Rural real estate investing can be tricky. Rural counties often have a diverse mix of real estate. Some in larger towns, some in smaller towns and villages but much of it out in the country away from municipality’s denser populations.
What is happening in much of rural America is that while housing inventory is shrinking in large metropolitan areas, inventory is increasing in rural areas 50 or 60 miles away. Currently, the median price for many of these homes is being reduced in an attempt to obtain offers from buyers and complete the sales.
The Diversity of Rural Communities
Rural communities along the Pacific Ocean coast can be a hodgepodge of communities. Resort communities immediately on the coastline may see inventory moving fast and prices rising as doctors, lawyers, and accountants from the nearby big cities seek out bargain summer and vacation homes.
A few miles inland, you’re likely to find devastated middle and small size towns that never recovered from the depression. Many of the few small businesses and small industries went bankrupt during the depression and the banks refused to make loans to restart them when the economy recovered. Most of us know what happens when a small town loses most of the employment opportunities. Those quick mind enough to see the ghost town coming sell their homes first at rock bottom prices that attract local buyers that think they are getting a deal because they expect the town to financially recover.
As time goes by, it becomes obvious that the town isn’t going to recover. That high unemployment will remain high. Those that still have a job hang on for a rough ride. The unemployed, especially the young people become restless. The crime rate goes up as they scavenge for money or anything to sell to raise money.
The alcoholism and drug rates go up as these people combat one long boring day after another. The consequences are home prices that decline because of lack of money in the town and no interest from outsiders to invest in property in a town that is going down hill. The end result is declining property values and increasing inventory as homeowners try to sell so that they can move on to greener pastures.
Inland Towns Where Life has Returned to Normal
Another typical town in these rural counties is the county seat. These towns are populated with middle-income people that hold relatively secure government backed jobs. These include various administrative clerks, heads of the different county departments, county road crews, the courthouse staff, the jail staff, headquarters for the county police, often a state police detachment, and similar middle class government work.
While it’s true that local governments laid off workers during the depression, many of those jobs have been refunded and restaffed. County seats tend to again be stable middle income towns. In these towns, you will find that housing prices have remained stable, maybe gained a little in value and the inventory may be decreasing as more county workers are brought back to work. Of course, employment at private businesses is increasing in response to a higher demand for groceries, hardware, and services. Life is good when you live in the county seat of a rural county.
Out in the surrounding country it’s very difficult to gain a meaningful grasp of what real estate is worth and what direction inventory and houses are going. Small farmers may be struggling to get going at full speed again or they may have generations of credit established with local farm supply houses that makes it relatively easy to restart. Of course, both our agricultural industries and our livestock industries are being taken over by large institutional businesses. At the least, these institutions should have the capital to ramp production back up to full speed. At the same time, these institutions may be working to buy up and consolidate more of the small struggling farms into their large operations. This could temporarily create price spikes for acreage and drive down inventory.
The bottom line is that citified investors that have succeeded at buying, selling, renting, and flipping $375,000 homes in the big city should think long and hard before snapping up a $40,000 rural house. What looks like a great bargain may be no bargain at all. I’ve seen dying towns and struggling farms where a good pickup truck sells for more than a house or small farm.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.