Investing In A City's Rebirth

"A glance at property listings in historically shrunken cities would make any small investor drool. Rents at $400 per unit per month, in a two-unit building for $70,000? Sign me up!

But the underlying reality is less fantastic, and locals know the crucial details that out-of-town investors miss when blinded by an impressive balance sheet. Such details could mean the difference between a sure-fire investment and a sure-fire flop.

Take Philadelphia, for instance. The duplex on 48th Street that fetches $200,000 might only be worth $170,000 on 53rd Street. Why? In this case, a University of Pennsylvania-sponsored program provides its staff with "soft seconds" -- a form of easy loan that need not even be repaid after seven years -- but only for homes inside a "University City" boundary that ends at 50th Street.

Local knowledge is valuable in every real estate market, of course. But in a shrunken city, three causes make such wisdom even more important."