the industry calls “old” houses.

Source: Bestplaces

Old homes aren’t always bad investments, but they do come with more repairs and maintenance work. You’ll have to learn how to deal with more complex issues, major renovations, and more to bring a home up to rental standards and keep it that way. For example, you might have to deal with:

• 1. Harmful lead-based paint
• 2. Outdated outlets & electrical systems
• 3. Obsolete water supply and drain systems
• 4. Damaged foundations, sills, and roofs
• 5. Unacceptable previous repairs & alterations

These are just some of the common problems old homes would have.

Still, don’t forget that there are many homes in Melvindale that were built in the early 2000s, or have already gone through overhauls and renovations in the past years. Given that the city will continue to develop in the next few years, do your best to sift through the options and find homes in good condition.

Your goal is to conduct thorough research of the housing market, pay keen attention to detail when inspecting relatively older homes, and be careful in your budgeting before purchasing a property to find a profitable investment opportunity in Melvindale.

Quality of Life in the Neighborhood: B

Moving on, let’s see the quality of life in Melvindale. As a rental investor, you want to purchase homes in good locations that will attract quality renters—those who’ll be responsible for paying rent, maintaining the property, and maximizing the impact of your returns.

On the other hand, having difficult tenants will only make things complicated, where you’d have to chase them up for rent payments and repair everything that they’ve damaged.

Let’s take a look if Melvindale meets the standards for a thriving, profitable rental business.

Local Economy

The local economy of a city is key to its overall livability because it determines the local average income, employment stability, and future development and growth. Fortunately, Melvindale is dedicated to improving its economy in the following ways:

• 1. A master plan approved in 2021 that serves as Melvindale’s roadmap towards future growth and city development. It’s accessible to all residents and designed to unify the community, address its needs, provide an urban framework, and more to ensure that the city is a desirable place to live.
• 2. Melvindale Economic Development Corporation and Melvindale Brownfield Redevelopment Authority have successfully led ongoing projects, such as:
• • 
    
  • - Comfort Inn Suites Hotel
  • - Tim Hortons restaurant
  • - Demolition and redevelopment of a former McDonald’s
  • - HUD home revitalization
  • - Kaiser Woods Subdivision
  • - Acquisition of vacant sites for redevelopment
  • - Obsolete Property Rehabilitation Incentives
  • - Remediation grants and funding

In a nutshell, the city is increasing its quality of life through developments and special projects that generate tax dollars, jobs, business opportunities, and the enhancement of the economy.

To quote Wayne County’s website, “The City of Melvindale is taking an aggressive approach to redeveloping the community through the Brownfield Redevelopment Program. Melvindale is listed as a Core Community by the State of Michigan, which offers additional benefits to developers.”

School Rankings

Based on GreatSchools, the top-rated public schools in Melvindale include Allendale Elementary School, Julian O. Strong Middle School, Academy for Business and Technology High School, and Melvindale High School. Their reviews are based on multiple measures, like academic performance and equity.

If you want to attract tenants with families, especially younger children, consider investing in homes near the schools we’ve mentioned. Remember that the better the quality of these schools, the more attractive your nearby rental home will be.

Also, here’s a heat map from NeighborhoodScout that shows the quality of schools in Melvindale:

Source: NeighborhoodScout

Crime and Safety

Melvindale may not be the safest place to live in the country, but it’s not the worst either. Plus, there are many areas in the city that are safer than the rest, attracting tenants seeking a nice neighborhood to live in while keeping your asset away from possible crimes.

Here’s a heat map from Crimegrade that shows the safest and most dangerous spots in Melvindale so you know which particular area to purchase a home in the city:

Source: Crimegrade

Given that safety in Metro Detroit varies from one street to another, we suggest that you visit the area and ask the neighbors about how safe they feel in the area, and if they have experienced anything dangerous. You’ll then have a proper crime rate evaluation of the exact block you’re looking to invest in, making it safe for you and your tenants to enjoy.

Livability

According to Areavibes’ evaluation, Melvindale has a “below average” livability score. However, it doesn’t discount the fact that the city ranks high on amenities, cost of living, and housing options.

Because of this, there are positive reviews from Niche that show residents saying, “Overall, the city looks nice. There are good places to eat and small stores,” and, “I have experienced nothing but kind neighbors and friendly people. It is also a very diverse, small community.”

Here’s a breakdown by Bestplaces to visualize the livability of Melvindale:

Tenant Class and Demographics: B-

Finally, let’s take a look at the potential tenant pool an investor like you will have in Melvindale. Your goal is to ensure that the demographics in this city support your goal of having a successful rental business—one that will have responsible tenants who’ll abide by your lease agreement.

Here are the key contributing factors to your investment:

Income: The average income of those living in Melvindale is lower than Metro Detroit, Michigan, and the nation. This isn’t good for investors, as it means you can’t charge higher rent—lest tenants will avoid renting from you, or have a hard time keeping up with the payments.

Source: Bestplaces

Unemployment: While the unemployment rate in Melvindale is a tad higher than the rest of Metro Detroit and Michigan, it’s still lower than the nation’s average.

More importantly, the potential future job growth in Melvindale is looking great. This means your tenant pool will increase, with more people coming into the city. And you’ll have tenants with steady, well-paying jobs to pay rent.

Source: Bestplaces
Education: Melvindale has fewer high school and university graduates than Metro Detroit and Michigan. Nevertheless, there are more locals here that have attended some high school at the very least. This means your tenant pool will likely have stable jobs, strengthening your cash flow.

• 
  

Source: Bestplaces
Source: Niche

As always, you need to conduct thorough tenant screening to ensure that you only accept good tenants. Comb through all applicants’ average income, current employment, and educational attainment to check if they earn enough and are stable enough to rent your home.

You also might run into tenants that require a higher level of management, which means you might want to hire a property management company to collect rent, maintain your rental homes, and ensure that all renters comply with the lease agreements.

Source: Google Maps

Overall Score: B

Based on our research and evaluation, we’ve given Melvindale a score of B for rental property investment. It’s true that the market might require more hands-on management, but the following reasons are compelling enough to make Melvindale a good place to start investing in Metro Detroit:

Melvindale’s rent-to-price ratio is 1.3%, which means you can find profitable rental properties that can generate strong cash flow. You’ll easily pay off the initial acquisition cost in no time.

Melvindale’s house value and appreciation rates are increasing, which means you can purchase properties at a low price, and hold on to them while they gain more and more equity.

Melvindale’s economy, schools, safety, and livability are relatively good, which means the tenant pool will grow in the years to come. You’ll have an increasingly easier time attracting quality tenants to rent your investment property.

As you can see, Melvindale has great opportunities for you to expand your portfolio or get started on Detroit investing. In fact, you might want to purchase more than one property, given how affordable they are and how easy it’ll be to reap returns. Should you choose to do so, remember to hire a professional property management company to maintain multiple homes without the stress.

Our team has in-depth, local knowledge of Metro Detroit and the rental investment opportunities it holds. We’ve been managing properties for more than two decades, and can handle the most complex of portfolios, so you won’t have to worry about anything.

Contact us to get started on Detroit investing! Kick back, relax, and watch your investments grow to immeasurable heights in Melvindale, Michigan.

Any other Metro Detroit cities or neighborhoods you’re curious about? Comment below and we’ll prioritize it in our future installments!

We’re not stopping this Deep Dive series until we’ve covered them all, helping you invest in one of the most lucrative markets—one rental property at a time.