Should You Consider Investing in  Tertiary Markets?

For real estate investors, markets come in three ranks: primary, secondary, and tertiary markets. Although sometimes considered “less than ideal” due to this ranking coupled with smaller populations, tertiary markets can be an attractive investment option for investors looking to generate increased returns.

The Trouble with Defining Markets

Despite the fact that there may not be a single defining factor of what makes a market a “tertiary market,” some investors boil it down to one thing: population. Markets with populations greater than 5 million are primary (think Los Angeles, Chicago, San Francisco, New York, etc.). Markets with populations between 3-5 million are secondary. Some investors consider tertiary markets ones with populations below 2 million.

With such a one-sided picture, lots of important factors are missing. Investment activity is another crucial data point that needs to be added into the mix, among others, including job growth and cap rate analyses.

Overall, investing in a tertiary market has much to do with a given investor’s risk tolerance. Investors with a lower tolerance for risk may not find tertiary markets suitable because of their potential for stagnation compared to primary markets if all calculations are not considered carefully. However, tertiary markets simultaneously offer investors the potential for greater returns as well as less volatility during a downturn. This is why some investors are branching out into tertiary markets. Ultimately, real estate investors must do their research, weigh all available data, and analyze their calculations before making investments in tertiary markets.

Protect Yourself & Your Assets

Protecting yourself and your investments is paramount when investing in tertiary markets. Although tertiary markets offer the potential for greater returns, they also come with a higher potential for risk if all factors aren’t evaluated, so these deals must be analyzed closely. It’s important to work with an expert before investing in a tertiary market to make sure your investment is protected.

Topics: Real Estate Investment, Capital Markets, Asset Management

Work cited: Michael Bowman, March 17, 2020

If I can help in any way please let me know, [email protected]. Stay Safe & Healthy.