Investing in a declining market?

[Chris C.]

Hello everyone,

I've yet to make my first deal and have been scoping out a couple of fourplexes in a neighboring city. The upside is the cash flow- about a thousand a month- on the properties but the downside is the area property values have been declining about 7% a year since 2006 and the market has showed no signs of turning. Should I buy in for the excellent cash flow and hope the market turns or pass on the area?

Thanks

Chris

[Ned Carey]

I see it is your first post so welcome to BP Chris C.

That is not investing that is speculating. You need to investigate why the market has declined. Is there any outlook for the fundamental reasons for the decline changing?

What will cause value to go back up is people moving into the area. People moving out of the area will cause values to continue to drop. Have Jobs left the area? Are there plans for jobs to come back? Are investors renovating in the area. Are new amenities coming to the area to make it more desirable?

I know you wanted and answer not a lot of question so here is what I do.

Baltimore City has been declining in population for 50+ years. While many positive things are happening there are many negatives that are a drag on growth. I am happy to invest here because I am buying at well below market or at least well below the intrinsic value.

My feeling is if I am buying well below market, If teh market falls I am still in a decent position.

I know I didn't give you the easy answer but I hope this helps - Good Luck - Ned