North Star Group, Inc.

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Detroit Apartments Report

Preamble

This report came together over several working sessions, initially reviewing a handful of smaller

multifamily properties in up-and-coming Detroit neighborhoods, plus a few larger ones. Out of

these options, we ended up focusing on a single site that best meets the goal of creating a

self-contained community with daycare, aﬀordable rents, integrated broadband, and security. It’s

relatively small in dollar terms—perfect for a pilot project—but large enough to support amenities

like food options and social spaces.

You’ll see two scenarios for how to ﬁnance and operate the redevelopment. Scenario 2 (fully

aﬀordable with project-based vouchers) ultimately wins out in terms of ﬁnancial feasibility and

lower equity requirements, though both scenarios are workable. To keep things simple, you can

jump straight to the ﬁnal section for a quick comparison of the two. Otherwise, follow the outline

to dig deeper into costs, design, and potential returns. We hope this short preamble helps you

navigate the details without getting lost in the minutiae! Most of the numbers are computer

generated, and so will need review and scrubbing.

Cheers

Michael Hoﬀman

Serenity Village Detroit

Redevelopment Feasibility: Mixed-Income

vs. Fully Aﬀordable Scenarios

Introduction and Rationale

Spoiler Alert: Scenario 2: Fully Aﬀordable (All PBV) below makes more sense economically.

The redevelopment of the former Transition West School (4800 Collingwood, Detroit) into a

45-unit apartment complex presents two strategic approaches: a mixed-income model and a

fully aﬀordable model. In this expanded analysis, we examine both scenarios in depth. The goal

is to compare how a 60/40 mixed-income strategy (60% market-rate units, 40% aﬀordable units)

versus a 100% aﬀordable strategy (all units utilizing project-based vouchers) impact the project’s

ﬁnancial feasibility. By exploring both approaches, we can understand the trade-oﬀs in rental

income, operating costs, debt capacity, and equity requirements, helping stakeholders decide

which model best balances social and ﬁnancial objectives.

This report is organized as follows: ﬁrst, we outline the key assumptions and parameters common

to both scenarios. Next, we detail the ﬁnancial projections for Scenario 1: 60/40 Mixed-Income

and Scenario 2: Fully Aﬀordable (All PBV). Finally, we compare the outcomes side-by-side –

including eﬀective gross income, net operating income, supportable debt, and required equity –

with clear tables and commentary. The rationale for evaluating both approaches is to ensure the

redevelopment can achieve long-term viability while meeting policy goals (such as providing

aﬀordable housing and community services). Exploring a mixed-income option alongside an

all-aﬀordable option allows consideration of both a diverse tenant base and maximizing

aﬀordability through federal vouchers. The following sections present the analysis structure

reﬂecting these dual scenarios.

Project Assumptions and Parameters

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Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

The ﬁnancial projections for both scenarios share a set of baseline assumptions about the

project’s design, costs, and ﬁnancing. These assumptions, as well as scenario-speciﬁc details, are

outlined below:

● Residential Unit Mix: The redevelopment will create 45 apartment units. In Scenario 1

(Mixed-Income), 60% of units (27 apartments) are operated at market-rate rents, while

40% (18 apartments) are oﬀered at below-market aﬀordable rents (targeted to

lower-income tenants). In Scenario 2 (Fully Aﬀordable), all 45 units utilize project-based

Section 8 vouchers with rents pegged to Detroit’s Housing Choice Voucher (HCV)

payment standards (set at 110% of HUD Fair Market Rent) michigan.gov. This means

Scenario 2’s contract rents are based on HUD’s FMR for the Detroit area – for example,

roughly $1,120/month for a 1-bedroom unit (110% of the FY2024 1-bedroom FMR of

$1,019) michigan.gov, with higher rents for larger units (e.g. ~$1,420 for 2-bedrooms).

These payment-standard rents are largely guaranteed by the voucher program, ensuring

high occupancy and collection rates.

● After-School Daycare Amenity: Both scenarios include a 1,500 sq. ft. after-school

daycare facility on-site as an amenity for the community. The daycare can serve up to 50

children and is expected to generate tuition of $100 per week per student. As part of the

lease agreement with the daycare operator, 20% of the gross revenue is paid to the

property owner as rent for the space. At full capacity, this translates to $1,000 per week

(20% of $5,000) or about $52,000 per year in rental income from the daycare facility.

This income is counted as other commercial revenue contributing to the project’s

eﬀective gross income in both scenarios.

● Acquisition Cost: There is no acquisition cost for the building. The City of Detroit is

assumed to contribute the vacant school building to the developer at zero cost. This

signiﬁcantly reduces the upfront development cost, as only rehabilitation expenses are

considered.

● Rehabilitation Cost: The project involves substantial rehabilitation of the old school

building using a panelized interior system for unit build-outs. The rehab construction cost

is estimated at $60 per square foot. Given the size of the school building (approximately

58,000 sq. ft of ﬂoor area, including the daycare space), the total construction cost comes

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Fairhope AL 36532

701-770-9118

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Serenity Village Detroit

to roughly $3.5 million ($60 × 58,000 sq. ft). This cost forms the basis of the development

budget for both scenarios. We assume no additional developer fee or soft costs for

simplicity, and focus on this hard cost as the total project cost in the loan analysis.

● Utilities and Broadband: All residential units will have utilities and broadband internet

included in the rent (i.e. the owner pays these expenses). We account for this by treating

utilities/internet as a ﬁxed operating expense of $50 per unit per month. For 45 units,

that equals $2,250 per month, or $27,000 per year, attributable to utilities/broadband.

This cost is folded into the overall operating expense assumptions.

● Operating Expenses: Total operating expenses for the apartment complex (including

utilities, broadband, maintenance, management, insurance, etc.) are assumed at 40% of

eﬀective gross income (EGI). This 40% operating expense ratio is typical for multifamily

projects and accounts for all ongoing costs of operations. It eﬀectively incorporates the

utilities expense noted above, as well as property management and routine maintenance.

For instance, if a scenario yields $600,000 in EGI, about $240,000 (40%) would go

toward operating costs in this model.

● Occupancy/Vacancy: We assume a normalized 5% vacancy rate for residential units in

underwriting the eﬀective gross income. In Scenario 1, this reﬂects standard market

vacancy allowance (95% occupancy). In Scenario 2, vacancy is minimal because

project-based vouchers ensure units are ﬁlled or the subsidy covers interim vacancies;

however, we still apply a conservative 5% vacancy factor for consistency. The commercial

daycare space is assumed to be leased and operating at capacity (its rent is tied to

enrollment, as noted, which we assume at full 50 children for the EGI calculation). In

practice, the voucher-backed scenario would likely achieve >95% occupancy consistently,

but using the same vacancy rate for both scenarios provides a fair comparison of income

potential.

● Tax Abatement (PILOT): The project is expected to receive a PILOT (Payment In Lieu of

Taxes) tax abatement from the City to signiﬁcantly reduce property taxes. Detroit’s PILOT

program for aﬀordable housing allows the city to waive traditional property taxes and

instead charge a nominal percentage of rental revenue as a service fee honigman.com.

Both scenarios would qualify: Scenario 2 is entirely aﬀordable, and Scenario 1 includes a

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Serenity Village Detroit

substantial aﬀordable component (40% of units), likely meeting Detroit’s criteria for a

PILOT under the expanded 2024 ordinance (which extends eligibility to projects with units

up to 80–120% AMI) honigman.com honigman.com. We assume the PILOT reduces

property tax expense to near zero (or a very small percentage of rent) – eﬀectively,

property taxes will not materially impact the operating budget in either scenario. This

assumption helps the project’s net operating income, as it removes what would otherwise

be a signiﬁcant expense line item.

● Financing Terms (HUD 221(d)(4) Loan): We assume the redevelopment is ﬁnanced with

an FHA/HUD 221(d)(4) construction-to-permanent loan for multifamily housing. Key loan

terms include a 5.0% ﬁxed interest rate and a 40-year amortization period (after an

interest-only construction period). Underwriting will be constrained by a required Debt

Service Coverage Ratio (DSCR) of 1.20, meaning the net operating income must be 1.20×

the annual debt service for the loan to be supported. The maximum loan amount is also

subject to HUD’s loan-to-cost (LTC) limits for 221(d)(4) projects: typically 85% of total

project cost for market-rate projects and up to 90% of cost for projects meeting HUD’s

aﬀordability criteria (e.g. Section 8 or LIHTC housing) adroccap.com. In practice, HUD

recently updated its guidelines to allow up to 90% LTC for broadly aﬀordable housing,

including Section 8 project-based voucher projects, while market-rate developments

remain capped around 85% adroccap.com. We will apply an 85% LTC limit for the

mixed-income scenario and a 90% LTC limit for the fully aﬀordable scenario, reﬂecting the

higher leverage HUD permits when deep aﬀordability or rental assistance is involved.

These LTC caps eﬀectively dictate that at least 15% (Scenario 1) to 10% (Scenario 2) of the

project cost must be funded by equity. A PILOT and the voucher subsidies improve the

underwriting but do not directly increase the LTC beyond these HUD limits.

With these assumptions established, we can now calculate the ﬁnancial projections for each

scenario. All monetary ﬁgures will be on an annual basis (for incomes and expenses), and

costs/loan ﬁgures in total dollars. The primary metrics of interest will be: Eﬀective Gross Income

(EGI), Net Operating Income (NOI), maximum supportable debt based on DSCR, and the required

equity investment given the LTC-constrained loan amount.

Scenario 1: 60/40 Mixed-Income Strategy

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19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

Scenario 1 assumes a mixed-income apartment operation: 27 units (60% of 45) at market-rate

rents and 18 units (40%) at restricted aﬀordable rents. This approach might involve using

programs like LIHTC or local aﬀordability requirements for the 40% aﬀordable units, but in

ﬁnancial terms we simply model them with lower rents than the market units. The market-rate

units are assumed to achieve approximately $1,200 per month in rent (for an average unit, e.g. a

one-bedroom in this location with a modern rehab). The aﬀordable units are assumed to charge

about $800 per month on average – a level aﬀordable to households at roughly 60% of Area

Median Income, or alternatively a potential LIHTC restricted rent for this area. This $800 is below

market and provides a discount to tenants; for the analysis, it is a ﬁxed reduced rent, not

supplemented by vouchers in this scenario.

Given these rent levels, the annual potential gross residential income (PGI) for Scenario 1 is

calculated as follows:

● Market-Rate Units Income: 27 units × $1,200/month × 12 = $388,800 per year (if fully

occupied).

● Aﬀordable Units Income: 18 units × $800/month × 12 = $172,800 per year (if fully

occupied).

● Total Residential PGI: $388,800 + $172,800 = $561,600 per year potential from all 45

apartments, before vacancies.

To be conservative, we apply a 5% vacancy rate on residential income. A 5% vacancy translates

to losing about $28,080 of that income (5% of $561,600) annually due to expected turnover and

unleased time. Thus, the eﬀective residential income after vacancy is $533,520 per year.

On top of rental income, the project earns additional revenue from the daycare amenity lease. As

noted, at full enrollment the daycare contributes $52,000 per year in rent. We assume the

daycare space is leased and operating (this could be considered relatively secure income if the

daycare operator has demand for 50 children, or the rent could ﬂuctuate if enrollment is lower,

but we’ll use the full amount for feasibility projection). We do not apply a vacancy factor to the

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19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

commercial rent in this case, under the assumption that the daycare is consistently utilized via

community demand or possibly operated by a partner organization with stable funding.

Adding the residential income (post-vacancy) and the daycare rent, the Eﬀective Gross Income

(EGI) for Scenario 1 is approximately:

● $533,520 (residential rent collected) + $52,000 (daycare rent) = $585,520 per year EGI.

For clarity, EGI represents all income actually collected, after vacancy losses. In this scenario,

roughly 91% of EGI comes from apartments and 9% from the leased daycare space. The

mixed-income approach yields a solid EGI, though it’s somewhat moderated by the inclusion of

lower-rent units.

Next, we calculate Operating Expenses. Using the assumption of 40% of EGI, we estimate annual

operating costs at:

● 0.40 × $585,520 = $234,208 per year in operating expenses.

This expense budget includes all costs to run the property. Importantly, it covers the

$27,000/year of utilities and broadband for tenants (which is about 11.5% of the total op-ex) as

well as maintenance, management fees, insurance, admin, etc. The PILOT tax abatement keeps

property taxes very low – for example, if the PILOT deal required a 4% of rent service fee, that

would be only around $23,400/year (which is within our 40% envelope). Many PILOT agreements

for deeply aﬀordable projects charge even less (Detroit’s new “Fast Track” PILOT can be as low

as 1% of rent for very aﬀordable projects honigman.com). So the $234k budget comfortably covers

any small PILOT payment. In eﬀect, Scenario 1’s operating expense ratio (40%) translates to a

per-unit operating cost of about $5,205 per unit annually, which is reasonable for a project

including utilities.

Subtracting expenses from EGI, we obtain the Net Operating Income (NOI):

● $585,520 EGI – $234,208 OpEx = $351,312 per year NOI.

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19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

This annual NOI (~$351k) is the cash available to service debt and (if any) provide return to equity.

It reﬂects the blended income of market and aﬀordable rents. Notably, the market-rate units help

boost the NOI, while the aﬀordable units reduce it compared to an all-market scenario; however,

the daycare revenue also boosts NOI and is a unique aspect of this project (providing not just

income but a community service).

With NOI in hand, we determine the maximum supportable debt for Scenario 1. The lender will

size the mortgage such that the annual debt service (loan payments) do not exceed NOI/1.20 (to

maintain a DSCR of 1.20). In other words, the project can support annual debt service up to:

● Max Debt Service = $351,312 / 1.20 ≈ $292,760 per year.

Now, given the loan terms (5% interest, 40-year amortization), we ﬁnd the loan principal that

corresponds to that annual payment. A 5.0% interest, 40-year fully amortizing loan has an annual

debt service constant of about 5.79% of the original balance adroccap.com. (This means roughly

$0.0579 of payment per $1 of loan each year, given the long term and interest rate). Using this

factor, the supportable loan amount by DSCR is approximately:

● $292,760 / 0.0579 ≈ $5,060,000 (around $5.06 million).

This indicates that, purely based on cash ﬂow, the project’s $351k NOI could service roughly $5

million in debt. In fact, the DSCR would be 1.20× at about a $5.06M loan size for those terms. It’s

important to note that this ﬁgure is well above the actual project cost in this scenario, which was

only ~$3.5M. In theory, the cash ﬂow could cover a loan larger than the development cost – an

uncommon but favorable situation – meaning the project is highly ﬁnanceable from a cash ﬂow

perspective.

However, HUD’s loan-to-cost (LTC) limit becomes the binding constraint in this case. HUD will

not lend above a certain percentage of the project’s eligible cost, regardless of DSCR. For a

project that is not fully aﬀordable (Scenario 1 has a mix), the standard maximum is 85% of cost for

a 221(d)(4) loan adroccap.com. Eighty-ﬁve percent of the ~$3.493M rehab cost is $2.969 million.

This is the maximum loan HUD would insure under LTC criteria for Scenario 1. The DSCR-based

ﬁgure ($5.06M) far exceeds this, so eﬀectively the loan will be capped at $2.97M (assuming no

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Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

other lower criterion like LTV or “85% of as-stabilized value” comes into play – typically LTC is the

limiter for construction loans).

At a $2.97M loan, the debt service would be only about $172k/year (using the same debt

constant), which yields an actual DSCR of roughly 2.04× ($351k NOI / $172k DS) – in other words,

the project’s cash ﬂow is more than double the debt service at this loan size. This provides a

signiﬁcant cushion to lenders and reﬂects very strong coverage, but it also means the project

cannot leverage more debt to reduce equity because of the HUD LTC cap.

Finally, the equity requirement for Scenario 1 can be determined. With a max loan of $2.969M

and a total project cost of $3.493M, the remaining funds must come from equity (or equity-like

sources such as grants, if available). The required equity investment is:

● Equity = Total Cost – Loan = $3.493M – $2.969M = $524,000 (approximately).

This equates to about 15% of the development cost, which aligns with the 85% LTC (the

developer must cover the other 15% with equity). In practice, this equity could come from the

developer’s own cash, an investor, or possibly gap ﬁnancing sources (city or state housing funds,

historic tax credits if applicable to the old school, etc.). But from a pure feasibility standpoint,

Scenario 1 appears to need just over half a million dollars in equity injection. That is a relatively

modest equity requirement for a $3.5M project, thanks to the low acquisition cost and solid

income – a positive sign for feasibility. It also implies a potential for excellent returns on that

equity since the NOI is high relative to the equity stake (however, part of that NOI in excess of

debt service might actually not be needed if leveraging only 85% – leaving room for cash ﬂow or

secondary ﬁnancing).

Summary of Scenario 1: The mixed-income approach yields an eﬀective gross income of about

$585,500 and an NOI of roughly $351,300 annually. The project easily meets debt coverage

requirements; in fact, NOI could support a loan far above the cost, but HUD’s 85% LTC cap limits

the loan to about $3.0 million. This results in a needed equity of roughly $524,000 (15% of cost).

The presence of market-rate units ensures robust income, while the aﬀordable units and a PILOT

keep expenses (especially taxes) manageable. The $52k from the daycare provides a small but

meaningful boost to revenue. Overall, Scenario 1 is ﬁnancially viable, with a DSCR well above 1.0

even at maximum leverage, and it requires a moderate equity investment from the developer.

________________________________________________

19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

Scenario 2: Fully Aﬀordable with Project-Based Vouchers

(PBVs)

Scenario 2 models the redevelopment as a fully aﬀordable housing project, where all 45

apartments are supported by project-based Section 8 vouchers. In this scenario, tenants pay

aﬀordable rents (capped at 30% of their income, typically), but the property owner receives a

contract rent from the Detroit Housing Commission (or relevant public housing authority) equal to

the HCV Payment Standard for each unit’s size. We assume the contract rents are set at 110% of

HUD Fair Market Rent (FMR) for the Detroit metro area, which is the current policy limit for

voucher payment standards michigan.gov. This eﬀectively maximizes the rent the project can

collect under the voucher program, while keeping units aﬀordable to very low-income

households. The beneﬁt of PBVs is that the subsidy is tied to the unit (not the tenant), ensuring

the unit’s rent is paid up to the standard as long as an eligible tenant occupies it (and the housing

authority will help ﬁll any vacancy by referring another voucher holder). This provides extremely

stable rental income for the property and qualiﬁes the project as “aﬀordable housing” in HUD’s

eyes, enabling more favorable loan terms (as we will see).

For the income calculation, we need to estimate the average voucher rent per unit. The payment

standard varies by unit size. For example, in FY2024 for Wayne County/Detroit, the 110% FMR

rents are approximately: $1,120 for a 1-bedroom, $1,420 for a 2-bedroom, and $1,754 for a

3-bedroom michigan.gov. Without a detailed unit mix, we can assume a mix of one- and

two-bedroom units for simplicity. If we assume many units are 1-bed and some are 2-bed (which is

reasonable for an adaptive school reuse), the average might be around $1,150–$1,250 per unit

per month. To be slightly conservative, we’ll use an average $1,120/month per unit in our

calculations – essentially assuming most units are one-bedrooms at the base 1BR payment

standard. This likely slightly understates the total rent if some larger units are included, but it

gives a safe estimate. (If half the units were 2-bedrooms, the average rent would be higher,

around $1,270; the scenario’s feasibility would only improve with higher average rent, so using

the 1BR rate is a conservative case.)

Now, annual residential rent potential in Scenario 2 is computed as:

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19901 Quail Circle

Fairhope AL 36532

701-770-9118

michaelh@nsgia.com

Serenity Village Detroit

● 45 units × $1,120/month × 12 = $604,800 per year (potential gross rent if 100% occupied).

Because the vouchers virtually guarantee occupancy (there is high demand and the housing

authority pays even if tenants cycle, with minimal downtime), one could assume near 100%

occupancy. However, to parallel Scenario 1, we will still apply a 5% vacancy deduction. A 5%

vacancy on $604,800 is $30,240. Thus, eﬀective residential income after vacancy would be

$574,560 per year. (In reality, the eﬀective income might be closer to the full $604,800 if

vacancies are quickly ﬁlled by the program. Even if a unit is temporarily vacant, many PBV

contracts will continue to pay rent for a short period or have a waitlist of tenants ready. But using

95% occupancy keeps our analysis consistent and slightly conservative.)

The daycare amenity rent again adds $52,000 annually. Combining this with the residential

income:

● $574,560 (residential at 95% occupancy) + $52,000 (daycare) = $626,560 per year EGI

for Scenario 2.

This EGI is higher than in Scenario 1 by roughly $41,000, primarily because all units are now

rented at voucher standard rates. The aﬀordable units in Scenario 1 that were only paying $800

now eﬀectively pay $1,120 (via subsidy), and even the market-rate units might see a slight

increase if $1,120 is comparable to or above what we assumed for market. Essentially, Scenario 2

maximizes rental income through federal subsidy, which compensates for the tenants’ inability to

pay market rent. The rent mix is uniform in this scenario – every unit brings in the voucher rent,

which simpliﬁes the income stream.

Next, operating expenses are calculated at 40% of EGI, consistent with before:

● 0.40 × $626,560 = $250,624 per year in operating costs.

Operating costs in Scenario 2 are slightly higher in absolute terms than Scenario 1, because they

scale with the revenue. However, as a percentage of income they are the same 40%. We are

implicitly assuming the property is operated with similar eﬃciency. One could argue that having

all low-income residents might slightly increase management costs (e.g. coordinating with the

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Serenity Village Detroit

housing authority’s inspections and paperwork, or providing on-site services), but these are

relatively minor and can be handled by the property management within a typical budget. The

PILOT would deﬁnitely apply here as well, since the project is 100% aﬀordable – likely yielding a

very low eﬀective tax rate (Detroit might charge as little as 1–2% of rents in PILOT for such

projects honigman.com, which on ~$626k EGI would be under $12k, well within our $250k

expense allowance). Therefore, the 40% ($250.6k) should be a fair operating expense estimate,

including the same $27k in utilities and all other costs.

Subtracting expenses from income, the Net Operating Income for Scenario 2 comes to:

● $626,560 EGI – $250,624 OpEx = $375,936 per year NOI.

The NOI of about $376k is higher than Scenario 1’s NOI by ~$24,600 (about +7%). This reﬂects

the higher rental revenue across all units. It’s noteworthy that including all aﬀordable units

actually increased NOI in this case – a counterintuitive result at ﬁrst glance, but explained by the

fact that the “aﬀordable” rents are backed up to near-market (FMR) levels thanks to vouchers. In a

sense, the subsidy allows the property to collect market-comparable rents even on units

dedicated to low-income families. Additionally, the fully aﬀordable nature might qualify the project

for certain operating cost savings or grants, but we have not assumed any additional subsidy

beyond rent and tax abatement.

With $375,936 in NOI, we determine the maximum debt service the project can carry at a 1.20

DSCR:

● Max Debt Service = $375,936 / 1.20 = $313,280 per year.

This is the annual payment the lender would be comfortable with, given the cash ﬂow. Now

convert that to a loan amount using the same debt constant (~5.79%).

● Using 5.79%, the supportable loan by DSCR ≈ $313,280 / 0.0579 = $5,414,000

(approximately $5.41 million).

So purely from a DSCR perspective, Scenario 2’s cash ﬂow could service roughly a $5.4 million

loan. This is even higher than Scenario 1’s $5.06M, owing to the higher NOI. However, once again

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Serenity Village Detroit

this number is far above the project’s actual cost of $3.5M. It indicates extremely strong

coverage; the DSCR at a loan equal to cost would be much higher than 1.20.

HUD’s loan-to-cost limit for aﬀordable housing comes into play to cap the loan amount.

Because this scenario is fully aﬀordable with Section 8 assistance, HUD categorizes it in the

highest leverage bracket. Typically, projects with Section 8 or similar deep aﬀordability are

allowed up to 90% LTC adroccap.com. We will use 90% as the limit here. (In fact, HUD just

increased the limit for broad “aﬀordable” housing to 90% in 2025, aligning it with the Section

8/LIHTC limit, as an incentive to promote more aﬀordable units adroccap.com.)

Applying a 90% LTC to our $3.493M cost gives a maximum loan of about $3.144 million. That

becomes the capped loan amount for Scenario 2. This is higher than Scenario 1’s allowed loan

(which was $2.97M) because HUD recognizes the aﬀordability by allowing a greater portion of

the cost to be debt-ﬁnanced. The project still must cover the remaining 10% of cost with equity.

The required equity investment in Scenario 2 is thus:

● Equity = 10% of cost = $3.493M – $3.144M = $349,000 (approximately).

This is roughly $175k less equity than Scenario 1 needed, thanks to the higher LTC. In

percentage terms, Scenario 2’s equity is 10% of cost, versus 15% in Scenario 1. This lower equity

requirement can make a big diﬀerence for a developer – it reduces the amount of upfront cash or

gap ﬁnancing needed and improves the return on equity. Moreover, because the NOI is higher,

the return on that equity can be very healthy (the project is eﬀectively over-cash-ﬂowing relative

to the debt service it must pay on the smaller loan).

It’s worth noting that the actual DSCR in this scenario at the capped loan will be even stronger

than 1.20. At a $3.144M loan, the annual debt service would be about $182k (using the same

mortgage constant), and with NOI $376k, the DSCR would be roughly 2.06×. The project is thus

very safe from a lender’s perspective (the income could drop by over 50% and still cover the

mortgage). This highlights how subsidy can improve ﬁnancial stability: the public funds (via

vouchers and tax abatement) are essentially de-risking the deal. HUD’s willingness to go to 90%

LTC also shows conﬁdence that such projects are low-risk and mission-aligned (especially since

HUD is the insurer of the 221(d)(4) loan).

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Summary of Scenario 2: The fully aﬀordable PBV approach yields an EGI of about $626,600 and

NOI of roughly $375,900 per year. The guaranteed rents via vouchers push NOI slightly higher

than in Scenario 1, despite all units being “aﬀordable.” The project could in theory support over

$5.4M in debt by cash ﬂow, but HUD’s 90% LTC cap limits the loan to about $3.14 million. This

requires an equity contribution of only ~$349,000 (10% of cost). The ﬁnancial metrics indicate an

even stronger coverage and slightly lower equity hurdle compared to the mixed-income case.

Essentially, Scenario 2 leverages federal rental subsidies to maximize revenue, thereby

minimizing the local funding needed.

Financial Comparison of the Two Strategies

Both scenarios turn out to be ﬁnancially feasible under the given assumptions, but there are

important diﬀerences in their income proﬁles and ﬁnancing structure. Below, we compare the key

ﬁnancial metrics side-by-side:

● Eﬀective Gross Income (EGI): Scenario 2 (Fully Aﬀordable PBV) achieves a higher EGI

(~$626.6k) than Scenario 1 (Mixed-Income, ~$585.5k). The diﬀerence of about $41k (7%

increase) is because the aﬀordable units in Scenario 2 generate rents at voucher payment

standards, which are closer to market levels, whereas in Scenario 1 those units were

limited to a lower rent. In other words, the subsidy in Scenario 2 eﬀectively raises the

average rent per unit (approx. $1,120 vs. $1,040 in Scenario 1’s mix). Both scenarios beneﬁt

from the $52k daycare income included in EGI.

● Net Operating Income (NOI): Corresponding to the higher EGI, Scenario 2 also has

higher NOI (~$375.9k vs. $351.3k in Scenario 1). Both projects have the same 40%

expense ratio, so the ~7% NOI increase mirrors the EGI increase. NOI margin is 60% of

EGI in both cases. It’s notable that even though Scenario 2 has all aﬀordable tenants, it

does not suﬀer a drop in NOI; in fact, it surpasses Scenario 1. This underscores the

strength of the voucher subsidies in covering operating costs and debt.

● Maximum Supportable Debt (DSCR=1.20): In terms of pure cash-ﬂow lending capacity,

both scenarios could theoretically support debt far above the project’s cost. Scenario 1’s

NOI could support about $5.06 million in loans, while Scenario 2’s NOI could support

about $5.41 million (due to the higher NOI). These ﬁgures reﬂect DSCR-constrained loan

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sizes if there were no LTC cap. Practically, they show that debt service coverage is not a

limiting factor in either scenario – even with much smaller loans (on the order of $3M),

the DSCR would be well above 1.20. Thus, from a lender’s perspective, both scenarios are

very safe deals in terms of cash ﬂow robustness. The presence of the daycare income

and the PILOT (reducing taxes) contribute to this strong coverage.

● HUD Loan-to-Cost Limits and Equity Requirements: The more relevant comparison

comes from the HUD-imposed LTC caps. Scenario 1 is treated largely as a market-rate

project (with some aﬀordable component, but below the threshold for HUD’s higher

leverage category), so it is capped at 85% of cost for the loan. Scenario 2 qualiﬁes as a

fully aﬀordable/assisted project, so it can go up to 90% of cost adroccap.com. As a result,

Scenario 1’s actual loan amount is limited to ~$2.97M, requiring about $524k (15% of

cost) in equity, whereas Scenario 2 can obtain ~$3.14M in loan, needing only about

$349k (10% of cost) in equity. Scenario 2’s ability to carry more debt is a direct

consequence of policy incentives for aﬀordable housing – HUD recognizes the lower risk

and social beneﬁt, allowing higher leverage. The diﬀerence of ~$175k in equity could be

signiﬁcant for a project of this scale: Scenario 2 could potentially cover that gap with

additional soft funding or the developer’s own capital, which is a smaller ask than in

Scenario 1.

The table below summarizes and compares the ﬁnancial metrics for the two scenarios:

Financial Metric

Scenario 1: 60/40

Mixed-Income

Scenario 2: 100%

Aﬀordable (PBV)

Total Units (Market /

Aﬀordable)

45 units (27 market @ $1,200;

18 aﬀordable @ $800)

45 units (all PBV-assisted,

avg. ~$1,120 rent)

Eﬀective Gross

Income (annual)

$585,520

$626,560

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Net Operating Income

(annual)

$351,312

$375,936

Max. Supportable

Debt (by DSCR

1.20)

$5.06 million

$5.41 million

HUD 221(d)(4) Loan

Limit (LTC %)

85% of cost ≈ $2.97

million adroccap.com

90% of cost ≈ $3.14

million adroccap.com

Equity Required (Cost

– Loan)

$524,000 (≈15% of cost)

$349,000 (≈10% of cost)

(Note: Dollar values are rounded to the nearest thousand. Max supportable debt ﬁgures are

theoretical and exceed project cost; actual loan is capped by LTC as shown.)

As shown above, Scenario 2 produces slightly stronger ﬁnancial metrics across the board: higher

EGI and NOI, which in turn allow more debt ﬁnancing and require less equity. Both scenarios

produce surplus cash ﬂow above what is needed for debt service (indicated by DSCR > 2.0 at the

capped loan levels). From a purely ﬁnancial standpoint, the fully aﬀordable PBV scenario is

advantageous in that it leverages federal funding to minimize the local equity needed while still

generating enough income to comfortably cover expenses and debt. The mixed-income scenario,

on the other hand, relies on cross-subsidizing the aﬀordable units with the market-rate units’

higher rents – which it does successfully – but it doesn’t tap into voucher subsidies, so its overall

income is a bit lower. It also doesn’t qualify for the absolute highest LTC ﬁnancing, stopping at

85% rather than 90%, thereby requiring a somewhat larger equity slice.

Conclusion

In conclusion, the expanded analysis comparing a 60/40 mixed-income redevelopment versus a

fully aﬀordable (100% voucher-backed) redevelopment of the Transition West School

demonstrates that both approaches are ﬁnancially feasible under the given assumptions, but

they entail diﬀerent ﬁnancing structures and policy implications. Scenario 1 (mixed-income) yields

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a substantial NOI and would provide a mixed tenant base (which can be beneﬁcial for

neighborhood diversity and rent integration), but it requires about 15% of the project cost to be

covered by equity. Scenario 2 (fully aﬀordable with PBVs) achieves even higher eﬀective income

by utilizing subsidy, and it beneﬁts from HUD’s more favorable loan terms for aﬀordable housing

– resulting in only a 10% equity requirement and slightly higher debt leverage.

The rationale for exploring both approaches is grounded in balancing social goals and ﬁnancial

viability. The mixed-income strategy might be pursued if the developer or city prioritizes a blend

of income levels and wants some units at true market rent (perhaps to attract certain tenants or

ensure the project isn’t exclusively low-income). It still delivers aﬀordability (18 units) but counts

on market units for proﬁt. The fully aﬀordable strategy aligns with Detroit’s and HUD’s push to

increase aﬀordable housing supply; it takes full advantage of voucher payment standards (which

are robust in this area) to support the project ﬁnancially. It also likely pairs well with obtaining

PILOT tax abatements and other incentives designed for 100% aﬀordable projects honigman.com.

From a ﬁnancing perspective, Scenario 2 clearly maximizes the supportable debt and

minimizes the equity gap, which can be critical if the developer has limited capital or if public

housing funds (vouchers) are more readily available than tax credit allocations or market-rate

investors. The higher DSCR cushion in Scenario 2 means the project is extremely resilient to

downturns (the guaranteed rent makes the revenue stable even in weak markets). Scenario 1,

while requiring a bit more equity, still demonstrates strong ﬁnancial fundamentals – the presence

of market rents pushes the NOI high relative to cost. It might have a slightly higher upside if

market rents grow faster over time (since vouchers are tied to FMR adjustments, which are

average), but it also carries a bit more market risk.

In summary, the fully aﬀordable PBV scenario emerges as the more leveraged and subsidy-rich

option, reducing the burden on the developer’s equity and ensuring long-term aﬀordability of all

units. The mixed-income scenario is still quite robust and might be preferable if diversiﬁcation of

income streams or tenant mix is a goal. The expanded analysis, as structured above, provides a

clear view of these two pathways. It oﬀers stakeholders a quantitative basis to decide which

scenario aligns best with the project’s ﬁnancial goals and the community’s housing needs. Both

scenarios beneﬁt from the city’s contribution of the building and the inclusion of a

revenue-generating daycare amenity, and both would likely receive policy support (PILOT tax

abatements, etc.), underscoring that with creative ﬁnancing and design, the conversion of the

vacant school to housing is a promising investment in Detroit’s neighborhood infrastructure. The

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choice between the two approaches will ultimately depend on whether maximizing aﬀordability

(and leveraging vouchers) or maintaining a mixed-income proﬁle is the priority, but either way, the

redevelopment can be structured to achieve sustainable operations and meet its debt obligations

comfortably.

Detroit Multifamily Rehab Opportunities

(20+ Units)

Detroit’s apartment market oﬀers several large multifamily properties (20+ units) that are ripe

for full gut renovation, especially in neighborhoods on the upswing. Below we outline key

listings on major platforms (LoopNet, Zillow, etc.) that meet these criteria, focusing on

properties in improving areas and providing context for their neighborhoods. We also include a

comparison table and insights on promising districts for multifamily redevelopment.

Promising Neighborhoods for Multifamily Redevelopment

Detroit’s resurgence has been led by a few core areas, and investors target nearby

neighborhoods for value-add opportunities:

● Midtown/Cass Corridor: Home to Wayne State University, major hospitals, and cultural

institutions, Midtown has strong rental demand. Many historic buildings (e.g. along

Second Ave, Cass Ave) are being restored howardhanna.com. Midtown’s revival boasts

new retail, transit (QLINE streetcar), and rising rents, making surrounding properties

attractive for rehab.

● Brush Park & Downtown Fringe: Brush Park (between Midtown and Downtown) has

transformed “from 85% vacant… to 85% new construction & renovation” in recent

years youtube.com. Large pre-war apartments here (and just north of Downtown) beneﬁt

from proximity to sports arenas and entertainment. For example, a redevelopment on

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John R Street sits within 1–3 blocks of all three major stadiums (Comerica Park, Ford

Field, Little Caesars Arena) showcase.com and next to “City Modern,” an upscale new

development in Brush Park showcase.com.

● New Center/North End: Just north of Midtown, New Center and the adjacent North End

are seeing new investment (e.g. the QLine streetcar’s northern terminus and the Fisher

Building renovation). In nearby NW Goldberg/Core City (west of New Center), the

presence of Henry Ford Hospital’s $3 billion expansion is spurring

development colliers.com. The city is also oﬀering development incentives in these

areas colliers.com. Historic structures like former halls and schools are being marketed as

multifamily conversion opportunities in this district.

● Southwest Detroit (Corktown & Mexicantown): Southwest neighborhoods are bolstered

by Ford’s $740M investment in Corktown (redeveloping the Michigan Central Station

campus) and a vibrant Mexicantown community costar.com reuters.com. Properties near

these areas stand to gain from new jobs and infrastructure (e.g. the Gordie Howe

International Bridge to Canada). Springwells/Vernor area, a bit west of Corktown, remains

a thriving market with strong occupancy colliers.com, making value-add deals there

promising.

● Palmer Park/Avenue of Fashion: Northwest of the core, the historic Palmer Park

apartment district (near McNichols & Woodward) contains dozens of 1920s-era apartment

buildings. After decades of decline, revitalization is underway – developers have

acquired many structures to restore their “historic grandeur” modeldmedia.com. By

leveraging historic tax credits and aﬀordable housing funds, several buildings have been

renovated, with 80% of new units designated as aﬀordable modeldmedia.com. This area’s

proximity to the Livernois “Avenue of Fashion” corridor and Ferndale makes it a

candidate for future growth. (Notably, a portfolio of 16 Palmer Park apartment buildings is

currently listed for ~$13M loopnet.com, indicating large-scale rehab potential in this

district.)

● Highland Park (Enclave city within Detroit): Surrounded by Detroit’s North End, Highland

Park oﬀers very aﬀordable entry points for large buildings. While historically disinvested, it

sits along Woodward Avenue with easy freeway access elliman.com, and there are

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ongoing eﬀorts to stabilize the community. Investors banking on broader Detroit growth

see potential in Highland Park’s redevelopment prospects elliman.com (often at a fraction

of the cost of Midtown properties).

Comparison of Available Multi-Unit Rehab Listings

Below is a comparison of selected Detroit apartment buildings (20+ units) currently for sale that

need full renovation or signiﬁcant value-add work. These properties are largely vacant or

underoccupied, presenting a blank slate for redevelopment. All are located in areas with

improving market fundamentals:

Sources: Data compiled from LoopNet/CoStar listings and broker marketing

materials howardhanna.com showcase.com colliers.com colliers.com elliman.com. Pricing and unit

counts are current as of April 2025; availability is subject to change.

Notable Listings – Details & Context

Below we provide additional detail on each highlighted property, along with neighborhood

context explaining why each location is considered promising for a rehab project:

Sheridan Court & The Wellesley (Midtown Detroit)

Address: 4401–4417 2nd Ave & 651 W Hancock St, Detroit, MI 48201 (Midtown/Cass Corridor)

Units: 121 units total (two buildings) – Sheridan Court (90 units) and The Wellesley (31

units) howardhanna.com.

Asking Price: $12,499,000 howardhanna.com. Listed via court-appointed receiver (MLS

#20250003563) howardhanna.com.

Condition: Largely vacant historic apartment buildings. Some stabilization upgrades have been

made under receivership: new boilers, new roof, improved egress, lighting,

landscaping howardhanna.com. However, interiors need complete renovation (units are outdated

or gutted). The oﬀering includes an NEZ (Neighborhood Enterprise Zone) tax abatement

through 2033, which dramatically lowers operating costs for a new owner (saving an estimated

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$400k per year in taxes) howardhanna.com – a signiﬁcant incentive to redevelop. All oﬀers are

being considered, signaling motivation to transact howardhanna.com.

Neighborhood: Prime Midtown location – steps from Wayne State University and Detroit’s

Cultural Center (Detroit Institute of Arts, etc.) howardhanna.com. This area has seen surging

demand for apartments in recent years as young professionals and students ﬂock to Midtown.

New developments and rehabilitations in Midtown have very low vacancy rates. Sheridan Court is

on 2nd Ave, a short walk from the QLine streetcar and Midtown’s restaurants and shops. Given

Midtown’s ongoing renaissance (with rent growth expected to exceed 5% by

mid-2025) commercialsearch.com, a restored Sheridan/Wellesley complex could command strong

rents or condo sell-out values. Summary: A ﬂagship rehab opportunity in a proven high-growth

enclave, with big upside due to location and existing tax incentives.

“John R Apartments” (Brush Park / Downtown Adjacent)

Address: 2627 John R Street, Detroit, MI 48201 (Brush Park neighborhood)

Units: 72 apartments + ~4,500 sq ft ground-ﬂoor retail space showcase.com (LoopNet notes 76

units, likely counting some conﬁgured units diﬀerently).

Asking Price: Unpriced (oﬀ-market) – marketed by owner/broker inviting oﬀers (this property is

listed as “Price Upon Request” cityfeet.com).

Condition: Major redevelopment required. This is a large 1913-built apartment building with

retail, currently mostly vacant. About 63% of the apartments are unoccupied and 100% of retail

is empty, eﬀectively leaving a mostly unused structure showcase.com. The property is structurally

sound and “lined up for re-development” with its prime location showcase.com. It sits in both an

Opportunity Zone (federal capital gains tax incentives) and a Neighborhood Enterprise Zone

(local tax abatement), which are attractive for investors showcase.com. The plan would be a full

gut renovation of all units and buildout of the retail. Given its adjacency to high-end new

construction, a developer could reposition this as a more aﬀordable alternative to luxury

apartments next door, capturing spillover demand showcase.com.

Neighborhood: Brush Park, just north of Downtown, is one of Detroit’s hottest redevelopment

areas. In the past ﬁve years, Brush Park has seen hundreds of new apartments and condos (e.g.

City Modern project) transform what was once a near-vacant district youtube.com. This property is

within a few blocks of Little Caesars Arena, Ford Field, and Comerica Park (Detroit’s sports

venues) showcase.com, as well as theaters, dining, and the downtown business district. It’s

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extremely walkable – residents can access downtown oﬃces or Midtown amenities on foot or

via the QLine streetcar (station is one block away) showcase.com. The listing notes it’s “one of the

most well positioned re-development assets in the city” given that City Modern’s luxury units are

next door and not everyone can aﬀord those high rents showcase.com showcase.com. A

rehabbed John R project could oﬀer slightly more attainable rents in a top-tier location, ﬁlling a

niche. Summary: A centerpiece Brush Park property requiring a full gut rehab, with a location

that virtually guarantees demand once upgraded (due to proximity to downtown, arenas, transit,

and new development) showcase.com.

“Finn Hall” – 5961 14th St (NW Goldberg / New Center area)

Address: 5961 14th Street, Detroit, MI 48208 (NW Goldberg, near New Center)

Units: Up to 50 units (31,441 sq. ft. building). Notably, the site includes adjacent land that could

allow expansion to as many as 100 units total in a phase-two development colliers.com.

Asking Price: Negotiable/Unpriced. Available for sale or lease; the broker (Colliers) is seeking

proposals.

Condition: This property is a shell redevelopment in progress. The building – formerly known as

Finn Hall – is a prominent 3-story structure dating to the early 1900s colliers.com. It has already

undergone extensive base building work (new roof and other structural/stabilization

improvements) colliers.com. The interior is currently gutted/open, ready to be built out into

apartments. Zoning and layout allow for 50 units as-is, and the listing notes potential for adding

units on the included land or incorporating a mixed-use component (retail) on the ground

ﬂoor colliers.com. The City of Detroit is actively encouraging development here, even oﬀering

various incentives to buyers/developers in this neighborhood colliers.com (likely due to its

strategic location and need for investment). This ﬂexibility – sale or lease, residential or

mixed-use – means an investor could take over the project at its current stage and complete the

vision.

Neighborhood: NW Goldberg/Core City, near New Center. This area is just west of

Midtown/New Center and has been gradually improving with artistic projects (like True North’s

modern live-work pods) and rehabbed historic buildings. A major catalyst is the Henry Ford

Hospital just a few blocks away – Henry Ford is in the midst of a $3.1 billion expansion of its

medical campus colliers.com, expected to add jobs and demand for nearby housing. Additionally,

New Center (about 0.5–1 mile east) houses the Fisher Building, the upcoming Pistons

Performance Center, and other developments that spill economic activity into adjacent

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neighborhoods. The 14th Street corridor is still developing, but several buildings have recently

been renovated or are in planning, and the city’s incentive programs (such as Opportunity Zones,

Historic Tax Credits, etc.) can make the ﬁnancials of a gut renovation more feasible here.

Summary: Finn Hall oﬀers a “blank canvas” in a neighborhood on the rise, leveraging the

momentum of New Center and a massive hospital investment. The upside includes potentially

doubling the unit count (with new construction on the site) and creating a mixed-use hub in an

area with few quality rental options currently – essentially getting in early on the

neighborhood’s revival.

Lansing Apartments – 2199 Lansing St (Southwest Detroit)

Address: 2199 Lansing Street, Detroit, MI 48209 (Southwest Detroit – Springwells area, near

Mexicantown)

Units: 54 units (mid-rise apartment building, 36,000+ sq ft) colliers.com.

Asking Price: $2,990,000 (about $55k per unit) colliers.com.

Condition: A classic 1920s apartment building operating at reduced capacity – approximately

60% occupied during marketing colliers.com. It’s described as a “value-add investment

opportunity”, with some modernization already started on the property colliers.com. The units

likely require updates (kitchens, baths, ﬁxtures) to reach full market rent, and the vacant units

need rehab and lease-up. The structure oﬀers “timeless appeal with modern conveniences” after

renovation colliers.com, suggesting features like brick exterior and possibly some restored interior

details. Because it’s partially occupied, a buyer can have cash ﬂow during renovations (renovate

units in phases). With CM zoning (likely allowing some commercial use), there may be options to

add amenities or repurpose space. Overall, heavy renovations are needed but not a total gut job

– more of a deep value-add to bring a dated building to contemporary standards and ﬁll it to

95-100% occupancy.

Neighborhood: Situated in Southwest Detroit’s Springwells neighborhood, close to the

Mexicantown main strip and West Vernor corridor (known for its restaurants and vibrant street

life). The listing notes it’s in a “thriving market” oﬀering a blend of history and future

prosperity colliers.com. Southwest Detroit has a strong community and has not seen the

population exodus that other parts of the city did – hence high population density and steady

rental demand loopnet.ca loopnet.ca. This particular property is a short drive from Corktown

(where Ford’s Michigan Central tech campus is under development) and about 10 minutes from

Downtown. Also, the new Gordie Howe International Bridge (expected to open by 2025-26) is

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being built a few miles south; this huge infrastructure project is bringing jobs and may increase

demand for housing in all of Southwest Detroit. In the immediate area, many small businesses

and community developments (like renovated storefronts, parks, etc.) are ongoing. Summary:

Lansing Apartments is a more stabilized asset in an authentic, up-and-coming neighborhood. It’s

not a full shell like some Midtown buildings, but the needed renovation and lease-up present a

signiﬁcant upside. The neighborhood’s growth is tied to grassroots revitalization and big projects

(Ford campus, new bridge) that bode well for property values.

280 Richton St (Highland Park) – “Richton Apartments”

Address: 280 Richton Street, Highland Park, MI 48203 (enclave city within Detroit)

Units: 34 residential units + 4 commercial storefront units (38 units total) elliman.com. Four

stories, ~23,800 sq. ft. loopnet.com.

Asking Price: $459,995 (recently reduced; was listed around $595k

previously) youtube.com elliman.com. This is approx. $13k per unit – extremely low price,

reﬂecting the condition.

Condition: Completely vacant and gutted. This property is essentially a brick shell that has

been “prepared for restoration” elliman.com. According to the listing, the building has already

been cleared out internally, likely down to the studs. All 34 apartments plus the 4 retail bays need

full build-out (mechanicals, electrical, plumbing, ﬁnishes). It’s a major project but also means a

developer can conﬁgure the spaces as desired (even the retail could potentially be converted to

more residential units, per the broker’s note) elliman.com. An added bonus: the sale includes a

vacant lot across the street (279 Richton) for parking or new construction elliman.com. This

could be used to satisfy parking requirements or even to build additional units or amenities for

the complex. Essentially, the prior owner stabilized the exterior and aggregated the lot, but left

the heavy lifting of interior rehab to the next investor.

Neighborhood: Highland Park, which is a small city encircled by Detroit. It lies along the

Woodward Avenue corridor about 4 miles north of Downtown. Highland Park has a tough past –

population decline, high poverty, infrastructure issues – but its location is strategically central

(between New Center, Hamtramck, and the University District). The listing itself pitches Highland

Park as oﬀering “aﬀordability, potential appreciation, steady rental demand, [and]

redevelopment prospects” for investors elliman.com. Indeed, being just oﬀ Woodward, the

building is minutes from the North End (where new shops and arts venues are popping up) and a

short drive up Woodward to Ferndale. The Davison Freeway (M-8) is a block away, giving quick

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east-west access, and I-75 and the Lodge (M-10) freeways are nearby as well elliman.com. There

are early signs of reinvestment in Highland Park – for instance, a large former school was

converted to a community center, and some urban farming and solar projects have taken root.

But it remains speculative, and any project here is pioneering. That said, the low cost basis and

inclusion of extra land oﬀer creative developers a chance to create needed quality housing with

relatively low overhead. Summary: 280 Richton is a high-risk, high-reward play. It requires a full

gut rehab from scratch, but at a rock-bottom price. If completed, it would deliver 34+ units in a

location that could catch the wave of reinvestment as the Midtown/New Center and Ferndale

trends radiate outward. The presence of ground-ﬂoor commercial spaces also means a rehab

could restore some neighborhood retail, contributing to Highland Park’s resurgence. Investors

should weigh the surrounding blight vs. the central location – the potential upside is

signiﬁcant if the neighborhood improves over time elliman.com.

Conclusion and Outlook

Detroit’s real estate landscape in 2025 oﬀers compelling opportunities for investors willing to

undertake full gut renovations of multifamily buildings. The most promising areas for such

projects tend to be those on the edge of well-established neighborhoods – where demand is

growing but property values are still catching up. As detailed above, districts like Midtown,

Brush Park, New Center, Southwest, and even enclaves like Palmer Park and Highland Park all

have examples of large apartment buildings awaiting transformation.

The common thread is historic structures with great bones in locations that are beneﬁting from

Detroit’s ongoing revival. Buyers can often acquire these properties at a low per-unit cost and,

by investing in a full rehabilitation, create desirable housing that taps into pent-up demand. For

instance, properties near Midtown/Downtown can attract young professionals and students,

while those in Southwest can serve a community that’s economically stable and culturally vibrant.

Tax incentives and abatements (NEZs, Opportunity Zones, Historic Tax Credits) are frequently

available, as the city and state continue to encourage redevelopment of long-vacant

buildings showcase.com howardhanna.com.

Investors should conduct thorough due diligence on neighborhood plans and upcoming

developments (e.g. transit expansions, new employers, city initiatives) to gauge future growth. As

noted, projects like Ford’s Michigan Central Station campus in Corktown and the new Gordie

Howe Bridge are likely to boost their surrounding areas. Similarly, hospital expansions (Henry

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Ford Hospital) and institutional growth (WSU, Tech startups in Midtown) will increase demand for

housing nearby. Even in more speculative areas, the sheer aﬀordability of Detroit’s multifamily

properties – often trading far below replacement cost – provides a cushion and opportunity for

outsized returns if the area turns around.

In summary, Detroit’s up-and-coming neighborhoods oﬀer a unique combination of low entry

prices and improving fundamentals. The listings we’ve highlighted – from a grand Midtown

complex to a humble Highland Park shell – each represent a chance to participate in Detroit’s

resurgence. With careful planning, suﬃcient renovation budgets, and a bit of vision, these

once-neglected apartment buildings can be transformed into desirable, income-generating

assets, all while contributing to the ongoing story of Detroit’s urban renewal.

Sources:

● LoopNet/CoStar Listings for Detroit Multifamily properties (accessed April 2025) –

including Sheridan Court & Wellesley howardhanna.com howardhanna.com, John R

Apartments showcase.com showcase.com showcase.com, 5961 14th St (Finn

Hall) colliers.com colliers.com, 2199 Lansing St colliers.com, and 280 Richton St elliman.com.

● Colliers International oﬀering memoranda for 5961 14th St colliers.com colliers.com and

Lansing Apartments colliers.com.

● Douglas Elliman Commercial listing for 280 Richton (Highland

Park) elliman.com elliman.com.

● Neighborhood context: Model D Media feature on Palmer Park

revival modeldmedia.com modeldmedia.com; Curbed Detroit and Reuters coverage of

Ford’s Corktown project detroit.curbed.com reuters.com; Walkscore & public data via

LoopNet (Walk/Bike scores) showcase.com; Downtown Development Authority reports on

Brush Park (via Urbanize) youtube.com; and various local news sources highlighting

Detroit development trends.

Sources

Below is a comprehensive comparison of all ﬁve apartment rehab opportunities we discussed in

Detroit, highlighting key data points (10 columns) for each.

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After the table, you’ll see an analysis of which three appear most promising based on size,

location, up-and-coming potential, and incentives.

Comparison Table of Detroit Multifamily Rehab Prospects

(20+ Units)

Which Are the Top Three?

From the investor perspective (“larger buildings” with strong upside and “up-and-coming” areas),

these three stand out:

1. Sheridan Court & The Wellesley (Midtown)

○ Why? It’s the largest in unit count (121) and sits in arguably the strongest

micro-market (Midtown). Already has a Neighborhood Enterprise Zone (NEZ) tax

abatement in place, saving hundreds of thousands per year in property taxes.

Demand is proven here, so post-renovation occupancy and higher rents are likely.

Although the purchase price is high, it’s the best-located property.

2. John R Apartments (Brush Park)

○ Why? Brush Park is one of Detroit’s hottest redevelopment corridors near

downtown stadiums. John R oﬀers ~72–76 units plus retail, with potential for a

signature mixed-use renovation. It’s mostly vacant, making it easier to gut and

reconﬁgure. Located in an Opportunity Zone + NEZ area, it also beneﬁts from

extremely high visibility and walkability. Potential for premium rents or a condo

conversion given proximity to new luxury projects.

3. Finn Hall (NW Goldberg)

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○ Why? Although it currently has ~50 units, it could expand to ~100 due to the

adjacent land. It’s in a rapidly improving district near New Center and the $3B

Henry Ford Hospital expansion. The city is promoting NW Goldberg development

with incentives. This is more pioneering than Midtown/Brush Park but oﬀers

signiﬁcant upside if the neighborhood sees continued growth.

Honorable Mentions:

● Lansing Apartments (Southwest): A solid mid-size (54 units) with partial occupancy,

moderate price, and strong Southwest Detroit neighborhood fundamentals. It may be less

“huge upside” than the top three, but it’s a safer, more stable market with consistent

demand.

● Richton Apartments (Highland Park): Extremely cheap per unit (~$13k/unit) but also very

high risk. Highland Park requires a signiﬁcant neighborhood turnaround to realize large

returns. Could be a great “ground-ﬂoor” play, but it lacks the proven momentum of

Midtown or Brush Park.

Bottom Line

● If you want the biggest guaranteed payoﬀ (and can handle a higher upfront purchase

price), Sheridan Court is #1 for scale and location.

● If you want an iconic property near stadiums/downtown with tax advantages and a

near-guarantee of rising rents, John R Apartments is the star pick.

● If you seek a truly up-and-coming area at a lower cost basis (and can handle a more

pioneering project), Finn Hall near New Center oﬀers major potential, including

expansion capacity.

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Redevelopment Candidates: Large Vacant

Buildings in Detroit

Detroit has numerous large vacant or distressed buildings that could be transformed into

mixed-use or residential campuses (similar in spirit to a “Serenity Village” project). Below we

identify several top candidates meeting the desired criteria – vacant schools, abandoned

factories, community centers or former retail sites – all roughly 30,000+ sq. ft., located in

stabilizing Detroit neighborhoods (often designated Opportunity Zones), and requiring

signiﬁcant rehabilitation. We include both city-owned properties (many oﬀered through the

Detroit Land Bank or City RFPs) and privately-held sites, with available details on size, status, and

pricing.

City-Owned Vacant School Campuses

Detroit’s city government (and its Land Bank Authority) owns dozens of closed school buildings

now being marketed for redevelopment chalkbeat.org. These facilities often feature solid historic

construction, large footprints (often 10–20k+ sq. ft. per ﬂoor) and several acres of land, making

them ideal for conversion into housing, community hubs, or mixed-use campuses. Many are in or

near revitalizing neighborhoods where the city is encouraging investment. The city’s 2020 study

of vacant schools identiﬁed those with viable structures and good redevelopment

potential chalkbeat.org. Below are prime examples:

The former George Washington School (13000 Dequindre) in Banglatown – a single-story

87,000 sq ft brick school on a 5.46-acre site with murals adorning its facade – is city-owned and

being oﬀered for just $299,000 crexi.com crexi.com. It sits in the Campau/Banglatown Strategic

Neighborhood Fund area (an up-and-coming immigrant enclave in northeast Detroit). The

building is a vacant historic school (not oﬃcially landmarked) in shell condition, ready for a full

rehab crexi.com. With its expansive green space and secluded campus-like setting,

redevelopment possibilities are wide open – the city welcomes proposals ranging from new

educational or training centers to multi-use residential/commercial hubs crexi.com. By-right zoning

for former schools allows ﬂexible reuse (light industrial, housing, makerspace, etc.), so mixed-use

housing with community space or a creative “village” concept would be feasible

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here crexi.com crexi.com. The site’s location is advantageous – tucked in a stable neighborhood

near the Davison and I-75 freeways, adjacent to the planned Joe Louis Greenway bike trail, and

just a short drive from Midtown and New Center crexi.com. This property is actively on the market

(open house tours were held in Jan. 2025) crexi.com and represents a top opportunity to create a

community campus in a revitalizing area. (Size: 87k sf; Price: $299k; Status: City

listing) crexi.com crexi.com. Redevelopment potential: education campus, arts/maker incubator,

or mixed-income housing with parkland crexi.com.

The former Detroit “Transition West” School (4800 Collingwood St.) – also known as the old

McKerrow Intermediate – is a 2-story, 58,223 sq ft brick school building (circa 1926) on a

3.14-acre fenced campus in the Dexter-Linwood area loopnet.com. This property (vacant since

2011) is structurally sound and retains its handsome Collegiate Gothic facade and central

auditorium. It lies in NW Detroit near the Russell Woods neighborhood (an area seeing some

reinvestment). The City of Detroit has oﬀered this site for sale (it was listed at $250,000

asking) hub.arcgis.com. Like other surplus schools, it can be adaptively reused under R2 zoning

(e.g. as apartments, a community center, or live/work space). Neighborhood context: It’s on a

residential street with occupied homes and adjacent lots that could allow parking or expansion.

Redevelopers could envision converting classrooms to loft-style residences or co-working

studios, and the auditorium/gym to community facilities. (Size: 58k sf; Price: ~$250k; Status:

City-owned, marketed) loopnet.com hub.arcgis.com. Redevelopment potential: Multifamily

housing (e.g. ~40–50 lofts) or a community hub with mixed uses (recreation, education,

nonproﬁt oﬃces).

Two East Side school campuses in the Jeﬀerson-Chalmers area also stand out as aﬀordable

“blank slates” for redevelopment. Hosmer Intermediate School (4365 Newport St.) and Andrew

Jackson Intermediate (3970 Marlborough St.) are both 1920s-era, 2-story school buildings on

3.5+ acre sites in Detroit’s lower east side (Fox Creek neighborhood). Each is vacant and owned

by the city, which is currently listing the land (with the building) for $99,000 crexi.com crexi.com –

essentially a giveaway price for ~50,000 sf structures plus acreage. These schools are located

in a historically stable area near Jeﬀerson Avenue that the city has targeted for revitalization

(Jeﬀerson-Chalmers is a designated redevelopment area). The surrounding neighborhood, while

struggling with some blight, has seen recent investments in ﬂood resiliency and small business

revival, and it borders the aﬄuent Grosse Pointe communities. Any redevelopment here could tap

into that momentum. Potential projects could include aﬀordable apartments or senior housing,

leveraging the large ﬂoor plates, or a “village” of community services – for example, co-locating

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a daycare, job training center, and artist live/work housing on site. The Hosmer and Jackson

school buildings likely need full gut rehabilitation (they have been open to the elements and

vandalized for years chalkbeat.org chalkbeat.org), but their basic structure is intact. At such low

acquisition cost, a developer could invest in stabilization and still be positioned to proﬁt from new

uses. (Size: ~40–60k sf each; Price: $99k; Status: City-owned, for sale crexi.com crexi.com.)

Redevelopment potential: Housing campus (e.g. veterans or artists’ housing) with on-site

community amenities, or a mixed-use conversion (studios, gallery, and nonproﬁt oﬃces).

Large Privately-Owned Sites for Redevelopment

Not all opportunities are city-owned. Some privately-held abandoned buildings in Detroit’s

improving districts could anchor major redevelopment as well:

● Fisher Body Plant No. 21 (6051 Hastings St.) – New Center/North End. This hulking

former auto factory (~600,000 sq. ft., six ﬂoors) michiganchronicle.com had been Detroit’s

most notorious abandoned industrial building for decades. It’s located in the Medbury

Park area just north of Midtown, surrounded by other redevelopment projects. In 2022, a

local development team announced a $134 million plan to convert Fisher Body 21 into

433 apartments plus ground-ﬂoor retail and co-working

space michiganchronicle.com michiganchronicle.com – one of Detroit’s largest ever

African-American-led redevelopment deals. The building was acquired privately (sale

price undisclosed) and is now in pre-construction, illustrating the huge potential of these

big vacant structures in rising neighborhoods. Once a graﬃti-covered ruin with open

ﬂoors and no windows (see image below), Fisher 21 is being reborn as “Fisher 21 Lofts,”

showing that even severely blighted factories can become thriving mixed-use

campuses given the right investment. (Size: 600k sf; Status: Privately acquired,

redevelopment in progress) michiganchronicle.com. This success story underscores the

redevelopment potential of Detroit’s other large industrial relics – for example, the

massive Packard Plant (an 3.5 million sq. ft. former auto plant on the east side) could

theoretically host an entire residential village, though it currently sits in a highly blighted

zone and would require extraordinary investment.

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The long-vacant Fisher Body Plant 21 (seen here in 2022) is a 600,000 sq. ft. factory building in

Detroit’s New Center area. Developers plan to transform it into 433 apartments with retail – a

$134 million mixed-use project michiganchronicle.com michiganchronicle.com.

● Former Detroit AMC Headquarters (14250 Plymouth Rd) – Far West Detroit. This is a

sprawling 1.4 million sq. ft. complex on 56 acres that once housed American Motors

Corporation. It has been vacant for over a decade, posing a redevelopment challenge.

The surrounding area (Plymouth Rd. industrial corridor) is not as immediately “hot” as

Midtown, but it’s strategically located near I-96 and stable neighborhoods like

Grandmont–Rosedale. A Missouri-based developer recently struck a deal to demolish the

ruined AMC buildings and construct new industrial facilities on the

site historicdetroit.org. While that plan favors new construction over reuse, it underscores

the site’s attractiveness for large-scale projects (the new development is projected to be a

790,000 sq. ft. modern logistics center) historicdetroit.org. For a visionary looking to create

a residential or mixed-use campus, such brownﬁeld sites could be re-imagined (e.g.

building a self-contained “village” of housing on a cleaned 50-acre campus). However,

in the case of AMC HQ, the chosen path is industrial reuse, not housing, given market

conditions. (Size: 1.4M+ sf on 56 ac; Status: Privately owned, slated for new industrial

development) historicdetroit.org. Redevelopment potential (if not demolished): Large

campus – e.g. a tech business park or institutional/residential compound – but current

project is industrial.

● Northwest Campus Properties (Former Redford HS / Cooley HS) – NW Detroit. Detroit’s

northwest side has a couple of prominent empty school campuses that are not yet

redeveloped. Cooley High School (located at 15055 Hubbell St.) is an architectural gem –

a 1928 Collegiate Gothic high school of over 320,000 sq. ft. on ~18 acres – in the Old

Redford area. The neighborhood is somewhat challenged but has pockets of strength

(nearby Old Redford commercial district and Arts & Tech Academy). A nonproﬁt oﬀered

$400k–$1M to buy Cooley and turn it into a community hub, but the school district (which

owns it) rejected the sale in 2023 chalkbeat.org clickondetroit.com. Cooley remains a top

candidate for future redevelopment: it’s structurally sound and visually striking, and could

anchor a Westside community campus (e.g. mixed-income apartments, recreation center,

and nonproﬁt oﬃces). Redford High School’s former campus (on the west side as well)

was partially reused – a portion became a new high school and a Meijer store – but any

remaining vacant structures or land there could also be repurposed. These large school

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sites in stable outer neighborhoods oﬀer room for “mini-village” developments (housing

+ retail + park space). They illustrate that not only inner-city neighborhoods but also

outlying Detroit areas have big redevelopment opportunities if ownership issues can be

resolved. (Cooley High: 322k sf; Status: DPS-owned, vacant; Potential: community hub or

mixed housing).

The table below compares top candidate properties by key metrics:

Property

(Address)

Size

(SF)

Location /

Neighbor

hood

Buildi

Type

Asking

Price

Status

Redevelopmen

t Potential

Former

Washington

School (13000

Dequindre

St) crexi.com

87,00

Banglato

wn (NE

Detroit) cr

exi.com

1-stor

vacan

scho

$299,000

crexi.com

City-owned; for

sale crexi.com

Mixed-use

campus

(housing, edu.,

makerspace) cre

xi.com

Former

Transition West

(McKerrow)

School (4800

Collingwood

St) loopnet.com

58,22

Dexter-Lin

wood

(NW) loop

net.com

2-stor

vacan

scho

~$250,00

0 hub.arcg

is.com

City-owned; for

sale (RFP)

Community

center or loft

apartments (2+

acres land)

Hosmer

Intermediate

School (4365

Newport

St) crexi.com

~50,0

00†

Jeﬀerson-

Chalmers

(East Side)

2-stor

vacan

scho

$99,000 c

rexi.com

City-owned; for

sale

Housing or

community hub

(3.5 acres

campus)

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Jackson

Intermediate

School (3970

Marlborough

St) crexi.com

~50,0

00†

Jeﬀerson-

Chalmers

(East Side)

2-stor

vacan

scho

$99,000 c

rexi.com

City-owned; for

sale

Housing or

mixed-use

campus (3.6

acres land)

Fisher Body

Plant 21 (6051

Hastings

St) michiganchro

nicle.com

600,0

New

Center /

North End

6-stor

factor

shell

N/A

(private)

Privately

owned; rehab

progress michig

anchronicle.co

433 lofts + retail

planned

(project $134

M) michiganchro

nicle.com

† Exact building square footage for Hosmer and Jackson schools not publicly listed; estimated

from 3.5+ acre footprint and 2-story layout.

Sources: Data compiled from property listings and city

records crexi.com crexi.com crexi.com crexi.com loopnet.com, and news on redevelopment

plans michiganchronicle.com michiganchronicle.com.

Conclusion

Each of these properties – whether a vacant neighborhood school or an enormous abandoned

factory – presents a transformative redevelopment opportunity. They oﬀer the space to create

a self-contained campus with multiple uses (housing, education, community services, small

business, light industry) and to do so in a way that supports Detroit’s ongoing revitalization of its

neighborhoods. City-owned sites like the Washington, Transition West, Hosmer, and Jackson

schools come at bargain prices and are located in areas with community support for new

investment chalkbeat.org chalkbeat.org. Privately-driven projects like the Fisher Body 21

conversion show that, with suﬃcient capital, even Detroit’s most distressed structures in

stabilizing areas can be reinvented into thriving mixed-use developments.

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Serenity Village Detroit

For a “Serenity Village”-style vision – i.e. a comprehensive residential campus with supportive

services – the former schools are particularly well-suited (ample land for gardens, recreation, and

expansion, plus solid frameworks for dormitory-style residences or community facilities).

Meanwhile, a site like Fisher Body 21 demonstrates the market potential for large-scale

residential reuse in Detroit when the location is favorable and incentives align. By focusing on

these large, structurally viable but underutilized buildings in emerging neighborhoods, a

developer or organization can both revitalize the property and deliver much-needed housing

and community amenities to Detroit residents. Each candidate above oﬀers a unique canvas on

which to build a new mixed-use community – turning Detroit’s past architectural assets into future

“villages” of hope and opportunity.

References: Detroit Land Bank and City of Detroit vacant property listings crexi.com crexi.com;

Crexi/LoopNet oﬀering memoranda for school sites crexi.com hub.arcgis.com; news coverage of

redevelopment projects michiganchronicle.com michiganchronicle.com; and the City’s Historic

Vacant Schools Study ﬁndings chalkbeat.org chalkbeat.org.

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