Investing in Rural Areas Pros and Cons?

General Real Estate Investing
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Investing in Rural Areas Pros and Cons?

Shavin Patel
Investor · Oklahoma/Texas · Member since 2020 · 14 posts · 7 votes

Hello everyone, Im relatively new to investing. Right now, I own some rentals in a rural area, and they're performing well. I am considering whether to keep investing in similar rural areas with populations below 15,000 or to transition to purchasing properties in larger cities.

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  • Clint Jusino
    Dallas · Member since 2020 · 154 posts · 95 votes
    2y
    Quote from @Shavin Patel:

    Hello everyone, Im relatively new to investing. Right now, I own some rentals in a rural area, and they're performing well. I am considering whether to keep investing in similar rural areas with populations below 15,000 or to transition to purchasing properties in larger cities.

    Can you clarify when you say performing well? What's the cash flow looking like? How's the equity on the rentals? I say if it's not broken then don't fix it. keep doing what is working for you. 
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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    2y

    I bought a 12 unit building a few years ago in a town/city of 16,000. It is a better than average property and is netting 70k year and growing. Small city tenants are a breath of fresh air. They are grateful, they accept responsibility and there are far fewer free loaders!

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  • Kai Kopsch
    Real Estate Broker · Charlotte, NC · Member since 2016 · 569 posts · 351 votes
    2y

    Ultimately, the decision should align with your investment goals, risk tolerance, and the amount of time you can dedicate to managing your properties. Diversification can also be a key to a robust investment strategy, so considering a mix of both rural and urban properties could be beneficial. Happy investing!

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  • Shavin Patel
    OP
    Investor · Oklahoma/Texas · Member since 2020 · 14 posts · 7 votes
    2y
    Quote from @Clint Jusino:
    Quote from @Shavin Patel:

    Hello everyone, Im relatively new to investing. Right now, I own some rentals in a rural area, and they're performing well. I am considering whether to keep investing in similar rural areas with populations below 15,000 or to transition to purchasing properties in larger cities.

    Can you clarify when you say performing well? What's the cash flow looking like? How's the equity on the rentals? I say if it's not broken then don't fix it. keep doing what is working for you. 

     The properties are cash flowing with a low entry cost to purchasing the property. Thats one of the Cons is theres hardly any appreciation growth. One issue i will run into is funding since alot of dscr loans do not fund in rural areas. 

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  • Shavin Patel
    OP
    Investor · Oklahoma/Texas · Member since 2020 · 14 posts · 7 votes
    2y
    Quote from @Bjorn Ahlblad:

    I bought a 12 unit building a few years ago in a town/city of 16,000. It is a better than average property and is netting 70k year and growing. Small city tenants are a breath of fresh air. They are grateful, they accept responsibility and there are far fewer free loaders!


     Yes, the cashflow is great in these smaller towns, but im looking for long term since lot of these small towns do not grow appreciation like the larger cities.  

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  • Shavin Patel
    OP
    Investor · Oklahoma/Texas · Member since 2020 · 14 posts · 7 votes
    2y
    Quote from @Kai Kopsch:

    Ultimately, the decision should align with your investment goals, risk tolerance, and the amount of time you can dedicate to managing your properties. Diversification can also be a key to a robust investment strategy, so considering a mix of both rural and urban properties could be beneficial. Happy investing!


    I do believe it would be best to invest in both the urban properties for long term since the properties will appreciate  over time  then the ones in the rural as they are just cash cows. 

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Shavin Patel:
    Quote from @Clint Jusino:
    Quote from @Shavin Patel:

    Hello everyone, Im relatively new to investing. Right now, I own some rentals in a rural area, and they're performing well. I am considering whether to keep investing in similar rural areas with populations below 15,000 or to transition to purchasing properties in larger cities.

    Can you clarify when you say performing well? What's the cash flow looking like? How's the equity on the rentals? I say if it's not broken then don't fix it. keep doing what is working for you. 

     The properties are cash flowing with a low entry cost to purchasing the property. Thats one of the Cons is theres hardly any appreciation growth. One issue i will run into is funding since alot of dscr loans do not fund in rural areas. 


     Generally the biggest con or concern on rural (from dscr lender perspective) is the availability of the land to build competitive supply cheaply that can challenge the value of the subject property.  One of the benefits of larger markets is that there is less raw land available in cities to add supply and pressure values

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  • River SavaPro Member
    Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Kai Kopsch:

    Ultimately, the decision should align with your investment goals, risk tolerance, and the amount of time you can dedicate to managing your properties. Diversification can also be a key to a robust investment strategy, so considering a mix of both rural and urban properties could be beneficial. Happy investing!


    I agree with Kai. Also, take into account that lenders will typically lower the LTV in rural areas.

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