When is it OK to compromise on local geo

[Dmitriy Dorosh]

I am new to RE and looking to purchase a 12+ unit apartments in an out of state market (in process of analysing several markets)

I know one of the top investment considerations is always local economy including, population growth and employment. One of the markets I am looking at does not have great stats. The Town is about 120k population, employemnt has been slightly growing, but the population has been declining 1-3% per year in the last 5 years. There is a state university with 12k enrollment which has also been stagnant. Rental prices have been growing with inflation, so by not much. There is really no expectation that the trends will get more positive or anything will happen in the near future that will make the local area a good investment from RE perspective.

So my question is at what point it is acceptable to still acquire a property in the market like that when the actual property you looking at will still bring in significant cash flow? For example, $1M property acquisition will still generate 10% cap rate with the assumption of 90% occupancy and 60% operating expenses ratio. To me these assumptions are very conservative and if the property can still provide 10% cap rate, what would be a reason not to do that deal?

P.S. assuming the property has no significant issues like bad foundation and leaky roof, which should theoretically be addressed in due diligence.

Thanks for any insight in advance!