When you think about investing in a rental property do you dream of wide open spaces, big red barns, and calling the cattle home? Investing in a rural property or tract of land might be the right choice for some investors, but there are pros and cons about purchasing property somewhere with more trees than people.
Possibility of future development
Every suburb of a major city was once rural and undeveloped land. As cities and metro areas grow over time, more land is needed to develop and keep pace with new growth. Buying rural property may be a very lucrative long term investment if it is purchased with an eye toward long term projected growth for the surrounding cities and towns. Most cities create and file development plans many years in advance, so make sure to do your research before finalizing a property investment.
Significantly cheaper land and home prices
Properties in the suburbs are much cheaper than comparable properties inside a metro urban area. Prices go down as you travel farther outside of a city, and there is also less competition for properties in rural places. Often there will only be one interested buyer at a time, and court auctions have very lower turnout. Lower competition means buyers have an edge over sellers and are in a better place to negotiate the terms of the sale.
Less land regulation
In a city, land and properties are heavily zoned and regulated, limiting the choices a landowner has when it comes to future development and land use. In rural places, there are often fewer regulations, particularly on large plots of land, enabling an owner to keep their development possibilities open over time.
Smaller economies and markets
Rural areas have a similar percentage of renters as suburban places, and the majority of renters in rural places prefer single family dwellings. Economic opportunities are often low in rural places, where most higher paying jobs require a commute to a suburb or metro area. If a local economy is present, it is likely concentrated in the hands of one or two large employers and any trouble with those businesses can be devastating for local tenants. A rural rental may sit empty for much longer than an urban or suburban property. If the plot is large, It’s possible to mitigate this risk in creative ways, such as planting hay or Christmas trees to make profitable use of dormant land.
Fewer qualified renters
Lower levels of economic activity can mean fewer qualified renters. The silver lining here is that a rural property is likely to command a longer term tenant due to the lifestyle and slower pace of life found in rural places. Careful vetting of potential renters is very important when leasing a rural property.
Less comprehensive public services
Public services like garbage pickup and recycling, police and fire departments, and existing infrastructure necessary for access to public utilities are not as universally available in rural places. This should be less of a problem for existing residential properties than for larger tracts of land which happen to include a dwelling.
Rural property investing is best suited to an experienced investor
Rural property investing requires more research and carries a greater risk than urban or suburban properties. However the multi-use nature of rural land helps mitigate some of the risks associated with renting to rural households. Research is absolutely necessary before investing in an out of the way place, so proceed with caution and a lot of knowledge and forethought.