10 Year Decline - Is My City Dead Or Is It Time To Buy???

Question

I live in Shreveport LA and it's been on a steady 10 year decline in new construction and labor, here's the graphs for different industries:

https://www.bls.gov/eag/eag.la_shreveport_msa.htm

I'm deciding on whether to invest in my town and bank on the city turning around eventually, or investing out of state.

The deals I'm looking for are what Alexander Felice does, BRRRR a foreclosure property that I purchase all in at 65,000 and will have an ARV of 95,000. These deals are available due to the shrinking population and job market, but I don't want to buy a house in a declining market that could lose me money in the long term.

Are there any signs to watch for or examples of other towns that have been in a decline this long and have come back?

Kenny M. Lewis · Answer

@Cory Hinton

This is the right time to buy and hold. Even with population declining you can still wait out this slow down.  Find out if the city is planning any new projects to retain the population

James Lemon · Answer

@Cory Hinton I live here and plan to buy more rentals!

Steve B. · Answer

@Cory Hinton real estate is  fairly inelastic and thanks to big government it’s only getting more inelastic.  This the number one driver of rents and prices in general is  supply vs population as population is usually synonymous with demand.  A declining population leads to a non-linear decline in rents and values.  But yes, you can make money in a declining market.  I wouldn’t try it, but it can be done

Account Closed · Answer

Anywhere, even Shreveport is a good place to invest if you have the right strategy and buy properties properly. I'd look for properties that have VA loans with folks who have been transferred away from Barksdale AFB , buy them off market, take over the loan and sell it on Lease Option to tenant buyers and get $10,000 down as an option fee and cash flow the property.

Cory Hinton · Answer

@Linda S. You're right. It is hard to see it from their perspective when you're putting the money down haha, but yes you're certainly right about how the renter thinks (coming from a previous renter)

Linda S. · Answer

@Cory Hinton,

You're not thinking like a renter, renters couldn't care less about property taxes, insurance,etc.. what they care about -- is the price, and is the home in a good location?   Could I be happy here short term?   People will happily go where rent is cheaper, so I'm guessing outside of the city it's likely better schools/area, but renters care about their bottom line as #1.

The house meets the 1% rule, and you could likely do a lot of work yourself and save $$ on renovations!

btw- I feel you with high property taxes, our little city is #2 in the state-- 1.35! insane!

John Teachout · Answer

If your strategy is Brrrr, then the main concern you need to have is what's your rental market looking like now and how do you expect it to look in the near and far future? What property values actually do is less of a cash flow factor than what properties rent for and what kind of inventory is there in the area? I'd watch any rental properties available in the areas and price ranges you think you want to buy in and see if they get rented. If they stay on the market a long time and they're not junky, maybe you would have a hard time renting out yours too. Impatient landlords rent to people they shouldn't and later regret it. Turnovers eat cash flow. My personal opinion is some investors become overly concerned with the macro economics of a region while I'm concerned with can I rent "this" property in "this" neighborhood for "this" amount at "this" time? I don't really care what percentage of so and so is trending towards this or that.

Zack Thiesen · Answer

@Cory Hinton So far I have only invested in my local market here in California. But it is getting impossible to work within my goals anymore so this year I will be moving into out of state markets. One of the markets I've looked into the property values are virtually stagnant/declining but is not much of an issue to me as long as I'm working to find true deals. At this point in the market cycle even a lot of the historically stagnant markets are experiencing little bumps in value and thinning inventory/higher demand, especially with multi-family buildings. This leads to temporary and artificially high valuations on some properties. Thinning inventory with certain types of buildings also means it's riskier to BRRRR because there can be less comps for an appraisal.

TLDR: In this environment it's especially important to look at and to know exactly what you are getting for your money and if it doesn't makes sense within the framework of your personal REI goals, to walk away and keep looking or wait. People that buy from the heart and pay retail at the top of a market are apparently out there driving all of this... as long as you're not one of them you'll be good! hahh

Zack Thiesen · Answer

@Cory Hinton I think generally it is just better (if cash-flow is your goal) to put the declining economy narrative out of your mind somewhat and look at what rents have done historically. But just wanted to add that I am not saying to discount the local economy completely... it can matter if you think your area will descend to a point where the cash flow property you've invested in a decent B- neighborhood will be a D neighborhood in 5 or 10 years. Then you're talking tenants that correspond to that who eat your cash-flow for breakfast and then ask for seconds. But you will know that much better than I would. If you're talking an economy that just doesn't have much going for it but the community is strong and things still seem to work out year after year, that's another story.

Ultimately, you just want to know your strategy and then consider things that can be obstacles to your strategy. If you work your way through those scenarios and numbers on your personal go/no-go list, then you'll be solid.

Darius Ogloza · Answer

If you plan to hold long-term and are only after cash flow, the question of whether a market is declining or not is not the key driver.  If the rents cover your costs and throw off sufficient free cash as well, then you should do fine regardless of what's happening in the macroeconomic sense.  If you are after appreciation, that's another story.