Updated September 9, 2020
Have you ever considered investing in tertiary markets? Real estate investors need to complete careful calculations and protect their investments when considering tertiary markets.
For real estate investors, markets come in three ranks: primary, secondary, and tertiary markets. Although sometimes considered “less than ideal” due to this ranking coupled with smaller populations, tertiary markets can be an attractive investment option for investors looking to generate increased returns.
The Trouble with Defining Markets
Despite the fact that there may not be a single defining factor of what makes a market a “tertiary market,” some investors boil it down to one thing: population. Markets with populations greater than 5 million are primary (think Los Angeles, Chicago, San Francisco, New York, etc.). Markets with populations between 3-5 million are secondary. Some investors consider tertiary markets ones with populations below 2 million.
Do you see any problems with this definition? With such a one-sided picture, lots of important factors are missing. Investment activity is another crucial data point that needs to be added into the mix, among others, including job growth and cap rate analyses.
Overall, investing in a tertiary market has much to do with a given investor’s risk tolerance. Investors with a lower tolerance for risk may not find tertiary markets suitable because of their potential for stagnation compared to primary markets if all calculations are not considered carefully. However, tertiary markets simultaneously offer investors the potential for greater returns as well as less volatility during a downturn. This is why some investors are branching out into tertiary markets. Ultimately, real estate investors must do their research, weigh all available data, and analyze their calculations before making investments in tertiary markets.
Protect Yourself & Your Assets
As you can see, protecting yourself and your investments is paramount when investing in tertiary markets. Although tertiary markets offer the potential for greater returns, they also come with a higher potential for risk if all factors aren’t evaluated, so these deals must be analyzed closely. It’s important to work with an expert before investing in a tertiary market to make sure your investment is protected.
If you’d like to discuss asset protection strategies to shore up your investment in a tertiary market, schedule your complimentary Strategy Session today. On the call, you and a Senior Advisor will discuss your investing goals and business, and go over the different legal tools and business strategies that may benefit you. There’s no cost and no obligation, just high-quality investing insight from experts. You can schedule online or by calling 800.706.4741.