Continue investing when people is leaving?

Question

I'm already investing successfully with positive cash flow in Real Estate with no vacancy rate in all my properties, but I have a concern, people are leaving this island (Puerto Rico, the Detroit of the Caribbean) at historical levels, we have been in recession since 2006, we have a 87 billion debt and there's no jobs. I don't want to feel like I'm rich in Haiti. I had to lower the rent to stay competitive with the competition, I know some landlords that are selling their houses because of the negative cashflow & vacancy rate & I want to be proactive, What should I do, buy, sell.... I can't find good deals here and I don't trust my area, in my opinion quite overpriced. .

P.S Either way I'm gonna move soon.

http://qz.com/164317/the-scary-thing-about-puerto-ricos-population-its-leaving-the-island-for-good/

http://online.wsj.com/news/articles/SB10001424052702304173704579262390542968318 http://america.aljazeera.com/watch/shows/the-stream/the-latest/2014/1/24/puerto-rico-the-nextdebtcrisis.html

P.S Either way I'm gonna move soon.

http://qz.com/164317/the-scary-thing-about-puerto-ricos-population-its-leaving-the-island-for-good/
	
	
		http://online.wsj.com/news/articles/SB10001424052702304173704579262390542968318
		
			http://america.aljazeera.com/watch/shows/the-stream/the-latest/2014/1/24/puerto-rico-the-nextdebtcrisis.html

http://qz.com/164317/the-scary-thing-about-puerto-ricos-population-its-leaving-the-island-for-good/

http://online.wsj.com/news/articles/SB10001424052702304173704579262390542968318
		
			http://america.aljazeera.com/watch/shows/the-stream/the-latest/2014/1/24/puerto-rico-the-nextdebtcrisis.html

http://america.aljazeera.com/watch/shows/the-stream/the-latest/2014/1/24/puerto-rico-the-nextdebtcrisis.html

Account Closed · Answer

Thank you all for your answers.

Pat L. · Answer

Its a beautiful area BUT I would definitely sell before the drop in RE values becomes precipitous

several of our friends are from PR & have already moved completely to FL to continue with REI & have not regretted it.

Bill S. · Answer

I would say sell except one word Caribbean but I know nothing about Puerto Rico. The only reason to stay might be if there are some areas or communities that are bucking the trend of decline. In which case you would want to more your investments there.

Declining population is the death knell of residential rental properties and investment in general. It steals appreciation, it steals rent growth, it steals jobs, and it steals money.

I see this in rural America and it's not good for those invested there. Rural towns and counties are declining in population and you see it with boarded up houses and vacant property. People are paying taxes and their properties are depreciating. One rural community I looked at has houses for sale for less then they cost 20 years ago.

Dennis Rodriguez · Answer

@Jorge C. I decided to move from Puerto Rico 18 months ago. The problem with investing in the island is the uncertaintity of what's going to happen with Puerto Rico's credit. If Moody's, SP and Fitch decide to downgrade the credit to junk, the consequences are going to be catastrophic.

If you decide to stay and "see" what happens, at least try to lower your mortgages as quickly as possible and that way even if you have to keep lowering your rent you may still break even. Or take some of your capital and try to diversify your portfolio by investing in other states with a good economy and positive growth.

For example, I know several investors in PR looking to invest here in Houston for rental properties but they don't want to move from the island due to personal reasons. You don't have to move but make sure your money is invested where it can grow and provide a steady income.

Feel free to PM me if you need more info about the local market and comparisons to the PR market.

Pa'lante hermano.

Roy N. · Answer

@Jorge C.

We see the same type of economic migration here in the Maritimes (Eastern Canada).  Many of the traditional resource industries (fishing, forestry, mining) are in a long decline and the region has been experiencing an annual emigration of 2-3% for a generation.  Within the region, there has been additional migration from the rural and smaller communities to concentrate in a few larger towns and cities.

In these smaller communities, this has lead to increased vacancy rates and lower quality tenant populations as folks move away.

George Paiva · Answer

Welcome to my world in the Northeast.  Yes its very hard to make it in an area where the population is going away.  That's why its very imperative that you buy for cash flow and make your money when you buy.

Even with people leaving you still have to look at the opportunity of people still have to live some where.  Can you add an amenity that will make a renter pick your unit vs the one down the street?  Or what is the minimum cash flow you can tolerate before its not worth keeping the property?  These are the type of questions you have to ask yourself.

You will also have to step up your marketing big time BUT do not lower your criteria for renters ie 3x income, >550 credit, no felonies, no evictions, etc...

Mark Tamondong · Answer

Don't leave yet. Just continue with your current investments in the area.

What you could proactively do is to try investing in other areas where you think it would be profitable. Unless you already have a prospect area where you have started a good investment, then you may already leave your current investments in Puerto Rico if you think it is not worthy anymore to continue your investments on it.

Al Williamson · Answer

@Jorge sounds like your instincts are telling you to sell, the indicators are telling you to sell, and you may have a lot of regrets if you're caught in a down draft.

It's perfectly okay to get out and sit on the sidelines for a little while. You don't always need real estate market exposure.

Account Closed · Answer

I don't think is temporary and I don't think it will change at least for this decade, is not just the lack of jobs (Also brain drain), high crime & the people who is not happy with the "dressed colony" political status. I think the best I can do is to move where I like and where the numbers make sense.

Thanks for your answer.

Ned Carey · Answer

@Jorge Conty  I see it is your first post welcome to BP.

Generally when population is leaving, that is bad for rentals. A question to ask is, Why are people leaving? Is this a temporary situation that may change?  Generally it is jobs or lack of jobs, that causes changes in population.

If the population decline is slow and there are great deals out there then I might keep investing there. But you say there are no good deals. It may be time to sell.