Should I Invest in Rural, Urban, or Suburban Real Estate?
Investing in real estate can be both fun and lucrative, but knowing where to start can sometimes be a problem. Do you begin in the city? How about a rural area? Somewhere in-between? What are the pros and cons of each? If I’m trying to flip a property, where is it best to buy?
To help you make your decision wisely, we’ve put together this guide, discussing the ups and downs of investing in different areas. After reading this, you’ll be better prepared to make an informed decision.
Rural areas have a unique charm that makes the very attractive, both to investors and buyers. First and foremost, properties in rural areas are cheaper than those in the city. The smaller populations of rural areas mean that there are fewer buyers when properties go on the market, so if you’re looking to buy cheap, this buyer-favoring market will make it easier.
Plots tend to be much bigger, with ample room for things like yards, garden plots (and sometimes) whole farms. It’s a really good place to stretch out and enjoy the space, and do with it what you want. That kind of freedom is highly sought by buyers in rural areas, so reselling a property can be lucrative if done right.
Its also very easy to be a big fish in a small pond, if you prepare a property right. If you’re looking to flip, taking an outdated structure or a plot of land that hasn’t seen much upkeep and giving it a makeover will make your investment the talk of the town. Your once buyer-centric market can quickly flip this way to be more favorable to you as the seller.
Part of the problem with rural areas is that there’s a more limited source of potential income. A smaller job market with fewer employers, and less money being paid out, means that people don’t move in very often, and when they do, they don’t tend to have as much money. The fewer economic opportunities mean that there tends to be very little change to the income levels of the population, which means people tend to stay living where they already are, rather than upgrading to something nicer.
This all means that there are very small buyer markets, so even if you’re a big fish in a small pond, there don’t tend to be very many fishermen. And since people don’t move often, properties don’t open up to buy for investment very often either. You may be waiting for a while to find the kind of property you want in a rural area.
What’s more, public services (like water, sewer, electricity, etc.) aren’t always available for more remote properties. For properties with older structures, you may find yourself paying to have water or electric lines connected, for example. This physical and infrastructural distance may be a turnoff to buyers who could already be upset about the distance from metropolitan areas.
In short, finding the right property, knowing what to do with it, and then being able to sell it in a smaller, rural market can be a difficult task that requires some skill and expertise. Best not to attempt this one until you’ve had a few flips under your belt.
For many, suburban areas are the best of both worlds. They offer many of the big city thrills with the lower property costs of a rural area. Suburbs are within driving distance of metro areas, but they offer much bigger properties for a much lower cost. For the price of a one bedroom condo in the city, you can get three bedrooms, two bathrooms, and a yard in the ‘burbs. That kind of decreased cost is appealing both to investors, and to the buyers who will come after.
There’s also a lot of features and amenities in suburban areas that are likely to appeal to families; things like big yards, more bedrooms, lower crime rates, quiet neighborhoods, nearby schools or entertainment, and so forth. And when you can’t find what you’re looking for at home, the city’s just a short jaunt away, offering all the excitement that comes with it.
Perhaps most importantly, suburban markets are busy, full of young families with stable incomes looking for a quality home. That means there’s plenty of buyers willing to consider a spruced-up property. Many of these families are two-income families, and can afford to spend a little more for something of value.
Among the problems you’ll run into when investing in a suburban property is the wear and tear; the addition of children and pets can be hard on a property, as they tend to cause damage. Whether it’s a soiled carpet, damaged hinges on a cabinet, or broken windows, you will likely have to do more fixing-up to make the property ready to sell again for a profit.
Suburban properties also require more advertising; while the locals all know what’s great about the location (where to go to eat, what to do on the weekends, fun special events, etc.), suburbs are rarely famous to outsiders for anything spectacular. You’ll need to have a local’s familiarity with amenities and entertainment in the area to better market your property to those who don’t know why it’s a great place to live. And be aware, with the city so close, you’ll be swimming against the current—many buyers will assume there’s little to see or do in the suburbs, and will keep their eyes turned city-ward.
To put it plainly, while you may have some difficulty marketing outside of young families, suburbs are a good choice for those looking to make an investment that’s likely to sell for a reasonable price in a reasonable amount of time.
Perhaps the biggest advantage to cities is this: they are their own best advertisement. You never have to sell a city—the culture, the food, the entertainment and excitement, they all come as part of the package. Big cities are known for what make them special, and the focus on what’s going on outside the property will have a positive impact if anything lackluster is going on inside it.
Urban markets also have a high turnover—that means there’s an abundance of properties to be had, and an abundance of buyers to present to. If the property or buyer doesn’t suit you, wait a day, and there will be a new one available. You’ll also see a wider variety of buyers, unlike suburbs and rural areas (which tend to young families and older, established families, respectively). This active market means that there’s less risk involved, and the economic opportunities in cities mean that buyers can afford to pay for what you’re selling.
Cities are the most expensive, by far (even more so, if you’re talking locations near a university). We’re talking over a $100 a square foot for a place (and in some cases, a lot more). That means $200,000 won’t get you very far, so expect to have more capital on hand than normal to make the investment if you want to turn a profit.
What’s more, people are starting to flow out of cities, not into them. Population trends have shifted, and cities don’t hold the monopoly they used to. People are starting to distribute away from major metro areas, and while urban markets are still hot, they’re not quite as abundant as they used to be. Those trends are only expected to continue.
And it’s hard to overlook the crime rates of cities. While break-ins and theft are much less common in suburbs and rural communities, cities are famous for their danger. Buyers, especially ones with small family members, are frequently looking for safer locations to put down roots.
Bottom line: cities potentially yield high returns, require more investment, and markets aren’t as robust as they used to be.
For more information about where to invest and how to flip, contact Success Path, where you can learn from the experts how to make flips successful.