While all the real estate investors are flooding the cities with highly appreciated investment properties, it’s your turn to make a profit and start making money in real estate. “But how?” asks the young real estate investor. It’s as simple as leaving metropolitan cities and finding the benefits of investing in rural markets that can bring you a sustainable rental income and the benefit of less pricey real estate properties.
According to Forbes.com, real estate investments in small-town markets are becoming more popular. With real estate investors lurking just around the corner in big cities, you can jump on small towns and start real estate investing.
The benefits of investing in rural markets
Cheaper real estate properties
In other words, you’ll get more bang for your buck! With bigger cities and metropolitan areas, real estate prices tend to skyrocket. Take New York City or San Francisco as an example. With the price of one residential property in both, you can by four or more investment properties in rural areas.
Less cash needed
Of course, with the low property prices come the low cash investment and down payment needed. Real estate investors can be paying a percentage of what big city property investors are paying. The best type of investment comes when you’re investing with other peoples’ money. The most successful real estate investors are those who have found the ways and means to get to that borrowed money while investing it for more cash. To find out how to invest in real estate with little or no cash, read this blog post: How to Become a Property Investor with No Cash in Your Pocket.
Low risk investment
As with any other type of investment, less cash involved in the process results in a lower risk investment. Therefore, when investing in rural markets with real estate, you’re not risking as much as when investing in a pricier piece of real estate. Making low risk investments sits among the biggest benefits of investing in rural markets. Therefore, real estate investors who are seeking low risk investments are going more rural with their investments.
More cash on cash return
Even though the natural real estate appreciation runs slower in rural areas, they make for a great cash on cash return and capitalization rate. This can be widely seen due to the low median property prices while comparing it with the rental income produced by properties in rural areas and metropolitan areas.
For more information on an advanced cash on cash return calculator, read this blog post: Where Can I Find the Best Cash on Cash Return Calculator?
Less competition
With every emerging real estate market, you’ll find a few shark investors that swallow most of the market. This can also be seen with investing in rural markets with real estate as you can’t invest in real estate without a little competition. In fact, if you don’t find any, run in the other direction or at least run a full-on real estate market analysis to protect your investment.
To clarify, competition when investing in rural areas is significantly lower. This makes it easier to enter the real estate investment business and start making money in real estate along the way.
Safer long-term investments
One of the best benefits of investing in rural markets is having safe long-term investments. When investing in rural markets with real estate, you are investing in a more segregated and separated real estate market. Therefore, you are not exposed to the ups and downs of the economy and the larger real estate markets.
The downsides of investing in rural markets
With every up, there’s a down and with every high, there’s a low. Read the list below to stay well-informed about the cons of investing in rural markets:
Minimal natural real estate appreciation
In any case of real estate investing, your investment properties will go through appreciation. It’s a matter of a percentage. With larger and more complex real estate markets, you will find higher real estate appreciation rates. Meanwhile, as opposed to the benefits of investing in rural markets, you will experience a lower percentage of real estate appreciation. This can be mainly attributed to population numbers increasing.
Affected by certain industries
In many of the US rural real estate markets, you will find a specific industry that dominates the town. Let’s take Johnstown, PA as an example. The town was blooming with coal mining and manufacturing up until a certain point and then decreased drastically. The reliance on one industry affected the town’s population and real estate market along the way.
News spreads faster in smaller towns
This is a double-edged sword for the real estate investor. As the news will spread about you buying investment properties, more and more people will know that you are a landlord. If anyone is in need of a rental property, you will find a tenant in no time. That’s one of the benefits of investing in rural markets. However, any issues with tenants or property management (which can sometimes happen in the learning process of becoming a landlord) might lead to vacancies real quick in rural markets thanks to word of mouth.
Takes longer to sell
Real estate investing in rural markets may be easier for the property buyer. On the other hand, if you find yourself on the side of property buyers, you might be waiting a bit longer due to the population and demand in the city or town. Additionally, the buying process may require you to have co-signers. This can make the process unnecessarily complicated.
A small pool of tenants and buyers
It all comes down to the population when talking about drawbacks. The lesser the population, the less likely you’ll find a tenant quickly. Moreover, the quality of the tenant may be lower than that in a bigger real estate investment market simply because you don’t have much of a pool to choose from. So, if you’re buying a rental property as a long-term rental property, make sure to factor that in along with the quality of tenants in the area. Still, don’t forget the importance of screening tenants properly whether in a mature real estate market or a rising one!
Can you use an investment property calculator when investing in rural markets?
The simple answer is Yes! With Mashvisor’s encompassing real estate market analysis, all you need to do is type the name of a city and voila! The automated system will calculate everything on your behalf! Of course, through Mashvisor’s investment property calculator, real estate investors can find out the cash on cash return, capitalization rate and even Airbnb occupancy rates for their real estate investments. Click here to make use of the 7-day free trial offered by Mashvisor.
Final words
With real estate investing in rural markets, you are diving into a market that will one day benefit from the constantly increasing number of populations. So, make sure to calculate the little details to come up with a healthy and lucrative real estate investment.
If you have any more insights about the drawbacks and benefits of investing in rural markets, please share them with us in the comments section below.