Do you buy in an area with a decreasing population?

Question

I noticed in this market it has more renters than homeowners. The percentage was 55/45 in favor of renters. It seems like a good deal and looks like the numbers will work. It is a package of 4 with 3 currently rented. 2 of the 3 are with long term tenants. If the numbers work does it make sense to do this deal? The decrease in population isn’t drastic, but it has been on the decrease gradually over the past 10 years. 10 years ago it’s was at a population of about 8,000 and now about 5600.

Darius Ogloza · Answer

A 30% loss in population in 10 years is massive. I would think that trying to increase rents in this environment will be well nigh impossible for a very, very long time. The loss of population will also likely hamper your ability to sell for a profit in case you want to move your capital to a better opportunity. Tenants will likely have a lot of choice so upkeep will likely also be important/potentially costly to retain them.

Kevin Hunter · Answer

@Jeff Campbell, how long is long-term for tenants? Also, have you reached out to a property manager or two to inquire about the market? These are important questions. 15 months is different than 5 years, and the 5 year tenants are less likely to move, in my experience. Also, property managers will have great insight into the area, the market, the rental population, etc.... They are a great resource.

James Bradin · Answer

Is the decrease in population due to a large business or employer leaving the area? If so I would be somewhat hesitant. With a population that small, they probably have some type of employment that a large percentage of the population lives off of, even through 1st and 2nd order affects. One of my properties is in a smaller military town. The military base is a driving factor in rent and housing prices in the area, and if it were to go away the population would decrease (along with my cash-flow). The opposite is true with large employers moving to the area.

Russell Brazil · Answer

no

Jeff Campbell · Answer

@Kevin Hunter great advice about reaching out to a property manager

Do you buy in an area with a decreasing population?

Do you buy in an area with a decreasing population?

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