Rural Real Estate Investing (Iowa)

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Rural Real Estate Investing (Iowa)

Kyle Schwery
Ankeny, IA · Member since 2017 · 14 posts · 6 votes

Hello. I am a current resident in a small town in Iowa and I am on the fence about buying a house. My area is an area with a low population and a flat to slightly downward population growth trend over the last 10 years. I am looking for a house to buy under market value, move in to for a year or so, fix up, rent, and refinance. I am curious if anyone has experience in smaller towns or situations like mine. I have a family and a business in so it would be hard for me to move and I know the area because I have lived here for 20 years and I grew up here. I always see people say that population growth is a key factor when deciding to invest in a property, but that is something I don't have the privilege of. 

Here is a snapshot of some statistics for my area form datausa.io. 

What is some advice you would share for someone like me? Thanks.

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Matt Hein
New to Real Estate · Cedar Falls, IA · Member since 2022 · 3 posts · 3 votes
4y

Your strategy has equity and cashflow benefits. You could validate the equity benefit by looking at what people are buying now -- people are voting with (a lot of) dollars on the type of home they want. You can then find a good-bones home to fix-up and build equity. The next layer would be cashflow in the future. Again, what are people renting now? Assume they're likely going to look for something similar in the future. That gives you the future metrics to build towards. Go ahead and play out a worst-case scenario and see if you break even after 5-years.

The life experience gained from this would be worth ~$10,000 in my estimation. (Just compare it to a year of college) So I'd think anything above a negative $10k return is 'profit'!

Godspeed!

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  • Matt Hein
    New to Real Estate · Cedar Falls, IA · Member since 2022 · 3 posts · 3 votes
    4y

    Your strategy has equity and cashflow benefits. You could validate the equity benefit by looking at what people are buying now -- people are voting with (a lot of) dollars on the type of home they want. You can then find a good-bones home to fix-up and build equity. The next layer would be cashflow in the future. Again, what are people renting now? Assume they're likely going to look for something similar in the future. That gives you the future metrics to build towards. Go ahead and play out a worst-case scenario and see if you break even after 5-years.

    The life experience gained from this would be worth ~$10,000 in my estimation. (Just compare it to a year of college) So I'd think anything above a negative $10k return is 'profit'!

    Godspeed!

    1Reply
  • Darson GranthamBusiness Member
    Realtor · Des Moines · Member since 2018 · 304 posts · 253 votes
    4y

    @Kyle Schwery I think you are in a fantastic position to become the "rental guy" of your small town.  Although most small towns are slowly dying, if you buy correctly (heavy discounts) and you provide a decent property to your tenants, you will develop a large portfolio of rentals that cashflow really we 2% all day long, and will have some equity.  Don't calculate appreciation at all in your formula, ONLY cash flow IMO.

    I see a couple of guys who own 60+ properties I the couple of small towns I grew up in, and they are NOTHING special, they just simply bought every house they could for 25-55K spent $10K in lipstick reno, and rent them all out for 600-850/mo.

    Now the downside here, is that the mental bandwidth you'll need to communicate with this level of sophistication of tenant will be heavy.  Proceed with caution and be self-aware as to what you are capable of. 

    [email protected]515-612-6013
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  • Samuel Brant
    Real Estate Agent · Central Iowa · Member since 2021 · 26 posts · 13 votes
    4y

    @Kyle SchweryI bought a single-family home back where I grew up in Carroll, Iowa. I used it as my primary residence for a while and then moved out and rented. I did some simple touches up and took great pictures and had no problem renting it out. When people find out in small towns you have high-quality rentals your name spreads like wildfire. Taking extra due diligence is required though, your pool of A-B tenants is much smaller and I would make sure to do extra screenings before choosing the right tenant. 

    A big advantage of a smaller town is you won't have city officials breathing down your neck with rental inspections.

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