A recent case I consulted on has been on my mind. A person looking for a two-bedroom condo in Ann Arbor calculated their monthly profit based only on the rent, without considering property taxes and management fees. To put it simply, the rent coming into the bank account isn't all theirs. It becomes clearer when we look at the Ann Arbor market.

According to a RentCafe survey, the average rent in Ann Arbor in 2026 is projected to be $1,725 for studios, $1,650 for one-bedroom apartments, and $1,973 for two-bedroom apartments (rentcafe.com, based on 2026 data). A Zumper survey shows an overall average of $2,007 (zumper.com). The area is close to the University of Michigan, so there is a steady demand from students and visiting scholars, and vacancies tend to fill quickly at the start of each semester. However, rental prices can vary significantly depending on the neighborhood, so I hope you won't make judgments based on just one area's numbers.

To get the real cash flow, you need to add property taxes. The average effective tax rate in Michigan is around 1.28% (propertytaxrates.org, based on 2026 data). Properties in Washtenaw County often have slightly higher rates, so it's best to check the actual tax bill for accuracy. If you forget to account for this tax when calculating cash flow, it may appear that the rent is good, but you could actually be in the red.

Michigan is relatively landlord-friendly. Under the Michigan Rent Control Preemption Act (MCL 123.411) enacted in 1988, local governments cannot individually impose rent control (hemlane.com). However, tenant protection provisions such as notice periods and prohibitions on retaliatory rent increases are still in place, so be sure to pay attention to these when drafting contracts.

Investment property loans have different conditions than primary residence loans. A down payment is typically required to be between 15% and 25%, and a credit score of at least 620 will get you in the door, but you'll need a score above 740 to receive favorable interest rates. The interest rates themselves are often set 0.5 to 0.75 percentage points higher than those for primary residences (fanniemae.com, freddiemac.com). Even in a steady rental market like Ann Arbor, the loan conditions still vary.

To have rental income recognized during the loan assessment, you'll need a lease agreement or a rent schedule from an appraisal, and banks typically only count about 75% of the expected rent as income (fanniemae.com). The 1% rule can help simplify your decision-making. The rule of thumb is that if you can expect about 1% of the purchase price in monthly rent, the cash flow is likely to be healthy, though it's not an absolute standard and can serve as a starting point. Comparing the cap rate, which is the net operating income divided by the purchase price, can also help you gauge which properties are better within the area.

When you add in landlord insurance, property management fees of 8% to 12% of the rent if you hire a management company, and maintenance costs estimated at about 1% of the property value annually, you can see what your actual net profit will be. It's also helpful to know that when you sell later, you can defer capital gains taxes by reinvesting in like-kind properties using a 1031 exchange (irs.gov).

Ann Arbor is a region of interest for Korean families looking to live there, so it's common to see properties purchased for investment that are later converted to primary residences when children reach school age. If you have such plans, it's wise to check school district ratings using metrics from GreatSchools or Niche in advance. However, school district boundaries change frequently, so be sure to verify which school the specific address is assigned to before purchasing.

If you're considering moving to Ann Arbor from another state and investing at the same time, it's safer not to carry over your previous state's perceptions of property taxes or insurance rates. Michigan's property tax system does not follow market value increases directly, and there is a set cap on annual increases, so the longer you hold a property, the more the actual market value can diverge from the taxable value. The taxable value at the time of purchase directly affects your future tax burden, so it's helpful to review recent sales tax changes before making an offer.

Ultimately, when choosing an investment property in Ann Arbor, it seems realistic to consider not just the rental numbers but also property taxes, management fees, and loan conditions. This article is not investment or legal advice, and I recommend consulting with real estate and accounting professionals, and immigration experts if necessary, before finalizing any contracts.