Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
It guess I've stumbled onto something with my marketing reach, because I am getting leads lately from small towns about 30-40 minutes outside the city -- places like Wallis and Cleveland and so forth.
Maybe this is a good thing, but I find it really hard to do comps on those properties. I am wondering if others are investing in the smaller communities around us here and how are you dealing with the lack of data.
In particular, I struggle putting value on the land. A lot of these little places are building-poor but land rich, eg. some crappy 2 bedroom sitting on a 2 acre parcel. Or the house is decent but it has issues, like foundation cracking, etc.
Anyway, if any of you are playing in this space, reach out and let's compare some notes.
Rural investing for buy and hold has been very good to me over the years. Houston numbers falling short compared to the profits I've been seeing from small towns. Why buy and hold? Prices lower and rents good. As for financing, or refinancing, this is where the problems arise. Unless it's in the path of progress, banks will balk at lending, or refinancing. Comps will be tricky. So for buy and hold, absolutley. For flips, and or BRRR, maybe be prepared to hold in case they end up on the market too long. I invest in Brazoria, Kenedy, Karnes City, and Houston.
@Mark Sewell in the same boat with you. I try to value 2 ways 1) land value only and then value of house and then cross check with MLS comps . For MLS comps i use proximity and frequency of listing/sale to adjust price. At the end, availability of information will have a reverse correlation to offer.
Pricing becomes an art rather within city where you would have hard data to create/outline a trend. Feel free to reach out and we can work through examples.
@Mark Sewell I have looked further out than 30-40 min, more like 1 to 2 hrs. away.
Comps have been an issue however, I buy to hold so my main focus has been rent per SF and vacancy rates. At first, I was worried about vacancy rates in a small towns, 4,000 +/- population, however, I have found that in some of the markets I have looked have a high demand for rentals than what I would expect.
One thing I have found that helps is finding a local REA that knows the area, they have been instrumental when learning a new market.
I have a buddy that is a real estate agent in Lufkin, and it seems that he is up there building spec houses. Interesting model -- don't have a listing, go build one! Or sell the pretty pictures in the brochures -- not sure how he's doing it, but he's showing those new houses on his FB page on a pretty regular basis.
I was also surprised to learn from some BP friends over in Beaumont that they are getting higher returns on their rentals than we are. There the strategy is to get basic houses out near the big industrial plants and rent them.
Rural investing for buy and hold has been very good to me over the years. Houston numbers falling short compared to the profits I've been seeing from small towns. Why buy and hold? Prices lower and rents good. As for financing, or refinancing, this is where the problems arise. Unless it's in the path of progress, banks will balk at lending, or refinancing. Comps will be tricky. So for buy and hold, absolutley. For flips, and or BRRR, maybe be prepared to hold in case they end up on the market too long. I invest in Brazoria, Kenedy, Karnes City, and Houston.
I am investing in West/Northwest Montgomery County area. I find pretty good comps most of the time. For the ones that I can't get good data, I expand time frame or search criteria and then usually use the lowest comp to err on the side of caution. For land I try to find a similar parcel and use price per acre and then underestimate house value. Flipped 3 homes up here, so far so good. Have one 17 acre property right now. it's rented out til March. Listed it already expecting 6-9 month time to find buyer.
I have stuck to the outskirts of major cities for most of my 15+ years of investing. Its not like the "city" areas in obtaining comps, or knowing what to do to maximize profits; unless thats your bag.
Imagine me trying to go into the city, after working on late 1800's farm houses and building barns to value add, then going into the Museum district. I'd have to learn how to do comps (block by block can be different in many city's) and learn what to do to the property to get the most value.
Luckily for me, I was a GC for 20 years and thus did TONS of work in major cities. (Houston, Austin, Fort Worth, New Orleans, Oklahoma City) and learned some "sure fire" ways to garner good, reliable, conservative, numbers for me to base my "comps", no matter where I found myself.
Find someone local, who knows the area and works it well. Ask them.