5 Risks of Buying Rental Properties in Declining Markets
You’ve probably heard that the key to real estate investing is “location, location, location.” This is true for all different aspects of a property’s location—the larger metro market it is located in, the specific area of town, and even the specific neighborhood. Some cities can literally vary street to street in terms of where is good to buy and where isn’t good to buy.
The very first thing that comes into my mind when someone asks, “What city should I invest in?” is “A growth market!” A growth market is arguably one of the most critical aspects of any location you choose to invest in.
Because investing in a declining market can pose major risks to an investment, much more than in a growth market.
Growth Markets vs. Declining Markets
There is no set guarantee that any one market will always be either a growth market or a declining market. A growth market can always switch to a declining market, and many formerly declining markets have been able to turn themselves around into growth markets. However, none of us knows when or if this will happen, so the best we can do is be as smart as we can in trying to predict which direction a market will go and deciding where we should invest.
In short, a growth market is one that has a proven trend of growth. The population continues to increase. Why would a population continue to increase? The main factor will always be jobs. If a market always has plenty of job opportunities, people will continue to live and move there. What is the most secure way of ensuring there will always be lots of jobs?
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