Originally Posted March 27, 2016 By John Dessauer
Investing in property in a rural area comes with its own set of rules for making a decent profit on your investment. Investing in a rural community can be quite different from buying urban real estate.
Probably the most attractive factor in buying rural real estate is the great price. I have bought many properties in rural areas and have done really well. One of my biggest success stories is a property I bought in Rensselaer, Indiana. You can read about that in my book, Apartment Confidential. Land and houses can be much cheaper in a rural area than property in more populated areas. Don’t let the low prices lure you into making a big real estate mistake. There are several issues that need to be explored before you make a purchase.
Take into consideration the population of the small town where you want to invest. How many people live there? It may be difficult to find qualified renters in such a tiny population. In rural areas houses, shopping, dining, and employment opportunities can be located many miles from each other. This could cause a lack of interest in a rental property or a resale. You may also need to drive a long distance to check on your property or meet with potential tenants. A lot of traveling back and forth can create stress, as well as cost money.
When it comes to an area’s economic health, you must be a bit of a sleuth. Do some careful research beforehand and chose investment property that doesn’t depend on just one industry for income. If the small town has only one place to work, such as a poultry processing plant, and that business fails, then the town’s whole economy can turn sour very quickly. Most of the population will move away to find employment, which will create a ghost town effect. This will eventually cause your real estate investment to drop dramatically in value and desirability.
In tiny towns and other rural areas, there can be a total lack of building codes, zoning, and other regulations. This means if a neighbor decides to build a big, stinky chicken farm downwind of your investment property there isn’t anything you can do. This can also mean that some houses were not built or updated to meet any sort of building codes. This can result in homes with awkward architecture or homes constructed in a dangerous manner, such as exposed electrical wiring. Any house you want to buy for investment should be thoroughly inspected for safety purposes of your future tenants. A thorough inspection can help you to avoid any possible lawsuits.
In very small towns water and sewage are not handled by the county as in urban areas. Usually, rural areas depend on individual wells to provide water and there are backyard septic tanks for sewage. This is a system that will need to be maintained over the years. The potential maintenance costs of these items should be considered before purchase.
You should be aware some small towns do not have their own firefighters or police. There are no fire hydrants on the corner in case of a house fire. This fact could significantly drive up the price of your landlord’s insurance. Also, no hospitals or doctors nearby could be a deterrent to some potential tenants.
“Remember, wealth has nothing to do with money, success has everything to do with failure, and life is as simple as you make it!” – John Dessauer