Investment in a Quad in Rural Iowa?

Question

I am in the process of analyzing a fully occupied quadplex in a rural community in Iowa. The numbers look good, but I'm concerned about vacancy time and service providers for such a small town...Anyone here investing in rural areas? We are fairly familiar with the area since my husband grew up in the next town over and we both grew up in rural areas of Iowa, but I'm trying to set some expectations since I've been a Property Manager in Denver for 7+ years (so a sliiiightly different market). Ag is the main industry. Tiny town (300+ pop). It's about 20-25 minutes to 3 larger (still smallish) towns and about an hour to Des Moines. This would primarily be a Cash Flow play as I wouldn't expect a lot of appreciation there. From the listing, it's fully occupied, but 3/4 are on month to month leases. Could that cause issues with financing?

What am I not thinking of?

Thanks in advance for your input!

Sara

Daniel Zwick · Answer

@Sara Reeder

That far from a major city you may have some vacancy issues. I have a couple units in a small town of 800 but we're very close to Iowa City. We tend to fill these units a bit slower than ours in Iowa City or Cedar Rapids but it's not drastically different. I have noticed tenants tend to stay longer in smaller towns. I'm guessing it's due to the lack of available rental units.

As far as financing goes, I wouldn't expect the month to month leases to have any impact. The last property I bought had a majority of leases as month to month and there was no issue. If you run into problems with your lender I would just call someone else as there are plenty of lenders that will fund it if it cash flows.

Best of luck!

Alecia Loveless · Answer

@Sara Reeder Two things that come to my mind is how many other rentals are in town that would be competition for this property? Also are there any realtors or other people in the industry you could talk to to see how much call there is in the immediate area for rentals.

A couple more things. Does the town put out any demographics or statistics on the amount of people who own homes, rent homes, graduate high school.

Is there Any industry besides AG that you could advertise your rentals in? Grocery store, library, hardware store, diner/restaurant. Are there churches you could connect with the ministers or priests in to let them know you have rentals. Do high school kids typically go to college, move away, continue living with parents on the farm? Just a few ideas for attracting tenants that I use besides my local Facebook groups. In my small New England area a lot of the local billboards in stores and restaurants still provide great results.

Sara Reeder · Answer

Thanks for your input Daniel! I think it would be difficult to self-manage since we are out of state so the property manager aspect was concerning to me; however, I researched agents in the town nearby and there were several that listed mentioned management services so I may reach out to them first to get their opinion. Now that I type that out, that should have been my first step. Ha.

Daniel Zwick · Answer

@Sara Reeder Sorry, forgot to mention the service providers. For our rural units we actually pull a lot of our service companies from smaller towns as they tend to have more availability than those we use in the bigger cities. It may take some time to find some you like but in my experience it hasn't been a major issue. The biggest draw back for me has been lack of property managers in rural areas but I've found some real estate agencies take on that role too. Not sure if you plan on self-managing or not but figured I'd mention that.

Sara Reeder · Answer

Excellent suggestions! Thanks for the response Alecia!

Investment in a Quad in Rural Iowa?

Investment in a Quad in Rural Iowa?

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