Does a state's debt position concern you? Would you buy properties in a broken state?

Question

Does it cause you to invest somewhere else when a state is irrevocably indebted and has high taxes to boot? The Top 5 States that can't Pay Their Bills are

New Jersey, Connecticut, Illinois, Massachusetts and California (Source: Truth in Accounting)

Does it matter, or is there another reason you'd invest elsewhere?

Bruce Woodruff · Answer

Generally speaking NO. It's just not smart. And just because 'everybody does it' does not make it anywhere near ok.... These states are also very 'blue' states which brings along crazy regulations and higher taxes and fees. That would worry me more than just the fact that they are insolvent-ish....

Matthew Paul · Answer

Here in Maryland it just made the news we have the highest utility rates in the country . People are complaining their electric bills have almost doubled . Maryland is running a couple billion shortfall . They have raised tag fees , taxes on cars , and things here are already expensive enough .

The problem I just had was 2 tenants tried to tell me their electric bill was crazy high and they wont have enough for rent . I had to tell them , you can either be a bit colder or be homeless . Sweaters , turn down the heat to 62 , shorter showers and turn off the lights .

Russell Brazil · Answer

You know what those high debt loads also interestingly correspond to.....high GDPs.

Massachusetts $120 billion in debt against $800 billion GDP

California $496 Billion in debt against $4.2 trillion in GDP.

Chris Seveney · Answer

Yes I would invest in California and Massachusetts as they have some of the highest paying jobs and limited housing. Some of the other states no - but it is not just one or two factors of why I invest.

you can argue those states have high income taxes but Texas and Florida insurance and property taxes are screaming high and as a real estate investor it costs you more sometimes to invest in those states. Again I also invest in those states as well because they are growing but always look at many factors not just 1 or 2

Kevin Sobilo · Answer

@Ken M., I don't invest in any of those states, BUT states in high debt and with high taxes would NOT necessarily dissuade me! Here are a couple of reasons why:

1. A deal is a deal is a deal. Depending on the strategy, what happens in the future is of little consequence. If I am flipping a house, my time horizon is so short that the high debt and taxes aren't likely to change my expected ARV or ability to sell.

2. For longer term investing like BRRRR, buy & hold, etc it isn't so much about what the situation is today, its what the future looks like!

For these longer term strategies which is riskier??? A low debt/tax state on the brink of acquiring higher debt and raising taxes because of economic problems?!? OR a high debt/tax state that has those issues stabilized/mitigated?!?

Steve K. · Answer

Yes I'm sure there are good deals to be had in all of these states. If I lived in one of them I'd invest there. These are all very wealthy states so some people must be finding success there, right?

Theresa Harris · Answer

Most places overspend and are in massive debt-is that good, no; but it seems to be normal these days. Look at the national debt of most countries=same thing to the point that several have gone bankrupt and yet the economy is fine or rather most people are unaffected.

Does a state's debt position concern you? Would you buy properties in a broken state?

Does a state's debt position concern you? Would you buy properties in a broken state?

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