Rental property investing in Michigan: cash flow, taxes, and what to expect

The Michigan setup, at a glance

Michigan sits at roughly 1.38% effective property tax, which matters more than most new investors realize. On a $80k-$180k Detroit property, that's about $1,104/year in taxes alone - call it $92/month before you've paid anything else. Run the rental cash flow calculator with that line item baked in or your projection will look better than reality.

Eviction stance here is balanced. Balanced. 7-day demand for possession, hearing in ~10 days, 10-day stay possible. ~30-45 days. That timeline directly affects your vacancy assumption: in balanced-friendly states like Michigan, you can underwrite 5-7% vacancy on B-class properties; in slower states you'd want 8-10%.

Where the math actually pencils

Detroit - $80k-$180k for typical SFR, $950-$1,400/mo for 2-3BR rents. very wide neighborhood variance, deep cash flow + deep risk.

Grand Rapids - $270k-$360k for typical SFR, $1,500-$1,950/mo for 2-3BR rents. growing tertiary, balanced returns.

Lansing - $180k-$250k for typical SFR, $1,150-$1,500/mo for 2-3BR rents. state capital + university, steady tenant pool.

The 1% rule (monthly rent >= 1% of purchase) is a smoke test only, but it filters fast: a $80k-$180k property in Detroit renting at the high end (1,400/mo) clears 0.8-0.9% in most cases, so you're already in the "needs the rest of the math to be tight" zone before vacancy + capex + management.

Michigan-specific things that bite

Detroit gets the headlines but the actual investable Detroit is a handful of specific zip codes. Outside those it's a rehab pit. Grand Rapids is the steadier play.

A few cash-flow-killer line items that catch out-of-state buyers in Michigan:

Property tax escrow. Lower than the national 1% average, but the homestead exemption you'd get as an owner-occupant doesn't apply to rentals.
Insurance. Standard hazard policies are still reasonable here, but ask about wind/hail riders depending on the specific zip.
PM costs. 8-10% of collected rent is typical. On a $950/mo property that's $86-95/mo - works out to about a month of vacancy each year.

What "good enough" looks like in Michigan

For a stabilized buy-and-hold in Michigan, the rule-of-thumb deal targets most investors I see are:

Cap rate: 6%+ on the actual NOI (not the broker's pro forma). Below 5% and you're paying for appreciation, which is fine if that's your thesis.
Cash-on-cash: 8-10% minimum at year 1 with 20-25% down. 12%+ is solid for the work.
DSCR: 1.25+ if you're using a DSCR loan. Lenders increasingly want 1.2 as a floor, 1.25 to clear comfortably.
Reserves: 6 months of PITI. Michigan's slower eviction process means you may need 8-9 months of reserves in a worst-case turn.

The play that works here

Michigan still has cash-flow-friendly metros (Detroit) where the math pencils on traditional 20-25% down rentals. Buy in B-class neighborhoods, accept slightly higher turnover for the cash flow, manage tightly.

Run your specific deal through the rental calculator with the state's effective tax rate (1.38%), realistic Michigan insurance quotes, and 8-10% PM. If it still pencils after that, you've got a deal.