Choosing where to invest

It seems that GM and the american car manufacturers are having a tough time staying afloat. The November 14th edition of Wall Street Journal had an article titled ” A Middle Class Made by Detroit Is Now Threatened by Its Slump” about how the car parts suppliers located around Detroit are also facing a similar recession and are cutting back on employees, wages and benefits.

At the Self-Storage seminar I attended a few weeks ago, one of the presenters mentioned Detroit as a place with potential. He was a hard-money lender and said he was lending money to investors in Detroit. I disagreed with him on that issue and I thought he didn’t know what he was talking about.

Just over a year ago I was looking at Detroit as a place to potentially invest. Houses were dirt cheap and the CAP rates on apartment buildings were in the 20s!!!! Then I found out why. For the past 20 years there has been a steady population loss, job loss and a decrease in the median wages. The median wages should increase slightly year over year but that wasn’t the case in Detroit. Doesn’t sound like a place with tons of opportunity to me.

And now with the WSJ article, it just confirms my belief. Always look for a turn-around before you invest in a contrarian market.

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