Cash Flow No Growth Case Study

[Matthew Irvine]

Invest or ignore.  All opinions appreciated.

County Size: 150,000
City Size: 40,000
Unemployment: In line with US
Household Income: $45,000
10 Year Pop. Growth: 0%
Renter Population: 30+%

City Description: The city is the service hub of the county, it contains all the big box stores as well as a struggling downtown.  The downtown is comprised mainly of smaller commercial buildings with mix use of restaurants/store fronts and residential apartments.  Classic case of a city that once manufactured one or more products and had a strong blue collar influence, but now is mainly low income service jobs.  Real estate prices have not recovered fully from the downturn and it is still very much a buyers market. 

These 'Micropolis' or mini cities exist all over the US, they are centers of there county and although they are stagnant in job and population growth, they are a necessity for all surrounding towns.  The renter population remains strong as service jobs allow for easy employment, but poor upside for renters to become owners.  Price appreciation is slow if it even exists but spreads in purchase prices are high.  The ability to negotiate purchase prices down for instant equity gains is prevalent due to lack of qualified home buyers.  Rents are strong and vacancy low.

The obvious concern for these markets is that the lack of population growth may worsen and actually begin shrinking. Stagnant economies that don't produce high paying jobs don't lead to increased real estate prices, so appreciation may be ruled out as well. The upside is using the BRRR strategy to capture the spread in prices, allow the 'working poor' to rent from you indefinitely and build a productive cash flow portfolio.

Thoughts?