Challenges with owning rural properties?

Question

Hi! I'm looking at some rural properties, specifically in Ohio, within 1-2 hours of Columbus - but mostly asking in general - to investors who buy or own rural properties...

How difficult has it been, in your experience, to find contractors for rehabbing & renovating your rural properties? Is there anything else should I consider before I buy rural? What do you wish you knew before purchasing yours?

My investing goal for this property will be as a primary residence for now, so not worried about rental rates or sales prices anytime soon, though it would be naive to ignore them completely, but my main goal is just looking for a property with deferred maintenance, something that I can add value to over time, hence my immediate concern that I'll be able to find the contractors and builders to do the work.

But anyway, figured I'd ask about your experiences before goin in blind!

Are my concerns even valid? Am I worrying about the right things here? What else should I be considering with a rural property?

Any insight is appreciated! Thanks!

Jody Sperling · Answer

@Mike Hasson, I knew the roof needed to be replaced, but wasn't prepared for the perfect storm of spiking lumber costs and hidden labor. The house had seven layers of roofing on it. We could see three. All that extra labor and waste added up. Four 40-yard dumpsters to get rid off the rubble!

I enjoy living in this town, and I've told my friends and family (who strangely seem slightly fascinated with the notion that I am so stupid that I will go bankrupt and have to repent for evangelizing about the amazing opportunities to those who invest in real estate) that this house was a failed investment, but that failure means I'll break even and end up living cost-free for two years.

That's one of the many things I love about real estate. Often failure for us means we don't make as much money as we thought we would. Failure for most other people means losing money. (Also, the fence would be pricy, and it's hard to part with that money because in general it won't add to the selling value of the property, but sometimes a person has to do what a person has to do!)

Mike Hasson · Answer

So much to think about, I'm already glad that I asked!

I think I need to make sure I have a good exit plan for the property and not lose sight of where it fits into the big picture. I do like the idea of small-town living but it may have to be a luxury that I continue building up to until I can take a little more risk.

I do plan on having property manager eventually but for now I do want to self manage so I can learn those skills before passing them on <--(Is this a good plan, or might I be better off just hiring the manager right from the beginning?)

@Bonnie Low Rural vs middle of nowhere is a good distinction. My dream house I can't see my neighbors and my dogs can run free over the horizon - would that be middle of nowhere lol or can I find that in a rural setting? I never thought about the difference... and even though I can make an way better pizza than Dominoes, I do like having the option lol

Thanks for the tips on the utilities as well, I'll look into what it takes to run/replace those because those are not numbers I've ever had to run! I was looking too at adding solar for extra self-sufficiency, which might help with the pump issue you mentioned, definitely something worth including in the plan!

@Carl Murray Thanks for mentioning the jobs thing, I'll be watching the work-from-home trends in nearby cities to see how that could open up some untapped potential - There must be folks (me?) who would love that sort of lifestyle if they worked from home - but reliable internet would be a must! For that crazy cashflow, was there something in particular that made them so? I'm thinking it might have to do with something with higher risk/higher reward?

Marc Rice · Answer

It's harder to find a good team of property managers, contractors, and real estate agents to service your properties and your growth since most of the talent goes to the larger cities nearby.

Mike Hasson · Answer

Thanks for the tips! I think that's a good approach to cap the budget beforehand so I don't get carried away with improvements, even if I tell myself "they are for my own enjoyment" lol

I feel like that roof thing could happen to anyone! Did you know it was going to need to be replaced going into the deal? Or was that total surprise? And how can a noob like me avoid getting stuck with something unexpected like that? Would an inspection find something like that beforehand?

The fence was another thing I was thinking about, since I do have a few shepherds myself! But I wasn't sure since I see so many of those homes have no fencing, if maybe fences everywhere were just a city-folk thing lol but nope - the fence is just as much there to keep my guys in, as it is to keep theirs out!

...I wonder how much it would cost to fence in an acre 6' high...

Challenges aside, would you say your happy with your rural purchase?

Jody Sperling · Answer

We bought an old house in rural Nebraska, about an hour north of Omaha. Finding contractors hasn't been an issue. The price was extremely good—or so we thought—at just $31,000. Right away, though, we got smacked with a $38,000 roof because the last several owners had chosen instead of fixing the roof to just add more layers on top of a roof that had already been leaking for at least five years.

The moral of the story is, foundations aren't the only extreme capital expense. But the moral beneath the moral is, when you do buy rural, property doesn't appreciate like it tends to in metropolitan communities. While I understand your point of view that you're not as worried about selling price, it's worth it to know that whatever you buy probably has a hard cap for how much you can put into it and expect to get out, and that cap is a lot smaller than buying and doing a slow live-in flip in the city.

A few other details that matter to me, and I wished I'd known. Splurge on a good water system. Hard water in rural communities, whether it's municipal or well water is hard on appliances, bad on cloths, unenjoyable to drink, and a hazard to boil. Budget for good filtration! And lastly, if you have a pet and need a fence, just go ahead and get that fence. So many people out here in the boonies just let their German Shepards and Shnoodles run free. It's a recipe for WWF Doggy Takedown.

Best of luck!

Carl Murray · Answer

From what I've seen...

Urban = Appreciation and moderate cash flow.

Rural = Less appreciation and (possibly) better cash flow (IF you self manage! )

There can be great contractors in rural areas. There can be terrible contractors. Same with property managers. You have to run numbers based on your personal goals and financial situation. Normally, I'd stick closer to urban areas (jobs). BUT, there have been some ridiculous rural cash flow deals cross my desk.

(for what that's worth)

Challenges with owning rural properties?

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