Buying cheap real estate in rural communities as first property

[Hunter Lannon]

Hi all, 

This is my first posting here, go easy ;)

I'm 21, a Computer Science dropout. I am making $60/hr as a 1099 infrastructure engineer. I might convert my hourly rate to a 90k/year salary as a w-2 employee shortly. I work remotely, but I live in Corvallis, OR, where I was going to school. I want to figure out an investment plan, whether that is to snowball my way into real estate or to invest in high-growth mutual funds. I'm not sure yet.

The cost of living in Corvallis is pretty high. I have a 2 bedroom apartment at $1064/mo (with the second bedroom as an office to write off as a business expense). I want to lower that as much as I can so I can direct ~70% of my take-home pay into investments. I could do real estate, which would take more learning but provide passive income if I'm smart about it, or I could play the safe route and put everything into mutual funds and retire early when the market goes up over the next 20 years. I'd have around $5k/mo cash coming as salary, with hourly it depends; its usually around 10k pre-tax.

I want to save as much as possible, so that would mean reducing my monthly expenses. I come from an area in Oregon where a decent house without major repairs could come around 100-120k, but a fixer-upper could be maybe $50k if I snag a good deal (I think? I'm really new to this). The rent in these areas is around 800-1200 for a 3bd 1ba house.

I'm really contemplating buying a $50k fixer-upper in the area to lower my costs. I figure I could pay off a house like that in 4 years if I bum rush it, which my income could allow me to do (I'm cheap). By 25 years old, I could save for a down payment and closing costs within 6 months for a decent rental (assuming I save 4k/mo on salary).

My worry about this is I would live in a rural area with lower rent prices and low family income, meaning I might have to spend extra in repairs and a decent chunk of the cash flow would go towards paying for repairs. But, I think this would be the best way to supercharge my savings rates to allow me to take more risk without going under if something goes wrong.

Do you guys invest in LCOL/ low rent areas? Is it ever worth it? The towns I'm looking at don't usually appreciate much because there is no development in the area. They of course do appreciate, but I think most of the ROI would come from rental cash flow.

My biggest holdup is if I stay where I am, I won't be able to buy at a very fast rate, and the market is very competitive because Corvallis has the only 'good' tech/engineering programs in the state, and is growing fairly quickly.

[Chad Matthews]

It is great to see some local folks who are active on BP. The Corvallis market is tough and almost never cash flows at this point ... take a close look at current vacancy rates as well. The recent development rush has brought more units to the market and is outstripping demand. Philomath currently has several significant apartment developments happening as well. 

I own several properties in the area but find if extremely difficult right now. Money is cheap, prices are high, and off market deals are difficult to find right now in the area. If you want to find your way into some of the more remote towns like Monroe or out toward the coast in Eddyville or Toledo you may have better luck.

Your situation sounds like it would be ripe for a house hack scenario ... search for a duplex or four plex to help the numbers get closer to working. You'll have to hunt hard and be willing to purchase something old that needs work but, with some sacrifice and elbow grease you can get started.