Small Town Investing - Too Good to be True??

[Alex Kouramanis]

If anyone operates with a small town investment niche, I could use some advice please!

I live in Toronto, Ontario, Canada, (average purchase price over $700k!) I am looking to invest out of town to get more cashflow. I saw a 12 unit on mls for $386k in a town 3.5 hours away with about 8,000 people. The gross income should be about $85k. If I assume 50% expenses, it's a pretty nice ROI. Property seems to be in pretty good shape for an older building and there's property management nearby to take care of it.

I haven't done any due diligence yet because, naturally, I am inclined to think there's got to be a catch! What is the problem with this town?

If bigger towns are within 1 - 4 hours of driving, will this town eventually dry up? What are the inherent risks in investing in smaller towns? What do small town investors look for in particular when investing in small towns? What kinds of questions should I ask property managers about the town and tenants? Should I try for a take back mortgage and just go for a zero down deal??

Any thoughts are welcomed and would be greatly appreciated!