Buying in rural markets

[Scott Houin]

Hello,

Today i would like to talk about buying in small towns in rural areas. 

Back ground:

My wife i and began investing in real estate two years ago.  When we started we were having trouble finding quality deals in our price range in our city.  It was because of this, and my mentor we adjusted our strategy and started looking for deals in the smaller towns near us. We ended up finding some deals in a smaller rural town that we like made an offer and it got accepted.   We bought the property for 20k did some repairs and rented it out for 450/month which provided us a cash flow of $150/month.  The property has been rented for a year and we haven't had any issues to this point.(knock on wood):) Since we had some success and learned a lot from my this property we thought we would start looking for our 2nd property in the same town and area.  The town we are investing in has about 13k people, two small colleges and several blue collar type employers in the area.  Most houses in the area are below 100k and its about 45 minutes from where i live.  We also have property manager who has done a good job to this point. Our main concerns with the market is that most of the houses are built in the early 1900's and the market seems to move really slow.  Many of the homes listed tend to be on the market for 60-120 days, sometimes longer.  it is also been hard to pin point resale values as comps seem to vary in price significantly. 

We have a current deal that we just put an offer on today and I will go through the numbers.  We are buying this home from an investor and its a two home package deal.  The properties have 3 units and all are currently rented out. 

The offer price we put in on both homes is 62k.  Rental from 3 units is 1450/month.

We estimate about 912/month in expenses, which include mortgage, vacancy, repairs, property manger, taxes and insurance.  

The cash flow from the property would be $537/month or $179 per unit. Total cash in would 15k with a cash on cash roi of 41%

On paper I feel the numbers work and that is why we made the offer. However, we noticed that finding deals with the same type of numbers is pretty easy in this area. (many being listed on the MLS) Why are other investors not buying these up left and right. I thought maybe I'm missing something that other people know about.

Is it possible that people are just not looking in this area?

On a rental property should i put much weight on the resale value?  I don't see much appreciation on properties in this town.

Anyone have any experience in other towns like this? Good or bad? 

Any other general thoughts of things to look out for or any suggestions on people i should contact as part of my due diligence?