Buy & Hold in Rural Areas?

Question

I'm looking at a deal but the property is in a very remote, rural area. (The population is only about 800 people) Does anyone else invest in areas with very low populations? Is this really discouraged, or are there ways to mitigate risks of vacancy with such a small pool of potential renters?

Shelby Pracht · Answer

Account Closed: We own a long term rental here in Mammoth already and have definitely looked into vacation rentals as well, but real estate prices are pretty high because it is a resort location. The property we're looking at is actually a couple hours north of here in a town called Walker, which is much more remote, but prices are much lower.

Account Closed · Answer

Hi Shelby,

I know this doesn't answer any of your questions directly and I'm not familiar with the area but a quick search on Google Maps looks like it's a beautiful spot and a great destination for skiing. If I were looking in that area, I'd have my radar up for  vacation rentals.  Have you given any thought to that? Still a viable buy and hold strategy as long as it's a stong vacation destination.

Frank Chirkinian · Answer

@Shelby Cook I like this idea in the current market.  All of the primary markets in most metros have low cap rates given the competition in the marketplace.  However, drive 40 miles out of town and you'll find opportunities to by income properties in the secondary and tertiary markets with cap rates that exceed 10% regularly.  You just need to make sure you've gauged the rental market and know what the market garners for rents in the particular area.  I've been investing in multifamily outside of my market in areas most wouldn't think to look and it's work out well for me.  Just do you homework.

Shelby Pracht · Answer

@Josh Caldwell

Thanks so much for your input, that's exactly what I'm nervous about!

Josh Caldwell · Answer

Ive never done buy and hold in a rural area but I have flipped contracts in rural areas and it is not easy to find buyers.  Simpley put, there arent a lot of buyers (renters) in the area.  you can buy the property but make sure it is a deal and factor in a high vacancy rate into your projections.