Has your mind ever lingered towards investing in a small town market?
Real estate is such a peculiar topic, which can make the mind wander towards such opportunities.
Big cities often get all of the attention as they are the catalysts for the country’s economy. If these major cities aren’t doing well then it is automatically assumed the entire nation is heading downwards. This doesn’t always happen in smaller towns since they’re often separated from the economic realities of larger markets.
So, why not stick to the thought of small town investing? Is there potential for going down that route?
There might be, but it is best to weigh out the pros and cons.
Good Tenants Are Easier To Find
The residents in smaller towns often know one another. This is wonderful for someone who has a property and needs to rent it out. The local residents will be able to locate someone to take up space and keep it clean.
In larger cities, it becomes harder to find a good tenant and the turnover rate can be nauseating because you are always back to square one in these cases.
The turnover rate is rarely high in small towns as long as you do find a tenant. When you have found one, they will stay for a while.
You are one of the rare investors who considered small town real estate markets. There is no competition to speak of in these areas and that means you can name your price and get properties.
There is no competition because people generally don’t move towards these smaller towns. They all head towards the larger real estate markets. With the competition taken out of the battle, you get to enjoy the spoils for yourself.
Your investment is definitely safer in these small towns compared to larger cities where the margins are razor thin.
No Bad Areas
Larger cities have certain parts of town that are forbidden for investors because of criminal activity. This is just a part of the big city, but not so much in smaller towns.
The real estate market remains safe because the entire town is safe. The policing of these towns is easier and those who live there are generally good at handling things before they get out of hand.
This makes it easier to keep the property’s value safe as an investor. You can purchase knowing the area won’t hurt you.
Harder To Finance
If you are hoping to get a mortgage, you won’t get it in a smaller town as easily as you would in a major city such as New York. You will have to fight for it and they will ask you many questions.
You need to have a lot of cash flow behind you to buy in these towns and that often pushes investors away.
Big investors don’t mind because they can fund it themselves, but those who need the mortgage will be stuck.
Banks don’t want to get into these smaller towns because they won’t recoup their funds as easily if you default on the loan.
Difficult To Locate A Property Manager
Do you plan on living in the property? If you do, this is obviously not going to concern you, but for anyone that is not, you will find it hard to get a good property manager.
These towns are not used to someone investing in real estate, so they often don’t have property managers for you to work with.
You will either have to get someone who isn’t trained or you won’t find one at all, which is risky as it is.
In major cities, there are proper firms who are responsible for property management. This is not the case in a smaller town.
Prices Increase Slowly
This is the one thing all investors point to when this conversation comes up. They state the small town properties are more of a lifelong investment. If you want to make money in 5-10 years, you have to stick to the major cities. You might end up waiting 20-25 years before you get a sizable increase in your small town investment.
They just don’t want to wait and most investors end up thinking short-term rather than long-term.
If you are up for the wait, the small town investment begins to make sense.
Real estate markets will always vary and it is an investment opportunity for great growth. Yet, the small town real estate market is only for a select few who know how to manage themselves and won’t panic.
If you are one of them, this could be lucrative for you.
Don’t pigeonhole yourself.
Look at the small towns too.