Should you go rural? Most people are usually attracted to real estate investment in metropolitan areas because of the higher expected return and demand. However, investing in a rural property appeals to a significant number of investors such as those who are looking to spend less, purchase multiple properties or pay fewer taxes. The issue with investing in a rural property is it requires extensive research and experience in real estate because unlike urban properties it bears more risk. This risk exists because the market is smaller scaled.
The scale of rural properties stretches from ranches, farmhouses and lake houses all the way to mountain cottages or houses in forests. The rural property options available to investors are of a wider variety than those found in cities. So why are people hesitant when it comes to purchasing rural properties? And what are the advantages that could make people invest in rural properties? To answer these questions we will consider the pros and cons of investing in a rural property.
Less Competition in the Market
There’s usually less competition for a rural property because of the large number of properties available in America’s vast rural landscape. High number of rural properties coupled with the low demand for them eventually creates a minimal or non-existent competition in most rural areas. Compare this with in a big city like New York for example and you understand that competition is fierce and unmerciful at times compared to rural areas.
Property Prices are Significantly Cheaper
A single rural property usually has an average of one offer per property outside the urban zones. The price decrease is of course influenced by lack of competition in rural areas, which pushes prices down. In some cases like auction sales there is only one interested buyer at court auctions. The price an average investor would pay in a rural property could be as low as half of what they would pay in a big urban city.
Expansion and Development
Many people purchase a rural property as a long-term planning scheme. The growth in populations every year means cities and urban areas are regularly expanding. If an investor can be very strategic in their rural property purchase location, then they can be able to buy an investment for cheap and sell it for much higher returns in the long-term.
Rural areas also give investors the chance to purchase multiple properties and to expand their portfolios to make more profits. The prices of rural properties certainly help investors to achieve that dream of becoming real estate market leaders.
Less Regulations and Laws
The regulation and laws advantage for rural properties are less than those present in urban areas in terms of property development. Restrictions are not as close as big cities where property development is restricted by municipality or state laws. The regulations of rural zones also makes it easier for owners to rent their homes on a service like Airbnb without having to deal with strict Airbnb regulations in cities like New York or Los Angeles.
Fewer Public Service
Purchasing a rural property comes with its own disadvantages. A rural area will not have the same variety or quality in public services that are available in big cities. This makes investors who are thinking about purchasing property for rent to hesitate due to lower number of people moving to rural areas.
Smaller Economy and Market
The fact remains that rural properties are risky business. Economic opportunities are certainly limited in rural areas because it can take a long time for an owner to find a tenant or a buyer for their property. If an investor is lending money to purchase a rural property it might not be wise to depend on any revenue from the property to cover the loan. After all, rural properties are long term investments that won’t pay their dividends any time soon.
Small Towns and Tourism
Small towns are evidently more quiet and peaceful than the big cities. This comes as a cost for the investor. Tourism is not so big in rural areas because of lack of tourist attractions, the availability of fewer amenities and services, as well as its remoteness from larger cities. These disadvantages mean that it’s actually quite difficult to use rural properties as Airbnb investments.
All in all,
Investing in a rural property can be a good opportunity if as an investor you are looking for something different and you’re prepared to wait for the return on the investment. The pros and cons mentioned above not only give a general idea of what owning a rural property could be like; it also gives the investor added incentive to do extensive research on the type of rural area and its proximity to urban life. In conclusion, rural property investment should only be considered if the investor is able to live with all the disadvantages that come with it. It would be incredibly hard to recoup the money you invested once you have made the purchase.