All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Newest Posts Trending Discussions Followed Forums Real Estate News & Current Events General Landlording & Rental Properties Buying & Selling Real Estate Deal Analysis See All
  • Education

    Read

    BiggerPockets Blog BPInsights: Expert Analysis Coronavirus Content & Resources Guides Glossary Reviews Member Blogs

    Watch

    Webinars Video Library Financial Independence Blueprint Intro to Real Estate: Rentals

    Listen

    BiggerPockets Real Estate Podcast BiggerPockets Money Podcast BiggerPockets Business Podcast Real Estate Rookie Podcast Daily Podcast (Audio Blog)

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Real Estate Agents Mortgage Lenders Companies Hard Money Lenders Contractors Investment Companies

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    BPInsights: Property Insights Tenant Screening Property Management Lease Agreement Packages

    New Feature

    BPInsights (beta)

    Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood.

    Analyze a property
  • Find Deals
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    Profit Like The Pros Bidding to Buy See all books

    Featured Book

    BiggerPockets Wealth Magazine book cover
    BiggerPockets Wealth Magazine

    Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Subscribe today and get the Oct/Nov issue delivered to your door!

    Get the Magazine
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books Washington
BlogArrowLandlording & Rental PropertiesArrowA Look at the Rewards, Risks & Rules for Investing in Rural Rental Properties
Landlording & Rental Properties

A Look at the Rewards, Risks & Rules for Investing in Rural Rental Properties

G. Brian Davis
Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
139 Articles Written
invest-rural-areas


Ever thought about rural or small town investing?

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

It’s a tempting proposition. Imagine the idyllic rolling fields, quaint historic towns, and charming places where everybody knows everyone else’s name. Perhaps the local real estate even offers strong returns?

Venturing away from cities has its benefits for real estate investors. Let’s take a deep dive into them before turning the leaf over to look at the risks and rules for success for rural investing.

Bucolic Bliss: Advantages of Rural Investing

Less Competition

Do you know how many real estate investors there are in New York City? Tens of thousands. What about in Shady Acres, Iowa? Maybe one or two, if any. (Okay, so I made up Shady Acres, but you get the idea.)

Less competition is a recipe for higher returns. Who is going to bid against you at foreclosure auctions? Who is going to get into a bidding war with you over Widow Wilson's run-down estate that needs major renovations?

You can often score killer deals in rural areas because you aren’t competing with a hundred (or a thousand) other investors and landlords all looking to get in on the same neighborhood.

Less Expensive

According to Zillow, the average home price in U.S. urban areas at the beginning of 2016 was around $269,000. In rural areas, it was around $170,000.

The price per square foot numbers were even more stark: Urban areas clocked in at $198, while rural areas logged only $108—nearly chopped in half.

That means that investors will have less money tied up in any given deal and lower cash barriers to invest.

Less Regulation

Statistics are less handy for comparing regulation in urban versus rural areas, but where statistics fail, common sense prevails. Is anyone going to argue that the landlord-tenant regulations in rural Idaho are more strict than those of San Francisco? Or New York City, Los Angeles, Chicago, Baltimore, Seattle, Portland… need I go on?

Related: USDA Rural Development Loan: The 100% Financing Loan That’s Not “Just for Farmers”

Red, blue, conservative, liberal, socialist; however you feel about the role of government and regulation, the fact is that tighter landlord-tenant regulations exist to protect tenants, not landlords. Less regulation on landlords and real estate investors makes life easier for them.

rural

Lower Property Taxes

Property tax rates tend to be higher in urban areas compared to rural areas.

For example, in the Mid-Atlantic region, the average property tax rate in urban areas is 2.11%, compared to 1.55% in rural areas.

That’s $1,120/year in higher cash flow—almost $100/month!

Less Turnover

Residents in rural areas and small towns tend to move less frequently than the residents in trendy urban neighborhoods. That’s great news for landlords in rural areas, who might rent to the same couple for 30 years!

Statistics comparing rural and urban turnover rates are surprisingly scarce, but anecdotal evidence suggests that housing turnover rates are substantially lower in rural communities.

Lower Crime Rates

Rural areas and small towns have lower crime rates than cities. It’s common sense, but it’s worth pausing to look at just how wide the gap is.

As of 2015, the violent crime rate in cities with populations over 250,000 was 734.2 (crimes per 100,000 residents). Compare that to small towns with populations between 10,000-24,999, which had a violent crime rate of 269.8. In other words, the violent crime rate in cities is nearly triple the rate in rural areas!

Is the difference in crime rates only for violent crimes? Nope. Cities with over 250,000 residents had a property crime rate of 3,359, while small towns of 10,000-24,999 people had property crime rates of 2,461.

Easier Networking & Brand Building

In small towns and rural areas, everybody knows everybody else. That makes it much easier to build a brand and a reputation in your investing niche.

It’s also far easier to identify key people who are “in the know.” For example, maybe Linda down at Linda’s Diner always seems to be the first to know about news around town, or maybe Bill with the county council is the guy to talk to about county zoning and economic development plans. These local linchpins are much more obvious and easier to befriend in small towns.

As you get to know some key people around town, they’ll become brand ambassadors for you. For example, when Constance sits down at Linda’s Diner and says she needs to sell her home within the next 30 days “or else,” who do you think Linda will tell her to call?

Easier Pulse-Taking & Trend Projecting

As alluded to above with Councilman Bill, it’s easier to understand the economy and real estate market in smaller towns and rural areas. Often, the local economy is based on a staple industry, and the town’s fortunes are tied to that one industry’s investment in the area.

Small real estate markets also tend to be more stable. They may not spike up through gentrification, like a suddenly-trendy urban neighborhood that the artists and coffee shops and hipsters all moved into overnight, but they aren't likely to collapse with an inbound crime wave or suffer urban decay either.

Stability and easier forecasting make it much easier to predict long-term rental returns, making investments more attractive.

Risks & Rules of Rural Investing

More Dependency on Single Industries & Employers

Simple economies may be easier to understand, but they can also be much more susceptible to collapse from losses in one industry.

Remember Michael Moore’s Roger & Me? Well, don’t watch it; it’s tedious and preachy, but it’s a case study of what happened in Flint, Michigan when the auto manufacturing plant closed. Spoiler alert: Bad things happened.

Be extremely careful when investing in any town that’s too heavily dependent on one industry for its success.

Less Demand for Housing

Sure, there’s less competition, but the subtext might read “less demand.” And with fewer housing turnovers comes fewer people moving at any given time.

All of that can spell trouble for vacant rentals or properties listed for sale.

Any local real estate agent can tell you with about 30 seconds' research what the average days-on-market numbers are for home sales and rentals. That's a good starting place, but sift through recent listings to get a sense for what's moving quickly, what's not, and why. Talk to local landlords if you can find any, and get their take on housing demand. Satisfy yourself that you won't have a property sitting vacant for six months as tumbleweeds blow by.

Thin Industry Support

How many property managers service the area? How many real estate agents? How many contractors? How many lenders fund deals there?

Real estate investors rely heavily on industry support services. It’s no surprise that one of the first challenges faced by new real estate investors is building a team of trustworthy, dependable support servicers. But options may be few and far between in the hinterlands.

Do your homework on who’s offering local support services, and double check that you have reliable, professional options for every member of your “mastermind team” that you’ll need.

Related: The Pros and Cons of Investing in Small Towns and Rural Areas

Lower Density Means Longer Drives

In urban neighborhoods, investors can walk the streets. They can walk by houses faster than investors in rural areas can drive by them.

There’s a convenience to higher-density areas. Small towns can still have manageable densities, but prepare for long drives and other inconveniences that come with spread-out rural districts.

Expect Well & Septic

There’s nothing inherently bad about wells and septic systems, but they come with their own maintenance costs for property owners. Build these costs into your CapEx or maintenance budgets if you buy a home on a well and septic system.

Know Thyself—and Thy Market

Rural and small-town investing is a different animal. It has some unique advantages over dense urban areas, but it also comes with a different set of risks.

As in any kind of investing, know what you’re investing in and invest in what you know. If you grew up in rural Iowa and you know the towns, the people, and the local economies and their rhythms, then it could be a perfect niche. Or if you move to a small town and fall in love with it, perhaps it’s a win waiting to happen.

But if you’re a city slicker at heart and are only considering rural areas for strategic reasons, think twice before opening your checkbook. You need to truly understand an area before investing in it, and that level of understanding requires spending plenty of time there.

As my mother always said, “Do what you love, and the money will follow.”

Have you had success investing in rural areas or small towns? What tips and tricks can you share? Or maybe you have a cautionary tale of woe to pass along to your fellow investors?

Comment below!

By G. Brian Davis
G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
Read more
G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and a free masterclasses on how to reach financial independence within 5 years.
Read Less
19 Replies
    Katie
    Replied almost 4 years ago
    “tighter landlord-tenant regulations exist to protect tenants, not landlords. ” Those regulations came about in response to pervasive terrible landlord behavior. I do not worry at all about even the tightest landlord regulations because I believe in treating tenants as I would want to be treated when I was a tenant.
    Rick Grubbs Rental Property Investor from Salisbury, NC
    Replied almost 4 years ago
    That is correct. The free market punishes bad landlords and rewards good ones. That is exactly why we don’t need government bureaucrats to impose unnecessary “fixes” which burden all landlords with an overly regulated business environment. Regulations kill growth and healthy self-regulating free market economics.
    Katie
    Replied almost 4 years ago
    The free market does not always punish bad landlords. If it did we would not have needed regulations. Regulations do not emerge out of thin air. In my town, with its 0.5% vacancy rate, the free market is useless for punishing bad landlords. Hopefully, you can see why that would be so.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Cody Barrett
    Replied almost 4 years ago
    Regulation came 2nd. 40 hour weeks, 9 to 5’s, and weekends did not come first….

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Cody Barrett
    Replied almost 4 years ago
    Regulation came 2nd. 40 hour weeks, 9 to 5’s, and weekends did not come first….

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Hi Katie, Degree of regulation may not be a difference that matters to you personally as an investor, but it’s still a difference, so it’s part of the conversation about rural vs. urban investing. In my home town of Baltimore for example, the landlord-tenant regulations are so heavily weighted in favor of tenants that it takes 4-9 months to evict a tenant who has stopped paying their rent. That’s not the case in some neighboring counties. But ultimately regulation differences are a fact of investing, and whether we agree or disagree with them, we need to recognize that they exist.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Tim Boehm Investor from Tillamook, Oregon
    Replied almost 4 years ago
    I think one of the major points you didn’t mention was leasing the land. Recently looked at a rural house that I could have rented out easily at $800 a month but the 60 acres of land rented out at $1500 a month and it was good farm land, the package???? 200k!
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Great point Tim! Land is definitely a unique advantage in rural areas, and the numbers can look very different than the traditional buy-and-rent residential home in an urban or suburban area.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Jerry W. Investor from Thermopolis, Wyoming
    Replied almost 4 years ago
    Brian, Great article. One thing to consider in rural areas is to look for niches just like in other areas. I got into a niche for awhile of renting out to the new teachers who came to town. They were basically pre-vetted by the school district, they had a steady income, and they would usually rent for at least one year to 3 years until they got tenured. As all of my houses were full i did not rent to any teachers last year. Another thing you touched on is word of mouth. Once you get a reputation for buying or renting in a small community folks will tell other folks. A good portion of my new tenants come about as a result of word of mouth. Another benefit is you know the local folks by reputation. If someone is unreliable or has a drinking problem you often hear about it by just asking folks. The big drawback is that it can be difficult to turn some folks down as you know their parents or friends etc. You can also run into some dumb town politics as well. It can also be very difficult to get really good contractors at a reasonable price. Good contractors can be booked up to a year or two in advance. You often must take a chance on new guys, some work out and others do not. Thanks for taking the time to share your experiences.
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Great advice about niching down Jerry! I completely agree – as they say, “there are riches in niches.” Glad to hear you had such great success with the small-town teacher niche!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied almost 4 years ago
    Interesting article. Rural properties have always made me very nervous.
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    They’re definitely a different animal. But I think the risks are manageable, as long as you understand and account for them. Let me know if you ever take the plunge and pick one up!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Adam Schart from Burlington, Colorado
    Replied almost 4 years ago
    Great article, though I will disagree with the presumptions of less competition, at least per capita. I can only speak for my own eastern Colorado, western Kansas area, but landlording and house flipping is still big business, usually by local residential contractors, real estate agents, or other business owners. Most are $450-$700 / month homes, and would never meet an out of town investor’s cashflow requirements, but they manage themselves (property management is virtually unheard of) and have large quantities. I would say most towns have 3-4 “main” landlords in town. We also see a lot of foreign investment in farmground in our area, especially from Germany. I guess as long as they sell before we run out of irrigation water in 50 years.
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Every market is different, no question. But even in areas like you mentioned that have a few primary players, just knowing and being friends with the other 3-4 investors in town can have some benefits. Friends tend not to get into bidding wars with each other!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Alex Chin from Seattle, Washington
    Replied almost 4 years ago
    Well here’s some Brandon Turner clickbait if I ever did see some… Great article Brian. I may just be taking a look at a few rural properties now. Gotta move outside my comfort zone some time right?
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Awesome Alex! Let me know how your first rural property goes, curious to hear. And you’re totally right, the comfort zone is the enemy of success!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Michael Beeman from Casey, IL
    Replied almost 4 years ago
    I really enjoyed this article. My brothers and I run a sawmill/logging business in rural Illinois. I am a new investor there and I recently purchased a 3 unit multi family that needs a little work, and a 6 unit apartment building next to an oil refinery, in an area that has extremely low vacancy rates. I will have about 12-13k per door in them. So, at 5 and 600 dollars per unit rents, the cap rates look pretty great. What I was considering doing was trying to push a little bit higher than some of the local rents, bc vacancy rates are very low in this area. Most of my fellow investors are telling me that they’re filling units in just a few days, which prompted me to think rents might be to low.
    G. Brian Davis from Baltimore, MD
    Replied almost 4 years ago
    Thanks Michael, and congratulations on the recent purchases! I say give higher rents a try – you can always lower them if you don’t get much interest.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Diane Perry
    Replied over 1 year ago
    Great article. I am thinking of investing in a somewhat rural area (45 minutes to and hour outside of secondary or tertiary city) simply because I have only a small amount of money to invest, and I simply cannot stomach the outrageous cost of private money. (I own my own home and a rented investment property, total value over 600K mortgage free, and can’t get a mortgage.) I found a nice church building in the tiniest of towns where I can convert (no pun intended) the social hall to living space and keep the sanctuary for some future use for myself, but am worried that converting the social hall into living space will leave me cash poor, and maybe it won’t get rented for a while. The property taxes are kind of high because of all the square footage. I thought it might be great to build an indoor rock-climbing space in the sanctuary, but, believe it or not, when I researched my inventive idea, discovered there was already a rock-climbing church conversion a few miles away! Does anyone have inventive ideas for about 1200 sq ft space with no columns and fifteen foot ceilings, with no driveup access or garage, and only street parking? If I can come up with something, I’ll pull the trigger. It’s about ten minutes from a small town that is a popular tourist destination and not far from skiing, but not real close either. Thanks for the terrific and thoroughly logical article.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
Rotate Log in or sign up to comment

Related Blog Posts

Landlording & Rental Properties Jan 13, 2021

Rental Arbitrage: The Secret to Making a Fortune on Airbnb Without Owning Property

By Jason Allen

Most people think that they need own property to be a real estate investor. Most people think they need thousands of dollars to start making money. This thinking couldn’t be further from the truth. Introducing Airbnb arbitrage, one of the best kept secrets of the real estate investing industry.

Read more →

Landlording & Rental Properties Jan 09, 2021

8 Reasons the Best Landlords Always E-Sign Rental Agreements

By Remen Okoruwa

Make the switch to electronic signatures and reap the many benefits—like a faster, smoother lease-signing process and easy access to signed documents (just to name a few).

Read more →

Landlording & Rental Properties Jan 03, 2021

6 Tips for Listing Your Rental Property Online

By Remen Okoruwa

No one drives around looking for rental signs on front lawns or scans the classifieds in the newspaper. Reach a massive audience by listing your rental online.

Read more →

Landlording & Rental Properties Dec 31, 2020

Meet the Investors: How I’ll Retire on Income From Just a Few Properties Featuring Ron Gallagher

By Alexander Felice

Learn from investor Ron Gallagher’s individual room to rent strategy and how he balances the pros and cons of property ownership.

Read more →
Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • Glossary
  • Reviews
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Editorial Guidelines
  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2021 BiggerPockets, LLC. All Rights Reserved.