Investing in small towns

4 Replies

I’m a newbie so this may seem dumb but I’m wondering how the experienced investors feel about investing in small towns. I’m interested in the buy and hold strategy and I’m looking at a small college town in MO where I have family. Crime and taxes are low, my sister works at the university and is always telling me there are few rentals available. At first glance the town seems to be growing. They just built a new hotel and conference center. I feel like this would be a good place to purchase my first property because I visit a couple of times a year and I have a support system there. I may be overthinking it but I’m curious what you experienced investors think. Thank you

@Michael Ryland
I would say the majority of investors stay out of small towns but if you have boots on the ground and the area is growing it’s a positive. Also what is a small town- If you are talking a few hundred to 1000 people that I small, 5,000+ is small but also has potentially better job opportunities for tenants

The question is if there is the availability for appreciation. If there is no appreciation then you need to have significant cash flow otherwise at the end of the day you will realize very little profit.

@Jay Hinrichs has a great post about cash flow vs appreciation and what the numbers look like at the end of the day.

Some college towns felt almost no impact during the housing downturn 10 years ago.  It wouldn't surprise me if the town you are thinking about could be a good place to invest. One thing to watch out for is if the University at some point decides to build a large number of rentals/dorms that private investors wouldn't be able to compete with.

@Chris Seveney Thank you for your input. I’ll
look for that article. My very conservative estimates at this point come to a 13% ROI on the couple of properties I’m looking at. The population is around 12,000. Like I said things appear good. I should have the financial pieces in place this week so hopefully I can pull the trigger on my first property soon. In the mean time I’m trying to learn everything I can.

@Michael Ryland Nothing at all wrong with investing in small towns. You are over thinking it imo. I would rather invest in a stable small town with family there as opposed to some other OOS place where you don't know anyone (at least not like you do family.) 

Any small town with a University is going to have a stable rental market from what I've seen, 

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