Buying a Turnkey Property in a Declining Town

[Tyler White]

I have been looking at purchasing a turnkey property in a town that is declining, Danville, Illinois. The prices of homes are incredibly low even after the turnkey fees. I have used the Bigger Pockets calculator and the COC return ranges from 9-16 percent depending on the percentages I put in. As I have done research on this town I have looked for both the good and the bad but seem to only find bad. Danville has had a declining population for well over a decade now at a steady decrease and some places online that I have found show that some of the homes have depreciated.

The turnkey company seems great to work with but I wonder is this something to stay away from because of the way the town is. 

Thanks

[Sarah R Pullen]

I think there are a couple of things worth considering here. Firstly, why is the population declining and will it continue? Did a major employer shut down, are crime rates high, does the city have an improvement or development plan on the horizon, etc. Then I think you have to decide what your primary goal is. Are you primarily interested in cash flow from tenants or is long-term appreciation more important to you. Even in small towns where the population isn't growing or is even declining, there can still be a good rental market, because people aren't as interested in buying single-family homes in a depreciating market, but they still need a quality place to live. But if appreciation is super important then this may not be the town to invest in. I know achieving both is ideal but if you're just starting out in real estate investing and hoping to do additional deals in the near(ish) future, I think cash flow is probably more important to achieve early on.