"Renters" vs "Owners" Neighborhood - Recently Changed

[Chris S.]

I have been investing in a specific town and recently one of the business owners that has been there for 20 years + told me that "The neighborhood is changing from an owner neighborhood to a renters neighborhood".  Meaning less people own the houses in that area.

How will that affect my investments?  Is it good or bad for the rental market?  Should I continue to invest in that neighborhood?

Thanks for any incite you have..

[Hattie Dizmond]

@Chris S.

I agree with @Mike Makkar in that you need to constantly monitor your property value.  However, I would suggest you need to do that anyway, as a regular part of maintaining your portfolio, not necessarily to keep an eye out on your appreciation.  Here's why...

First, I personally discourage appreciation plays, unless you are in a market known for steep, fast appreciation.  (i.e. SoCal)  Getting into a deal with the hope of appreciation to make the deal work is basically gambling, and I don't like to gamble.  That isn't to say you shouldn't get into a deal that is a little thinner than you would otherwise, with the plan for a 3-5 year exit, if the property appreciates. 

Second, and this is probably the most important, you don't want to be caught holding a property after a neighborhood or area has experienced a major downturn.  You can get stuck with a property you are upside down on.

So, it's good practice to run CMA's on your properties at some regular interval. How often is probably a function of how well you personally know the area, but I would do it at least once a year. Just my 2 cents.