Understanding Detroit investment returns

NOI = gross rent − vacancy allowance − operating expenses. It excludes mortgage payments and income taxes, so it describes the property itself rather than how it is financed.

Example: rent of $1,200/month is $14,400/year. Subtract an 8% vacancy allowance ($1,152) and $5,000 of operating expenses, and NOI is $8,248. These figures are illustrative only.

• Property taxes — can be substantial in Detroit; check the actual bill and whether it may be reassessed after a sale.
• Insurance — landlord policy priced for the property's age and condition.
• Vacancy — time between tenants and non-payment risk.
• Maintenance and repairs — ongoing upkeep, typically higher for older homes.
• Capital reserves — saving for roofs, furnaces and water heaters.
• Property management — usually a percentage of collected rent plus leasing fees; essential for remote owners.
• Utilities, registration and compliance — any landlord-paid utilities and city rental registration costs.

Cap rate = NOI ÷ total property cost. Using the example above and an all-in cost of $100,000, the cap rate is 8.2%. Cap rate lets you compare properties regardless of financing. A high cap rate can signal opportunity — or higher risk — so it must be read alongside condition and location.

Cash-on-cash = annual pre-tax cash flow after debt payments ÷ cash you invested. For an all-cash purchase it is close to the cap rate. With financing, it can be higher or lower depending on interest rate, down payment and closing costs — leverage magnifies both gains and losses.

On our listings, projected annual net ROI is set during our underwriting using one consistent definition: the estimated annual net operating income divided by the total cash invested (purchase price plus estimated rehab and closing costs), assuming an all-cash purchase unless the listing states otherwise. It is shown before income taxes and before any appreciation.

We screen opportunities against an aspirational target of 8%–12% annual net ROI. That range is a goal used to decide which properties are worth presenting. It is not a historical average, not a forecast for any specific property, and not guaranteed. Actual results can be lower, or negative, if rent, vacancy, repairs, taxes or insurance differ from the assumptions. If you use financing, your return will differ and must be recalculated with your loan terms.

Every published opportunity shows the investor price and the assumptions behind any estimate, so you can test them in your own model. ARV, rehab and rent figures are labeled as estimates; seller statements are kept separate from our estimates and from verified facts. Before purchase, confirm each number with your own inspection, contractor bids, rent comparables and insurance and tax quotes.

See current numbers on approved opportunities, and read our full disclosures.