BRRRR - Small Towns?

[Drew Ballard]

We all know the market is tough but there are great deals to be found, just have to look creatively for them. I'm interested to know if anyone else does any Small Town Investing?  There's more risk with this for sure, but a lot of potential upside. This also seems to be below the threshold of most lenders. 

We are considering doing BRRRR in a small Southern Town of 20-25,000 Residents. The market #'s aren't amazing but I grew up near the area and understand the market well. They recently commissioned a Grant Study that revealed they have a serious Rental Property Shortage and are unable to attract new jobs and industries that have been interested in the area due to this.

Couple of Examples:

Property 1 - 3Bed/2 Bath - $54,000 - ARV roughly $120,000 - (Could Flip) but Rent 900-1000 at top of market. Rehab ballpark of 30k.

Property 2 - 2 bed/1 bath - $18,000 - ARV roughly $75,000(+) Rehab 30k if sticking similar to current structure. Rent $700 Rent.

Property 3 - 2 bed/1bath - $36,000 - ARV roughly $75,000 - Rehab 20k. Rent $700.

One doesn't seem worth it but a package deal of a couple at a time looks like a better deal.  There's a lot of risk here, but possible upside also.  If anyone has any experience with these markets would appreciate feedback, even if its "run."

[Ryan Irwin]

Quote from @Drew Ballard:

We all know the market is tough but there are great deals to be found, just have to look creatively for them. I'm interested to know if anyone else does any Small Town Investing?  There's more risk with this for sure, but a lot of potential upside. This also seems to be below the threshold of most lenders. 

We are considering doing BRRRR in a small Southern Town of 20-25,000 Residents. The market #'s aren't amazing but I grew up near the area and understand the market well. They recently commissioned a Grant Study that revealed they have a serious Rental Property Shortage and are unable to attract new jobs and industries that have been interested in the area due to this.

One doesn't seem worth it but a package deal of a couple at a time looks like a better deal.  There's a lot of risk here, but possible upside also.  If anyone has any experience with these markets would appreciate feedback, even if its "run."

 Great question @Drew Ballard.  I have a couple properties in a small town (pop ~25K) and have found that it's a great market.  Of course, there are some challenges.  One is like AJ said, sometimes national lenders can be a bit cautious, but I have found that if you have at least 25K population, they are good.  However, appraisals can be a bit more expensive and take longer due to the area, plus harder to find good comps.  

Another challenge I've found is that it can take a bit longer to find a tenant due to the lower population.  However, by holding out for a good one, I've also found like you said, rents are higher and the tenant seems to stick around longer. 

Finding good partners (contractors/handymen/prop managers) can be a bit of a challenge too due to the lower population. 

Appreciation isn't as high as a large metro, but like you said, what you lack there is gained in cash flow.  

Again, I've had good success and no market is not without challenges.  As with all markets, the key is to balance risk with reward.  

All the best!