[DSCR](/blog/what-is-dscr-ratio) Loans in Ann Arbor, Michigan: Investing in the Big Ten's Premier College Town

Ann Arbor is one of America's most reliably excellent real estate markets. Home to the University of Michigan — consistently ranked among the world's top 25 universities — Ann Arbor generates extraordinary and perpetual rental demand from over 47,000 students, thousands of university staff, and a growing technology and healthcare sector that positions the city well beyond its college-town identity.

For income investors, Ann Arbor has two faces: the premium student rental market near Central Campus and the professional rental market serving the tech and healthcare ecosystem. Both segments support DSCR loan financing, though they require different investment approaches.

[DSCR loans](/blog/dscr-loan-guide) — which qualify borrowers based on property income rather than personal W-2s or tax returns — have become the financing vehicle of choice for investors building Ann Arbor portfolios. This guide covers everything you need to know about DSCR lending in this premier Michigan market.

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Why Ann Arbor Is a Premium DSCR Investment Market

University of Michigan: 200 Years of Stability

The University of Michigan has operated continuously since 1817. With an endowment exceeding $21 billion and status as one of America's premier research universities, U of M is as close to a permanent institution as real estate markets get. The university's enrollment doesn't fluctuate with economic cycles the way a private employer might — it's a structural, perpetual source of housing demand.

Student rental demand near Central Campus is particularly strong: University-owned housing has a lottery system, and thousands of undergraduates end up in the private rental market each year. This creates year-round occupancy for well-positioned rental properties.

Tech and Healthcare Economy

Ann Arbor's economy has diversified well beyond academia:

• Michigan Medicine: U of M's health system employs over 30,000 people
• Google: Significant Ann Arbor office with hundreds of employees
• Ford Motor Company: Research and innovation centers in and around Ann Arbor
• Pfizer: Long-standing major employer in the area
• Emerging tech startups: Ann Arbor consistently produces tech spinoffs from U of M research

This professional employment base creates rental demand from high-income tenants who drive DSCR performance in the non-student submarket.

Limited Housing Supply

Ann Arbor's urban growth boundary and neighborhood character preservation create structural supply constraints. The city cannot easily expand horizontally, meaning rental supply growth is limited while demand continues to rise. This supply-demand imbalance supports rent growth and low vacancy rates.

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Ann Arbor DSCR Loan Calculations

Ann Arbor's higher price points (compared to the broader Michigan market) make DSCR math tighter than, say, Detroit or Grand Rapids. However, the premium rents near campus offset higher acquisition costs:

Campus area investment example (Burns Park neighborhood):

• 4-bedroom house near Central Campus: $650,000
• 25% down: $162,500
• Loan amount: $487,500
• Monthly PITI at 7.5%: ~$4,000
• By-the-room rent (4 rooms × $1,200/room): $4,800
• DSCR: 4,800 ÷ 4,000 = 1.20x ✓

Professional neighborhood example (Old Fourth Ward):

• 2-bedroom condo: $375,000
• 20% down: $75,000
• Loan amount: $300,000
• Monthly PITI: ~$2,450
• Market rent (professional): $2,200–$2,600
• DSCR (high end): 2,600 ÷ 2,450 = 1.06x (approvable at some lenders)

By-the-room student rental is the most reliable path to strong DSCR ratios in Ann Arbor. Lenders may scrutinize per-room income structures; see DSCR loans for rent-by-room properties for guidance.

For the full [DSCR calculation](/blog/how-to-calculate-dscr) methodology, see how to calculate your DSCR ratio.

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Ann Arbor Neighborhoods for DSCR Investment

Central Campus Area (Burns Park, Kerrytown, Old Fourth Ward)

The premium student rental market. Walking distance to U of M's main buildings. Properties here command the highest per-bedroom rents in Ann Arbor — often $1,100–$1,500/bedroom for renovated spaces. Very low vacancy. High acquisition prices but strong DSCR achievability through by-the-room rental.

Best property types: 3–5 bedroom single-family homes, small multi-units

North Campus Area

Adjacent to U of M's North Campus (engineering, art, music schools). Slightly more affordable than Central Campus area but still strong student demand. Proximity to the biomedical research district adds professional rental demand.

Best property types: Condos, 2–3 bedroom homes

Medical Campus / Hospital Area

Within walking distance of Michigan Medicine. Constant demand from medical students, residents, and hospital staff. The 24/7 hospital employment cycle creates year-round occupancy without academic-year seasonality.

Best property types: Condos, 1–2 bedroom apartments, small multi-units

Ypsilanti (Adjacent Market)

Technically a separate city (Ypsilanti), but directly adjacent to Ann Arbor with Eastern Michigan University anchoring its own student rental demand. Much lower acquisition prices (often 40–50% of comparable Ann Arbor properties) with improving fundamentals as Ann Arbor's growth spills eastward.

Best for: DSCR investors seeking better cash-on-cash returns who accept more management intensity.

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Michigan-Specific Lending Considerations

Michigan Tenant Laws

Michigan has landlord-friendly laws compared to many coastal states. Security deposit limits, eviction procedures, and landlord-tenant rules favor property owners, which DSCR lenders view positively from a risk perspective. For state-level context, see our Michigan DSCR loans guide.

Property Taxes

Michigan's property taxes are calculated based on "taxable value" which increases at the rate of inflation (not market value) until the property is sold, at which point it resets to 50% of assessed market value (State Equalized Value). When you purchase an Ann Arbor property, expect property taxes to increase significantly from the prior owner's bill. This is critical to model correctly in your DSCR calculation — use current purchase-price-based tax estimates, not the seller's tax bill.

Detroit vs. Ann Arbor DSCR Strategy

Michigan investors often have to choose between the two markets. Ann Arbor offers stronger appreciation, higher-quality tenants, and lower management risk. Detroit offers significantly better cash flow and cash-on-cash returns but with higher management intensity. Many experienced Michigan DSCR investors hold both: Detroit for cash flow, Ann Arbor for appreciation.

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[DSCR Loan Requirements](/blog/dscr-loan-documentation-checklist) in Ann Arbor

Student rental note: Some lenders apply additional vacancy adjustments to student rentals, assuming a 2–3 month annual vacancy during summer. Others accept 12-month leases with students as evidence of year-round occupancy. Ask your lender specifically how they handle student rental income in Ann Arbor.

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Financing Multi-Unit Properties Near U of M

Multi-unit properties (duplexes, triplexes, and quads) near Central Campus are among Ann Arbor's most prized investments. They're expensive — a well-positioned quad can list for $1.5M–$2.5M — but they produce the cash flow to support strong DSCR ratios.

Small apartment example:

• 6-unit property near campus: $1,800,000
• 25% down: $450,000
• Loan amount: $1,350,000
• Monthly PITI: ~$11,000
• Market rent (6 units × $2,200): $13,200
• DSCR: 13,200 ÷ 11,000 = 1.20x ✓

Note: Properties with 5+ units require commercial DSCR or bank financing, not residential DSCR loans. See our guide on DSCR loans for 5+ unit properties.

For 2–4 unit investment properties, residential DSCR loans apply and the process is streamlined.

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Building Your Ann Arbor DSCR Portfolio

Starting strategy for new investors: Begin with a 3–4 bedroom single-family home in the Medical Campus or North Campus area. By-the-room rental to medical students or U of M graduate students produces strong DSCR ratios at manageable acquisition prices ($400K–$550K range). Use this property to build lending relationships before scaling.

Scale strategy: Use DSCR refinances to extract equity as Ann Arbor appreciation compounds. Ann Arbor's median home price has historically grown 3–5% annually, significantly ahead of national averages. Equity can be redeployed into additional DSCR properties, in Ann Arbor or in lower-cost Michigan markets like Grand Rapids or Kalamazoo.

For a full framework on portfolio scaling with DSCR financing, see [[DSCR loan portfolio](/blog/dscr-loan-portfolio-scaling) scaling guide](/blog/dscr-loan-portfolio-scaling).

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Frequently Asked Questions

Do DSCR lenders cover Ypsilanti and Washtenaw County properties? Yes. Most national DSCR lenders lend throughout Washtenaw County, including Ypsilanti, Saline, and Chelsea. The loan process is identical to Ann Arbor proper.

Can I buy a condo near U of M with a DSCR loan? Yes, with caveats. Condo projects must meet lender approval requirements (owner-occupancy ratios, HOA financial health, litigation absence). See DSCR loans for condos.

What happens to Ann Arbor rents in summer when students are away? Many landlords use 12-month leases to maintain consistent income. Students who sign 12-month leases often sublet their rooms in summer. The key is documenting long-term lease arrangements rather than month-to-month tenancies.

Is Ann Arbor investment property still a good buy at current prices? Ann Arbor's price-to-rent ratio is tighter than it was five years ago. However, for investors focused on total return (cash flow + appreciation + debt paydown), Ann Arbor's long-term fundamentals remain among the strongest in the Midwest.

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External Resources

• University of Michigan Housing & Residential Life — On-campus capacity and demand data
• Michigan Medicine Employment — Healthcare employment scale
• Ann Arbor Area Association of Realtors — Local market data
• Washtenaw County Assessor — Property tax data
• National Multifamily Housing Council: Michigan Outlook — Multifamily market research

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Related Articles

• [[DSCR Loans in Michigan](/blog/dscr-loans-michigan): State Overview](/blog/dscr-loans-michigan)
• DSCR Loans in Detroit
• DSCR Loans in Grand Rapids
• DSCR Loans for Rent-by-Room Strategies
• DSCR Loans for Multifamily 5+ Units
• DSCR Loan Portfolio Scaling Guide