Has anyone BRRRR invested in smaller towns and communities?

Indianapolis, Indiana
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Has anyone BRRRR invested in smaller towns and communities?

Andrew Matura
New to Real Estate · Indianapolis · Member since 2023 · 14 posts · 17 votes

Hey all, I am new to real estate investing and am accumulating my resources to begin investing with the BRRRR strategy in a year-year and a half time frame.

I live in Indianapolis Indiana however, my wife and I plan on moving up north (near family) around the Lafayette area. Has anyone successfully or unsuccessfully invested in smaller towns/communities? The homes in this specific area consist of older homes which on a surface level, seem good for a BRRRR strategy.

Any and all advice is appreciated, thank you all in advance!

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Joshua Davidson
Rental Property Investor · Morgantown, WV · Member since 2018 · 57 posts · 24 votes
2y

Hi @Andrew Matura,

Yes, I have done BRRRR investing in Wheeling, WV, a small city of about 25k people. We had a lot of success. Please feel free to check out my profile for more details on the investment, but we were able to spend 1 year slowly renovating the apartments as tenants moved in and out, invested heavily into leasehold improvements (long-term fixed like HVAC, water heaters, exterior paint, property drainage, etc), converted month-to-month tenants to annual leases, and raised rents to market.

In all, we were able to do a cash-out refinance after 1 year and got our entire investment, including down payment, back into our personal accounts and we still have a cash flowing property.

The beauty of smaller town and communities is that often big-time investors are not looking at them as closely and they can cash flow quite well, at the sacrifice of "natural" appreciation. With the BRRRR strategy, you can "force" the appreciation and get the benefit of both.

Please feel free to connect with me if you have any other questions, and if you need any assistance or guidance with bookkeeping, taxes, or other business strategies please let me know. Good luck!

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  • Joshua Davidson
    Rental Property Investor · Morgantown, WV · Member since 2018 · 57 posts · 24 votes
    2y

    Hi @Andrew Matura,

    Yes, I have done BRRRR investing in Wheeling, WV, a small city of about 25k people. We had a lot of success. Please feel free to check out my profile for more details on the investment, but we were able to spend 1 year slowly renovating the apartments as tenants moved in and out, invested heavily into leasehold improvements (long-term fixed like HVAC, water heaters, exterior paint, property drainage, etc), converted month-to-month tenants to annual leases, and raised rents to market.

    In all, we were able to do a cash-out refinance after 1 year and got our entire investment, including down payment, back into our personal accounts and we still have a cash flowing property.

    The beauty of smaller town and communities is that often big-time investors are not looking at them as closely and they can cash flow quite well, at the sacrifice of "natural" appreciation. With the BRRRR strategy, you can "force" the appreciation and get the benefit of both.

    Please feel free to connect with me if you have any other questions, and if you need any assistance or guidance with bookkeeping, taxes, or other business strategies please let me know. Good luck!

    4Reply
  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    2y

    Hi Andrew,

    BRRRR should work in most areas but it can be harder in less populated areas. One key thing to check would be whether the property is considered "rural". The reason being most lenders cannot do rural properties and you'd be limited to local conventional financing. This can be easily done by plugging in the address into the CFPB tool. Another point would be to check comps, as high activity is a good sign for BRRRRs.

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    2Reply
  • Arthur Schwartz
    Investor · Baltimore, MD · Member since 2019 · 168 posts · 47 votes
    2y

    Yes and I don't recommend.  The prices will be better in more rural small towns than more urban areas.  If you are handy and you live locally, it may work out  But if you need a contractor to come from a larger city, they will charge an arm and a leg, if they come at all.  And if you move, who is going to manage the property?

    1Reply
  • Andrew Matura
    OP
    New to Real Estate · Indianapolis · Member since 2023 · 14 posts · 17 votes
    2y

    Thank you all for the feedback! We are looking toward the smaller towns since it will more than likely be our long term residence. Another reason is that we truly want our investment to uplift the communities we are apart of. I feel that this is much more tangible in a smaller community. That being said I understand the difficulties of property management and renovation in these areas. I will look further into these aspects to make sure we choose the right target market for us!

    1Reply
  • Glen Wiley
    Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes
    2y

    We have properties in counties around Richmond, Va and they work really well. A few things to watch for:

    1. Look carefully at the source of jobs in the area, make sure you understand where the workers are driving. You don't want to rely on a single large employer to the extent that if they close up shop the whole town goes bust.

    2. Look at the trends for values in the neighborhoods you are investing in - you need to buy in areas that are trending up, looking better maintained, improving.

    3. Get a feel for the local government, are they growth focused or are they restricting construction? If they are restricting construction then you have the potential for extra appreciation over time since supply will be constrained.

    0Reply
  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 716 votes
    2y

    Congrats on entering the real estate investing journey! In smaller towns like Lafayette, Indiana, the BRRRR strategy can be advantageous, offering more affordable properties and potentially lower competition. However, there are unique considerations, such as a limited market, challenges in finding qualified contractors, and potentially lower rent potential. Thorough research on the Lafayette market, including rental trends, neighborhood analysis, and renovation costs, is crucial. Connect with locals, like realtors and contractors, for insights. Consider a hybrid approach, starting with a property closer to your current location in Indianapolis while building knowledge and connections in Lafayette. This allows you to gain experience and use profits from the first property for investments in Lafayette later.

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  • Joshua Davidson
    Rental Property Investor · Morgantown, WV · Member since 2018 · 57 posts · 24 votes
    2y
    Quote from @Andrew Matura:

    Thank you all for the feedback! We are looking toward the smaller towns since it will more than likely be our long term residence. Another reason is that we truly want our investment to uplift the communities we are apart of. I feel that this is much more tangible in a smaller community. That being said I understand the difficulties of property management and renovation in these areas. I will look further into these aspects to make sure we choose the right target market for us!


    That's the exact reason my wife and I enjoy living in WV. It is a beautiful and underrated state, but it definitely has its room for improvement. We have gotten a sense of satisfaction fixing up our investment and getting good, qualified, respectable tenants in there. Kudos to you!

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    2y

    @Andrew Matura

    Investing in smaller towns or communities can be a viable strategy, and the success depends on various factors. Here are some considerations and tips for investing in smaller towns, especially in the context of the BRRRR strategy:

    Do extensive research on the local market. Recognize the smaller town's employment economy, demographic trends, and driving forces.

    Determine the area's demand for rental homes. Keep an eye out for indicators of population increase or steady housing demand.

    The BRRRR approach may be appropriate for older properties, particularly if they require renovations. Nonetheless, carry out a thorough property examination to find any such problems.

    Examine the funding choices that the smaller town has to offer. Local credit unions or banks could provide funding that is more suited to your requirements and have a greater grasp of the community.

    Understand the local construction codes, zoning laws, and any other rules that can affect your ability to make improvements or rent out the property.

    Make sure your escape plan is well-defined. Think about if you want to keep the property for a long time, sell it after renovations, or put it to other uses.

    Note that careful planning, thoroughness, and flexibility are necessary for profitable real estate investing. Since every market is different, it's important to keep yourself updated on the particular traits of the smaller town you're thinking about.

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  • Staci Rogers
    Lender · Bloomington, IN · Member since 2023 · 77 posts · 29 votes
    2y

    Hi @Andrew Matura,

    Lafayette is a great market that has a lot of potential. In addition to being a college town, the business industry looks positive. GE Engine Services and Caterpillar, Inc. both recently received tax abatements and plan to add 41 and 100 jobs, respectively. The population has also trending positively over the past several years. 

    The Wall Street Journal/Realtor.com Winter 2023 Emerging Housing Markets Index put the market as the #1 emerging market in America, classifying it as a hot market. https://www.ibrc.indiana.edu/ibr/2023/outlook/lafayette.html

    I've worked with a lot of investors who have found success investing in smaller markets throughout the state. Feel free to connect if you have any questions.

    Staci

    1Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    2y

    My cousin invests in Emporia, KS. It has its advantages (most notably, it's cheaper). But there are some challenges; notably it's easy to rehab out all your equity and it can be hard to find contractors/vendors sometimes.

    Also, a small town can be particularly vulnerable if it's reliant on one major company if that company leaves. I would be nervous about investing in a small town with only one major employer. 

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  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    Define "small"...

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  • Jen Arizmendi
    Real Estate Broker · South Bend, IN · Member since 2019 · 37 posts · 17 votes
    2y

    Hi Andrew, if you want to try out South Bend, IN I'm happy to help.  I have hundreds of investors who are investing from all over the country as well as abroad. We are still affordable and have great returns!  Please connect if you would like to hear more about my market!  Best of luck!- Jen

    2Reply
  • Gordon Burwell
    New to Real Estate · IN · Member since 2023 · 7 posts · 1 vote
    2y

    Hello!  I work in Lafayette now and commute daily. When you say smaller towns and communities do you specifically mean Lafayette,or surrounding areas as well? 
    I ask because to most Lafayette is the city and when talking north of Indy.  Lafayette is gonna be about the biggest city/town for quite awhile, Especially with Purdue being there.  That being said they continue to building factories and warehouses and bringing jobs in.  And I also feel like there are under developed areas in Lafayette that could need to be improved.  

    1Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Andrew Matura I'm not familiar with that specific market but I invest and BRRRR in communities of 800-8000. There's about 8 communities in my primary target area in New England and they're all considered to be extremely hot real estate markets. I've seen abundantly strong appreciation in a 1-2 year period on all of my properties.

    While I don’t usually take out 100% in my refinance because I’m looking for strong cash flow I’ve been able to take out most of my down payments. I often end up leaving some of the renovation dollars in the property. But that’s been my plan all along to generate the most cash flow.

    I would certainly think any market greater than 8000-10000 people would be sufficient to do some BRRRRs in. It may take some searching to find good candidates for this method because I often wait in between my deals coming available in the smaller markets but then 3-4 might come available at once.

    You might be pressed to do 100s of them like people claim to be doing in markets like St Louis of Cleveland but I would think you’d be able to successfully get several under your belt and have the market to sell them or rent them upon completion.

    1Reply
  • Max C MooreBusiness Member
    Realtor · Indianapolis, IN · Member since 2021 · 32 posts · 13 votes
    2y

    Andrew, 

    My experience in Indianapolis is that the BRRRR Strategy is great when adding $30k - $40k of value. Not doing a full gut rehab. Our median rent growth was 27%+ last year & continues to rise. There is a high demand for well executed & A+ rental grade. Even in submarkets that rental rates level out at $1,400 the A+ finishes are fetching about $2k. With the lighter value add you wont get all of your initial money back but depending on the deal you will be able to get a good majority back leaving maybe 7% - 15% in the deal. While still breaking even every month. Even with our price increases YOY standard appreciation + value add you can see a 30% swing in value. The one thing I warrant is know that you are going to be leaving cash behind to cashflow. I just went to refinance on one of my BRRRR projects & did a quick number spread on return on equity & realized I was in a better spot to sell & 1031 leveling up to a better property. This one I waited 24 months to allow the market to increase in value before refinancing. I also was at a great rate for todays market.

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  • John Otradovec
    Lender · Springfield, MO · Member since 2024 · 46 posts · 20 votes
    2y

    Yes it can be done and can also be a great place to do BRRRR since less competition and new builds, etc. I help clients, as a PML, do it all over the country. Just about picking the right property most of the time. Good luck!

    1Reply
  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    2y

    Hey Andrew, leveraging your existing financial strengths and experience in pooling resources for investment like commercial syndication, you could consider building a diversified real estate portfolio focused on out-of-state single-family homes in growing markets or smaller multi-family units like duplexes or triplexes. This approach can balance cash flow, manageability with a smaller initial investment and ease the learning curve while allowing for gradual scaling with the help of local real estate professionals and property management companies. 

    1Reply
  • Jake KnightPro Member
    Property Manager · Indianapolis · Member since 2017 · 303 posts · 146 votes
    2y

    That strategy should work find in smaller markets as well, it's really about finding the right deal.  You'll just want to make sure you underwrite it well. We have a lot of experience doing this in Anderson but I am not familiar with the Lafayette market.

    1Reply
  • Jason Bailey
    Member since 2024 · 4 posts · 3 votes
    2y

    Welcome to the real estate world! I haven't specifically tried BRRRR in Lafayette, but I've done some deals in smaller towns. Older homes can be a goldmine for this strategy, but make sure to do a thorough inspection for any hidden issues.

    Check out local contractors, get to know the market well, and connect with other investors in that area. It's all about understanding the nuances of the local scene.

    1Reply
  • Billy Houston
    Member since 2019 · 4 posts · 5 votes
    2y

    Crown Point, IN here...

    There are advantages and disadvantages like any area. Small towns have more limited options on house availability, and if you land in a town with a single powerhouse buyer you can find yourself picking up the leftovers. one of the big benifits is that same ability to control the market, I get sellers who call direct knowing i have a house in their area. Contractors tend to be cheaper, but day labor is hard to find.

    1Reply
  • Tracy Reaves
    New to Real Estate · CT · Member since 2018 · 8 posts · 3 votes
    2y

    Hi all,

    I am looking at a mixed used property and haven’t not secured all my funding. Should I put in offer without all the funding?

    This would be my first investment property 

    All feedback welcomed


    Thanks

    1Reply
  • Michael DiossaPro Member
    Investor · RI · Member since 2023 · 192 posts · 163 votes
    2y
    Quote from @Arthur Schwartz:

    Yes and I don't recommend.  The prices will be better in more rural small towns than more urban areas.  If you are handy and you live locally, it may work out  But if you need a contractor to come from a larger city, they will charge an arm and a leg, if they come at all.  And if you move, who is going to manage the property?


     This is actually a really good point! 

    1Reply
  • Michael DiossaPro Member
    Investor · RI · Member since 2023 · 192 posts · 163 votes
    2y
    Quote from @Arthur Schwartz:

    Yes and I don't recommend.  The prices will be better in more rural small towns than more urban areas.  If you are handy and you live locally, it may work out  But if you need a contractor to come from a larger city, they will charge an arm and a leg, if they come at all.  And if you move, who is going to manage the property?

    !

    1Reply
  • Glen Wiley
    Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes
    2y
    Quote from @Tracy Reaves:

    Hi all,

    I am looking at a mixed used property and haven’t not secured all my funding. Should I put in offer without all the funding?

    This would be my first investment property 

    All feedback welcomed


    Thanks


    Get your funding lined up first. It makes you more competitive if there are multiple buyers competing for a house, many sellers are reluctant to go under contract unless they can mitigate the risk of not closing due to financing problems - they do this by only signing with folks who are either pre-approved or pre-qualified.

    Another reason for getting funding lined up first is that you will be way less stressed between going under contract and closing.
    0Reply
  • Jake BakerBusiness Member
    Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 696 votes
    2y

    @Andrew Matura

    Good contractors are harder to come to buy in smaller or secluded towns. 

    The BRRRR strategy can still work. It is okay to leave some money in the deal. A "perfect brrrr" is hard to come buy with today's financing.

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