It’s not rocket science, but you would be amazed at the number of people who don’t check the local employment makeup when buying investment property. With the economy in many US cities in bad shape and likely to remain precarious, it’s wise to look at what the dominant sectors are in your chosen investment location.
According to this report – http://microreviews.org/5-recession-proof-sectors/ the top 5 recession proof Sectors are Healthcare, 2nd hand Shops, Telecom, Higher Education, and Fast Moving Consumer Goods.
It follows that it makes sense to buy in a city where at least two of these sectors dominate (for example in Buffalo, NY – Healthcare and Higher Education are the two largest employment sectors in the city.)
Taking the time to check on this, gives a strong foundation to your investment that tenant demand will remain and not be washed away by high unemployment and declining population. Just look at the devastation caused in Detroit from the Auto-Manufacturing Industry fallout – prices have dropped dramatically and tenant demand has also fallen. This environment is not attractive when you’re looking for steady rents, good tenants, and even some future growth.
Cities where unemployment has hit badly, like Las Vegas, not only has a high number of foreclosures (often adding to rental supply) but the knock on effect of having a large number of empty homes in a neighbourhood can also hit rents, increase crime, and give any landlord headaches.
But buying in a boom bust city can be avoided, with a little homework – just focus on cities full of steady boring jobs like Healthcare, Higher Education, and Telecoms.
On the other side of the coin, avoiding declining industries is just as important – smaller declining sectors like Print Media, CD/DVD stores and Real Estate Brokerages are countrywide and so maybe don’t factor so much, but according to this article.
According to the article, Oil Dependant Businesses are one larger sector being hurt from the higher oil price – This not only affects the Auto Industry, but also interestingly affects sprawling Cities like Atlanta, Georgia, where long car commutes from the suburbs are becoming prohibitively expensive. Bear this and other future trends in mind too – avoid areas where the inhabitants rely on goods and other variables that are becoming more expensive or less attractive. More on this later.
Author Alan W. Findlay is a Partner in Abbotsinch Capital with more than 15 years of experience in real estate investment. You can contact Alan by E-mail: firstname.lastname@example.org or by phone: +44 (0) 20 7193 2079.
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