Urban VS Suburban VS Rural

Charles Lambert · 2023-07-03T17:47:35-07:00

I don't see any recent posts on this, so just wondering what people's takes are on buying investment properties in an urban, suburban or rural area. There was some discussion five years ago, but that was pre-pandemic and I'm wondering if that has changed things.For myself, I've been trying to decide between urban, suburban and rural, and a while ago, after weighing out the pros and cons for me, in my situation, I decided an urban area would be best for me. It was a tough choice and even harder to let go of the comforts of suburbia (I've also lived in a downtown urban area as well as rural in the past, currently in the suburbs). Now that I decided I want to house hack in small, multi-unit building in a walkable urban neighborhood, I feel it's moved me ahead in my investing journey.Now, that's not to say I wouldn't invest in the suburbs. Ideally, for my house hacking, I'm hoping to find my first building in a downtown area with a very walkable neighborhood in a mid size city with a lower cost of living. But, if the best deal happens to be in the suburbs (or a small town, maybe rural), so be it, as long as the numbers work and there's a good positive cash flow. Most of the multi-unit buildings seem to be in older or historic districts and downtown due to zoning bylaws most areas have. I'll most likely end up with a generic, flat roof, red brick quadplex built between 1920 and 1960, give or take. The nice SFH seem to be in the suburbs, but I've seen it the other way around too. Personally, I like the character of older homes, especially mid century modern, but this is all about business, so I'm willing to look at other properties. I have to say, the idea of a new construction SFH or duplex in the suburbs with (hopefully) no maintenance for a while sounds appealing. I don't like the idea of an HOA, I had one once and saw why so many people hated them. HOAs seem to be mostly in the suburbs, occasionally rural areas.But, for those with a few, or lots of properties, where do you prefer buying and investing? Urban, suburban or rural? And what are the reasons? Maybe better ROI, easier to find quality tenants, maybe the profile of a tenant (family with parents working, driving a respectable car and renting a respectable suburban home), or something else? Or is it just personal preference? I get the impression many of the rentals here are in suburban areas, nothing wrong with that, just wondering why you chose the area or type of property you did?

Sherry McQuageBusiness Member

Real Estate Broker · Moore County, NC · Member since 2020 · 169 posts · 141 votes

3y

Hello,

It may just come to what you prefer to deal with. Where I live/work, the urban areas are really expensive and challenging to find a property that the numbers will work as an investment. Rural areas can be attractive in that you buy land and build whatever you want (SFH, duplex, etc), just make sure there's internet available there...also, search on the forums for what to look for (industries, remote work friendly, near major highways, etc).

Older homes/buildings (1920-1970), in my opinion, have issues that I personally don't want to deal with...old wiring, odd floorplans, outdated fixtures, crumbling foundations. Yet they do have some charming features, too.

Keep looking, learning, and running the numbers... you will figure out what interests you that you can turn into a profitable investment.

Best to you,

Sherry

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

3y

I think it depends on the area. Sometimes rural, really isn't that far from town.

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Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

3y

with rural, and I mean really rural not "sparse suburban" which is an actual thing, the huge issue is liquidity...whatever you buy you are likely to own for a long time. Followed by potential issues with tenant volume, small town power brokers, lack of property management etc. I'd be wary unless you are familiar with the area. Path of progress purchases would be lucrative but you may be waiting a long time

Dense suburbs and urban are pretty close in challenges and depend on specific location, condition and possible appreciation. Jobs in the area? Schools? Restaurants, coffee shops? Whats your projected tenant base....

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Michael SmytheBusiness Member

Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes

3y

Would focus on ROI and not worry much about the rest.

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Charles Lambert

OP

Member since 2023 · 32 posts · 17 votes

3y

Great feedback everyone, thanks! I'm coming to a point where I will be selling my current house and using that money to put towards an investment property. If you had asked me a few years ago, or even a year ago, I'd have said hands down, I want to be in a rural area again. As mentioned, I've lived in urban, suburban and rural areas.

Being raised in the suburbs and my mother brainwashing me into believing that the suburbs are best and rural and urban areas are second best, she almost had me believing it. There are pros and cons to all of them. After A LOT of thinking, researching and soul searching, I think for myself, I would choose urban. It will suit my needs better as I get closer to retirement age and in my case, will probably be cheaper than living in a rural area.

From an investment perspective, I can see the point about liquidity. Some rural properties can stay on the market for years, compared to suburban and urban areas which can sell in hours, days, weeks or occasionally months. But, they cost more, but rent for more and more easily. I was considering living on a small acreage and thought maybe I should rent for a year in that area. I was shocked that I could rent a pet-friendly 3 bedroom 2 bathroom house on 10 acres for only $600 a month, however, reliable internet was a concern, and a potential dealbreaker for me and many others. In some suburbs $600 would only be about one week's rent on a smaller house, and in the downtown core, maybe a one bedroom apartment for $2400. I also think HOAs are more prevalent in the suburbs and I'd rather avoid an HOA (unless "I" am the HOA and own the whole building).

I agree, probably easier to find quality tenants, or just tenants in general in the suburbs or the urban downtown areas. As I am thinking of relocating to an area with a lower cost of living, I've been looking at a lot of suburban and urban areas where my money would go further. I've discovered a few urban and suburban cities that look like I could get either a duplex, triplex, quadplex or maybe bigger, for less than my SFH is worth. But, many are indeed 1920s to 1960s or 1970s buildings and I worry about issues with maintenance and repairs, I don't want to be stuck with a money pit.

It seems some of the best values are in certain suburban areas with new construction. As a new investor who is afraid of making mistakes or losing money, I find the idea of a turnkey new build duplex very attractive. About the same price as an older quadplex in some other cities. I suppose if they both ended up cash flowing about the same, I'd like the new build duplex in the suburbs as it will show very well and hopefully not need much major work for about 15 years. Though that means less doors to collect rent from, so if there is a vacancy in a duplex, that's 50% vacancy, and I was planning on living in the other unit. But, it would be more private, though car dependent.

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Charles Lambert

OP

Member since 2023 · 32 posts · 17 votes

3y

One option is to buy a quadplex in a mid-size city with a college and/or hospital or other large employer or institution nearby. I'd live in one apartment, and rent out the others, one or all of which might be medium term furnished rentals. Or, maybe just a regular one year lease. Some mid size cities have a real urban living experience downtown, but just a few miles out of there, it's totally suburban, so it's hard to classify those types of cities as they are kind of a hybrid.

I'd definitely run the numbers, and I'm willing to consider living in any of those areas: rural, suburban or urban. Whichever makes more sense after running the numbers. And I think most people would appreciate being closer to shopping, transit, major highways, schools, employers, fast, reliable internet, etc. My guess is that people who really want to be in a rural area, like with an acreage, probably prefer to buy, not rent, though both are possible.

In some cases, rural may not be that far from town. For myself, that sounds like something I'd personally enjoy at this point in my life, but maybe not for aging in place (early 50s here). But, if I found a decent property and it cash flows, and doesn't need any significant renovations, I'd consider that too. If it's close to a city, it may be easier to sell if I ever need to, as well as to rent, as it may be just a short 10-20 commute into the nearest major city. I think those may be what people describe as the "sparse suburban" areas. It's also encouraging to see many of you are out of town, or out of state investors which is another option I may consider.

My mother once had a SFH and a quadplex in a small town (5000 people), both probably 1920s buildings, and tried to do it all herself, then used a local Realtor to manage it. She had never-ending frustrations and problems and sold within a few years, at best, she may have broken even. There was not much choice in tenants, most were either low income workers or on social assistance. So yeah, all good reasons to consider a bigger city with a larger pool of prospective tenants, quicker to rent and for more, though it costs more to buy.

Much as I personally like rural areas, I think I'm going to drop it from my short list. Urban and suburban areas have their challenges too, but I think I'd be in a better position to work with that. I want a tenant base of either decent blue or white collar workers and/or (if I do a furnished medium term rental) studious international students who have affluent parents paying their way.

But, in the end, I agree, it's the ROI that should make the decision. I think for me, I should look at suburban and urban areas where the numbers work and the properties cash flow. Maybe even invest out of state and get some suburban Midwest properties.

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Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

3y

@Charles Lambert you are being very thoughtful about this, so I'm sure you will do fine. I wouldn't shy away from the older buildings, especially since many are on their 3rd or 4th update including all the systms and might be more modern than one from 1995!

They also give you the opportunity for adding value. For instance being able to install minisplits, convert to gas, connect to public sewer or what have you. Agreed it makes sense to avoid money pits, but some of these things are really solid. And they are often in great areas.

An unbalanced duplex or similar might work very well. One big unit and one or 2 small ones, and you could downsize as your needs change or you don't feel like walking upstairs a lot. Good luck!

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Charles Lambert

OP

Member since 2023 · 32 posts · 17 votes

3y

Quote from @Jonathan R McLaughlin:

@Charles Lambert you are being very thoughtful about this, so I'm sure you will do fine. I wouldn't shy away from the older buildings, especially since many are on their 3rd or 4th update including all the systms and might be more modern than one from 1995!

They also give you the opportunity for adding value. For instance being able to install minisplits, convert to gas, connect to public sewer or what have you. Agreed it makes sense to avoid money pits, but some of these things are really solid. And they are often in great areas.

An unbalanced duplex or similar might work very well. One big unit and one or 2 small ones, and you could downsize as your needs change or you don't feel like walking upstairs a lot. Good luck!

Awesome, thanks! Yes, I am kind of torn between older buildings and newer, or even new construction, as I fear the older buildings could be money pits. I like the character they have, and many are in desirable locations. But, as you said, they could have been updated several times, and could be more modern than a 1990s building. I've seen some listings for 1920s to 1960s quadplexes that look beautifully renovated and appear to be turnkey. They will cost more, but for me, I think that's an acceptable trade-off as I am not really into doing major renovations.

Once I'm ready to buy my building, I'll be sure to do my due diligence and find one that has updated plumbing, electric, roof (especially if it has a flat roof), etc. The value is so much better with older buildings too. Though I also see the benefit in new construction, it could appeal to tenants who can pay more and the building will likely not need much or any work for several years.

Those other updates are good ideas too, and not overly expensive, like adding mini-splits, convert to gas (though I hear that natural gas is falling out of favor now due to gas emissions and the environment), or connecting to public sewer (though I've been looking at a lot of urban and suburban buildings that are already connected). But, if I find one on the edge of town or out towards a more rural area, if they are not already connected to city sewer and/or water, and it's possible to connect them, I agree, that would add a lot of value, and be more convenient and reliable. And there could be other ways to add value, ideally without spending too much.

I've seen some unbalanced buildings too. I didn't realize that's what they were called, but I liked them. For myself, I'd like a two bedroom (maybe even three bedroom) and rent out the 1 or 2 bedroom unit(s). And some I've seen have a commercial unit downstairs, like an insurance office, hair salon, restaurant, convenience store, etc. Those seem appealing since commercial tenants tend to sign longer leases and could potentially be more reliable than residential tenants.

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Urban VS Suburban VS Rural

Urban VS Suburban VS Rural

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