New Investor- Live in a rural area, thoughts on investing here?

Question

Hi there, I'm new to real estate investing and would love to hear your thoughts in investing in real estate in rural areas. I live in a rural town in southwest Minnesota with a small population. So, I'd love to hear whether or not you invest in rural areas and what your success has been. Also, looking for advice as to whether or not it would be a good place to start investing or would it be a good idea to branch out of my local area and start investing elsewhere. Look forward to hearing your insights. Thanks!

Brad Hicks · Answer

Hey Amanda I'm originally from the Marshall area as well. It's very possible to make money in the smaller surrounding towns. With the amount of houses that are sub 50k  that will rent for 700+ right off the bat it's easy to find properties that will cashflow. Where you run into problems is longer vacancy rates and repairs being a larger percentage of your gross rents (furnaces and roofs cost more or less the same on a 150k house and a 50k house) then if you were buying the same property in Marshall or Brookings

Adam Tafel · Answer

@Amanda Bennett I would study some statistics on urbanization before considering a rural purchase. Americans have been moving to larger/metropolitan areas steadily for decades, about 3% in the last 20 years. That might not seem like much- but automation is growing exponentially, Amazon takes a bigger market share every year, and there are countless other factors.

If it happens to be a recreational destination (like Brainerd MN) or contains other outdoorsy attractions I might consider a deal. I’ve heard of some amazing ROI in rural areas, but there’s always a reason that no one else is buying.

Dan Vleck · Answer

I have done well in Brainerd. This area has a population over 20,000.  I’m not sure what our business growth would have been like in a smaller town.  Rents are decent in the Brainerd area, but not like bigger cities. We’re getting around $1000/mo for a 3 bedroom house.

Amanda Bennett · Answer

Thank you @Greg Morris and Account Closed! I will definitely look into the area. I am not too familiar with it, but like you said not too far from where I am at!

Hi, @Lynn Olson I have not looked into farm ground to rent, but an interesting area to maybe look into. I just have not considered it for my portfolio at this time. But something that could be an option in my area. Thank you.

Greg Morris · Answer

I do invest in rural areas. Most of your sales will be FHA or USDA financing. You can find cheap homes to rehab. You also have to be willing to pay closing cost around 6k.The closing cost would be added the cost of the home sale price, it's worked out at closing on paper. So yes you can make money if the house for sale is affordable and you can make the numbers work. Kind in mind after you buy the house you will have other cost, electric, water, insurance, everything must be working to pass a FHA or USDA home inspection. Most realitor know of these loans and many can get into a home with 0 down to $1000.

Joseph Cacciapaglia · Answer

I don't personally invest in rural areas, but have seen others have success with rural vacation rentals. It seems there is demand for some out of the way places. I don't know about your area in particular though.

Scott Jensen · Answer

@Amanda Bennett There's pros and cons of investing in smaller towns. The tenant pool is obviously smaller so there's an additional risk there. Property values are usually quite a bit lower in smaller towns outside of the metro area so it can be a lot easier to get a property with good cash flow.  I know of investors that are investing outside of the metro because housing prices are so high in the metro.  Just be prepared for possible vacancies and make sure to not over-leverage yourself.

Account Closed · Answer

@Amanda Bennett It comes down to what kind of deal you can get. If you can get an amazing deal, you can almost always make money. What that means is really dependent on the property. Some properties aren’t even worth a nickel. Try analyzing some different types of deals to see if they make sense.

Where you are at, you’re sort of out of the vacation property belt, but one place that I’ve been interested in is not too far from you. Check out Big Stone Lake. It makes up the border of Minnesota and North Dakota. It is over 12k acres and I think is one of the best kept secrets, and it shouldn’t be!

Amanda Bennett · Answer

@Adrian Fajardo Thank you! I think that is great advice and have definitely have been trying to focus on where I want to be and work backwards from there.

Lynn Olson · Answer

Have you considered farm ground you can rent the ground out and the building site as additional income. I am going to look at a building site with 4 acres  about 12 miles outside of Willmar. It is a privet sale that I will add to my farm ground portfolio. The hard part is finding a property manager in rural areas , if you want to ever move. I live in Maryland but have family in the west central area , so I am comfortable investing . Good luck

New Investor- Live in a rural area, thoughts on investing here?

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