Small Town Real Estate Investing Considerations

Written by Marc on May 5th, 2009

In an article that I wrote just a month ago about Small Town Real Estate Flipping, I touched on the topic of investing in real estate in small towns.  Not only do they offer attractive prices, but they also give you the opportunity to get good return on investment (ROI) if you do things right.

But the one thing that I didn’t touch on were some good practices to follow when looking for small town investment properties.  Since most of us would be more familiar with city real estate, there are some things (and potential quirks) that you need to be aware of when investing outside of larger cities.

The first thing that should be on your mind is employment opportunities within the community that you are looking at as well as the employment opportunities in surrounding areas.  Ideally, the small town would be within driving distance of a city so that they have plenty of options when it comes to employment.  If you cannot find something in your price range close to a city, make sure there are employment opportunities within the community – the home buyer will need to make money somehow to pay their mortgage.

The age of the home also plays an important factor.  Unlike cities where it is common for older homes to be torn down for new construction, some smaller communities have a large amount of old housing stock.  A good example would be the village that I live in – we live in one of the “newer” homes and it was built in 1976.  Age can be a deciding factor as to the resale value and potential of a property because most people associate a younger home with a higher perceived value and better condition.

The construction of the home is also important.  What you will find in smaller communities is that there are a larger number of custom renovations which can include everything from an addition to the home, to other things such as plumbing or electrical.  Based on the fact that a large number of these jobs are not done by professionals, it is advisable that you get a home inspection prior to purchasing the property to ensure that there are no hidden problems.

Speaking of home inspection, when buying a property in a community outside of a city, it is even more important to spend the money and get a professional opinion on the property.  Quite often there are hidden problems, or other headaches (think of asbestos as being one of them) that can significantly affect your ability to make a profit on the investment and a home inspector should be able to find these problems for you.

Though in some cases, there might be a little more work involved when making your decision regarding a small town real estate investment, as long as you make sure to do your due diligence, there are plenty of opportunities to make a good return on your investment.  Just make sure to follow some of the guidelines that I have provided up above and you should have a good investing experience.

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One Response to “Small Town Real Estate Investing Considerations”

  1. Great Article.

    Conventional wisdom would have you believe that investing during times when
    real estate is rapidly appreciating is the best way to accumulate wealth.
    I disagree. I think that when real estate is rapidly appreciating, it is a
    sign that there is a great disequilibrium in the market. Investing for
    appreciating is a double edged sword because you have no control over the
    market and therefore, you can not rely on the returns generated by your
    investment. I believe that investing for reliable cash-flow in
    non-volatile markets is the best way to accumulate wealth. After all, if
    you have $20,000 invested at 11% for 22 years and only let your initial
    deposit compound, the ending result is staggering: $222,451.24. Why is it
    that less than 10% of all americans have this amount in their retirement
    account? Because they invest for appreciation, whether it be stocks or real
    estate.
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