Cost Segregation in Detroit, MI

The ultimate cash-flow machine — $165K median prices, 88% building values, and Michigan's full bonus depreciation conformity create the highest cost segregation ROI per dollar of any major U.S. metro. The EV revolution is pouring $25B+ into the region.

Population
4.3M
Median Home
$165K
Rent (3BR)
$1,300
Property Tax
2.80%
Annual Job Growth
20K+
Ranking
EV Capital
Overview

Value Props for Investors

EV REVOLUTION
$25B+ in EV & Battery Investments

GM's Factory ZERO, Ford's Rouge EV Center, and multiple battery plants are transforming Southeast Michigan. Thousands of manufacturing jobs ($55K-$85K) drive rental demand in Detroit suburbs.

MAXIMUM ROI
$165K Entry with 88% Building Values

Detroit offers the most extreme cost seg economics in America. 88% of your purchase price goes to depreciable components and study costs as low as $3,000. The 559% ROI is one of the highest achievable.

PORTFOLIO SCALE
Buy 3-5 Properties for 1 Coastal Home Price

A $500K budget buys 1 Charlotte property or 3 in Detroit. Three Detroit properties generate 3x cost seg deductions, 3x cash flow, and 3x diversification. The portfolio math is unmatched.

Tax Strategy

Cost Segregation & Tax Rules in Detroit, MI

Understanding how federal and Michigan state tax rules interact is critical to maximizing your cost segregation benefits in Detroit.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$165,000
Building Value
88%
12% land / 88% building
Cost Seg Range
22-38%
of building reclassified
Home Age
65 yrs
Built ~1959
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Detroit, typical reclassification rates are 22-38% of building value.

Purchase Price Breakdown
Building 88%$145,200
Land 12%$19,800
Building Value Reallocation (with Cost Seg)
5-Year Property17%
$24,394
15-Year Property11%
$16,262
27.5 / 39-Year (Remaining)72%
$104,544

5 & 15-year components ($40,656 = 28% of building) are eligible for bonus depreciation in Year 1.

Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $165,000 property with 88% building value and 28% reclassification yields ~$15,043 in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1959, Detroit's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Full Conformity
Michigan Bonus Depreciation Conformity

Michigan conforms to federal bonus depreciation provisions under IRC Section 168(k). With a flat 4.25% state income tax, MI investors capture 100% first-year bonus depreciation at both levels. Note: Detroit residents face an additional 2.4% city income tax, amplifying cost seg benefits for Motor City properties.

What This Means for Detroit Investors: Full conformity combined with Michigan's 4.25% flat tax means significant state-level savings on top of federal benefits. Detroit's ultra-affordable prices amplify the ROI — properties under $200K still capture meaningful tax savings.

Federal vs. MI Depreciation Timeline
PeriodFederal TreatmentMI State Treatment
Year 1100% bonus depreciation100% bonus depreciation (full conformity)
Years 2+Standard MACRS schedulesSame as federal
Section 179 Expensing
State ConformityConforms

MI conforms to federal Section 179 limits. This is especially valuable for Detroit rehab projects where new fixtures, appliances, and equipment can be expensed immediately alongside cost seg reclassifications.

Key Takeaway

A $230K property with a $189K depreciable basis and 28% cost seg reclassification yields ~$19.5K in federal tax savings PLUS ~$2.2K in MI state tax savings in Year 1 — a total of ~$21.8K. In Detroit at $165K, the ROI per dollar is even more dramatic.

Bottom Line

Michigan is a full-conformity state. Every dollar of federal bonus depreciation flows through to your MI state return. The combination of full conformity + ultra-affordable Detroit pricing creates some of the highest cost seg ROI per dollar in the entire country.

Local Property Tax
2.80%
Detroit effective rate
Transfer Tax
$3.75 per $500 of value (state) + $0.55 per $500 (county)
State Income Tax
4.25%
Flat
Property Tax Details

Detroit's effective rate of ~2.80% is among the highest in the country — the main cost headwind. Ultra-low purchase prices and strong cash flow offset this.

Assessment Methodology
MethodState Equalized Value (SEV) at 50% of market value, with Proposal A taxable value cap
Reassessment CycleAnnually
Assessment BodyLocal Assessor / Board of Review
Appeal WindowMarch Board of Review (varies by township, typically early March)
Appeal Success Likelihood
Good
LowModerateGoodVery High

Michigan's Proposal A caps taxable value increases at the rate of inflation or 5%, whichever is lower — a major investor protection. SEV can exceed taxable value, creating appeal opportunities. The March Board of Review is your free first-level appeal. Michigan Tax Tribunal handles second-level appeals.

Work with Overline — Our team helps Detroit investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Detroit, MI

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for MI properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Detroit, MI Property Details
$
50%95%
5%35%
2%25%
Total Reclassified28% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$145,200
$165,000 x 88%
Normal Annual Depreciation$5,280
$145,200 ÷ 27.5 yr (residential)
5-Year Reclassified$24,684
15-Year Reclassified$15,972
Total Accelerated$40,656
28% of $145,200 building value
Federal Tax Savings (Year 1)$15,043
$40,656 x 37% bracket
MI State Tax Savings (Year 1)$1,728
Total Year 1 Tax Savings$16,771
7.7x normal annual deduction captured in Year 1

MI State Tax: MI has full bonus depreciation conformity — both federal and state savings hit your pocket in Year 1.

Insurance & Risk

Insurance Landscape in Detroit

Insurance costs directly impact your cash flow. Understanding Detroit's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$2,200
Detroit average
State Average
$1,800
22% below average
National Average
$2,300
for comparison
Key Risk Drivers
1
Severe thunderstorms and wind
2
Older home structural concerns
3
Frozen pipes and water damage
Coverage Recommendations
Standard homeowner's policy with replacement cost coverage
Wind/hail deductible awareness (typically 1% of dwelling coverage)
Sewer/drain backup coverage (essential in older Michigan cities)
Frozen pipe and water damage endorsement for older homes
Umbrella liability policy ($1M+) for rental properties
Cost Seg + Insurance Connection

Michigan's older housing stock makes accurate component documentation critical. A cost seg study provides detailed valuations of updated HVAC, roofing, electrical, and plumbing — especially important for renovated Detroit properties.

Revenue Comparison

STR vs. Long-Term Rental in Detroit

Compare short-term (Airbnb) and long-term rental income for a typical Detroit investment property.

Long-Term Rental
Monthly Rent (3BR)$1,300
Annual Gross$15,600
Vacancy Rate7%
Net Annual$14,508
Tenant StabilityHealthcare and auto workers provide stable demand; Rocket Mortgage driving Midtown/downtown demand
Depreciation Schedule27.5 years
Residential rental property
Tax TreatmentPassive Only
Losses can only offset passive income unless you qualify as a Real Estate Professional (750+ hrs/yr)
Short-Term Rental
Avg. Nightly Rate$105
Occupancy Rate60%
Annual Gross Revenue$22,995
Net Annual (after expenses)$16,097
Management20-25% of gross
Depreciation Schedule39 years
Classified as commercial / transient use property
Tax TreatmentActive Income Eligible
Losses can offset W-2 / active income if you document 100+ hrs of material participation and meet IRS criteria
Cost Seg + STR Loophole

Detroit's ultra-low prices maximize cost seg ROI per dollar. A $165K property generating $16.8K in Year 1 savings means your tax benefit covers 10%+ of the purchase price. Scale to 3-5 properties for $50K-$85K in combined Year 1 savings.

Market Fundamentals

Economy & Housing Demand in Detroit

Strong economic engines create stable rental demand. Here is what drives Detroit's economy and housing market.

Median Income
$37,000
Rent-to-Income
33%
Healthy ratio
Vacancy Rate
6.5%
Pop. Growth
+0.2% annually (stabilizing)
Major Employers
1
GM HQ (15K+)
2
Henry Ford Health (33K+)
3
Corewell Health (20K+)
4
Rocket Mortgage (17K+)
5
Ford Motor (12K+ in metro)
6
Stellantis (20K+ in metro)
Top Industries
Automotive & EV
Healthcare
Finance & Fintech
Technology
Manufacturing
Landlord & STR Rules
Landlord Friendliness
Friendly
Eviction Timeline
30-45 days
STR Regulation
Permitted with registration

Detroit requires STR registration and compliance with the rental ordinance. Downtown and Midtown see strongest STR demand.

Why Invest Here

Detroit is polarizing — and that's why the math works. $165K median prices with 88% building values create the highest cost seg ROI per dollar in America. GM, Ford, and Stellantis are investing $25B+ in EV. Rocket Mortgage transformed downtown. Buy 3-5 properties for 1 coastal home and multiply your tax savings.

Where to Invest

Top Neighborhoods in Detroit

#1
Corktown / Midtown
Trendiest neighborhoods with Ford's autonomous vehicle campus
Price
$250K
Rent
$1,600
Yield
7.7%
Ford's $740M Michigan Central redevelopment anchors Corktown. Midtown has Wayne State, Henry Ford Hospital, and the DIA. Highest-demand rental market with strong STR appeal.
$250K$1,6007.7%
Ford's $740M Michigan Central redevelopment anchors Corktown. Midtown has Wayne State, Henry Ford Hospital, and the DIA. Highest-demand rental market with strong STR appeal.
Ford's $740M Michigan Central redevelopment anchors Corktown. Midtown has Wayne State, Henry Ford Hospital, and the DIA. Highest-demand rental market with strong STR appeal.
#2
Warren / Sterling Heights
Auto-corridor suburbs with GM Tech Center
Price
$220K
Rent
$1,450
Yield
7.9%
Heart of the auto industry — GM Tech Center, Stellantis, and hundreds of suppliers. Lower risk than Detroit proper with strong cash flow.
$220K$1,4507.9%
Heart of the auto industry — GM Tech Center, Stellantis, and hundreds of suppliers. Lower risk than Detroit proper with strong cash flow.
Heart of the auto industry — GM Tech Center, Stellantis, and hundreds of suppliers. Lower risk than Detroit proper with strong cash flow.
#3
Dearborn
Ford Motor Company's hometown with diverse community
Price
$200K
Rent
$1,400
Yield
8.4%
Ford's 12K+ Rouge Complex and World HQ employees. Diverse community, UM-Dearborn campus. Highest R2P in the metro.
$200K$1,4008.4%
Ford's 12K+ Rouge Complex and World HQ employees. Diverse community, UM-Dearborn campus. Highest R2P in the metro.
Ford's 12K+ Rouge Complex and World HQ employees. Diverse community, UM-Dearborn campus. Highest R2P in the metro.
#4
Ferndale / Royal Oak
Trendy inner-ring suburbs with walkable downtowns
Price
$280K
Rent
$1,700
Yield
7.3%
Detroit's answer to Brooklyn — walkable, eclectic, popular with young professionals. Higher entry but significantly lower vacancy and stronger appreciation.
$280K$1,7007.3%
Detroit's answer to Brooklyn — walkable, eclectic, popular with young professionals. Higher entry but significantly lower vacancy and stronger appreciation.
Detroit's answer to Brooklyn — walkable, eclectic, popular with young professionals. Higher entry but significantly lower vacancy and stronger appreciation.
#5
Livonia / Westland
Family-friendly western suburbs with good schools
Price
$230K
Rent
$1,500
Yield
7.8%
Best combination of affordable entry, family appeal, and safety. Consistent demand from auto and healthcare workers. Solid cash flow with lower risk.
$230K$1,5007.8%
Best combination of affordable entry, family appeal, and safety. Consistent demand from auto and healthcare workers. Solid cash flow with lower risk.
Best combination of affordable entry, family appeal, and safety. Consistent demand from auto and healthcare workers. Solid cash flow with lower risk.
Local Partners

Investor-Friendly Partners in Detroit, MI

We are building a curated directory of top investor-friendly brokers, property management companies, and service providers in Detroit, MI.

Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

Coming Soon
Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

Coming Soon
Insurance Agents

Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

Coming Soon

Are you a broker, property manager, or insurance agent serving investors in Detroit, MI?

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Frequently Asked Questions

Cost Segregation FAQ — Detroit, MI

How much can I save with cost segregation in Detroit, MI?

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On a typical $165K property in Detroit, cost segregation can yield approximately $16,771 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 559%. Overline studies cost $499-$2,000.

What is the property tax rate in Detroit?

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The effective property tax rate in Detroit is approximately 2.80%. Detroit's effective rate of ~2.80% is among the highest in the country — the main cost headwind. Ultra-low purchase prices and strong cash flow offset this.

Is Detroit a good market for real estate investing?

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Detroit is polarizing — and that's why the math works. $165K median prices with 88% building values create the highest cost seg ROI per dollar in America. GM, Ford, and Stellantis are investing $25B+ in EV. Rocket Mortgage transformed downtown. Buy 3-5 properties for 1 coastal home and multiply your tax savings.

What is the average insurance cost for rental properties in Detroit?

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The average annual homeowner insurance premium in Detroit is approximately $2,200. Detroit insurance is above state average due to older housing stock. Work with a local broker who specializes in Detroit investment properties.

What are the STR and landlord rules in Detroit?

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Detroit is rated "Friendly" for landlords. STR regulation: Permitted with registration. Eviction timeline: 30-45 days. Detroit requires STR registration and compliance with the rental ordinance. Downtown and Midtown see strongest STR demand.

Who are the major employers in Detroit?

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Major employers in Detroit include GM HQ (15K+), Henry Ford Health (33K+), Corewell Health (20K+), Rocket Mortgage (17K+), Ford Motor (12K+ in metro). Top industries: Automotive & EV, Healthcare, Finance & Fintech, Technology, Manufacturing.

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