Investing In Rentals In A (Slowly) Declining Area

[Matt T.]

I recently asked a question and was cautioned about buying properties in a declining area. The area I am looking at is declining, but not too quickly. The houses are really affordable and the renters are plentiful. It is like a perfect storm.

There are properties I am crunching numbers on that have CAP rates of 19% and cash-on-cash returns of 59% with a 25% down payment. One move in ready duplex I am looking at is $39k with a potential rent of $1k. It seems insane.

What am I missing? I understand part of the objective is to have your property appreciate over time, but when you can double your cash every 2 years, does it really matter?

Also, I believe this town will rebound. It is in a good location with a good manufacturing infrastructure. It is a prime candidate for quite a few employers to come to town in the next 5 years.