Is there money to be made flipping houses in rural areas? You bet there is! Make no mistake, house flippers are making money in rural areas right now. All too often, real estate investors overlook deals in rural areas, missing out on tremendous opportunity!
There’s Money Flipping Houses in Rural Areas
I’ve done a lot of deals out in rural areas. and hopefully sharing some of my experiences can help you see an opportunity when one arises.
Rural Deal Example 1
I have an apprentice in Ohio who had an opportunity come his way. A lead came in, but it was far away from his immediate area. He was hesitant for three reasons; it was a long drive, it was an area he was unfamiliar with, and he didn’t think there was any industry out there. This would have been a missed opportunity if he had acted on his assumptions, but I told him it was a home run and that I would fund the deal. So, with me funding the deal, he picked it up for $100,000.
Now, he did a lot of renovations to the property, which took some time because of the distance. The renovations included a new kitchen, new HVAC, new roof, and updated bathrooms. However, it was worth it because in the end it sold for $273,000. After closing costs, commissions, hard money lending fees, and he gave the buyers a credit, he made just shy of $100,000 net profit.
Rural Deal Example 2
Another one of my apprentices was working on a deal in Pennsylvania. His main concern about buying rural property was that he wouldn’t have any buyers. The property was a well-built farmhouse and barn on five acres for $125,000. When I looked at the deal, I knew it was going to sell fast. You would be surprised how many people want properties like this.
He doubted me. He said, “This is Pennsylvania, it’s Amish country. Nobody will want it.” I assured him this was a real deal. So, he purchased it, did a little bit of cosmetic work and put a sign out front. Before he could get it on the MLS, an Amish man made an offer of $250,000. That deal made over $100,000 in net profit.
These two examples illustrate that there is money to be made in rural areas. Actually, the deal that got me out of living in my truck and being homeless was in the middle of nowhere. I made over $56,000 on my first deal with my mentor. This is one reason why I can see the opportunity in flipping houses in rural areas.
6 Advantages to Flipping Rural Properties
1. Limited Inventory
The first advantage to flipping in rural areas is that there is limited inventory. Having limited inventory makes less competition and makes it easier to sell to buyers. Whereas when you try to sell in a subdivision, you are competing with a lot of other sellers. And make no mistake, there are buyers in rural areas. There are still people buying houses no matter what the economy or market is like. The key is you don’t have a lot of competition and you might be one of the few with a nice enough home for someone to move into.
2. No Competition in Creative Real Estate Investing
The thing I absolutely love about investing in rural areas is the lack of competition from people applying creative real estate techniques. This allows you to be the big fish in a small pond. Now, that doesn’t mean that there aren’t any investor buyers in the rural areas. There are those in the country with mattress money that buy a beat-up house, fix it up, and resell it. However, when it comes to competing for the best leads, it’s pretty much nonexistent.
3. Loan Programs
Another advantage rural property has is the special loan programs such as USDA rural loans and farm credit loans. Also, sometimes the United States Agricultural Department gives loans. These loan programs make it easier to sell to people who don’t have a perfect loan application or have a less than perfect credit rating.
4. Creative Financing
This is something that is almost nonexistent in rural areas but is in huge demand. An example of creative financing would be offering a rent to own or owner financing. This is helpful when someone has a down payment, but they don’t qualify for a bank loan. There’s lots of opportunity for creative terms flipping houses in rural areas because there aren’t many people offering creative terms. Whereas in metropolitan areas, there’s countless other investors offering rent to own or owner financing.
We can’t overlook the opportunities to flip and subdivide land in rural areas. In fact, I have a great video called 10 Tips for Buying Land. When you’re buying land in the country, there are some angles you can take that can potentially make a lot of money. One niche would be to buy land, split it up, and then sell in to deer hunters. There are plenty of deer hunters out there and they all want good land with deer on it.
6. Mobile Homes Conversions
Mobile homes on their own land are another opportunity in rural areas. If a mobile home is on it’s own land, you can file with the county and convert that mobile home to a manufactured home. Now you have a real property and new loans are available which adds tremendous value. There is huge opportunity with mobile homes, especially since we have such an affordable housing crisis. Statistics are showing that mobile home sales are just ballooning right now due to affordability. They can be an ideal solution for a lot of people that want to be homeowners.
4 Hazards Flipping Rural Properties
1. Assuming There Aren’t Any Buyers
The biggest hazard of all is when you assume there are no buyers. Just because the area doesn’t have a lot of jobs and it doesn’t look like anybody lives there, doesn’t mean you don’t have people who want to buy. As people get older, they go from wanting to live in the city where all the action is, to moving further away. I’ve noticed it happening to me as I’ve gotten older. I now want to have more land and more privacy. That’s the direction people go as they get older, and there’s a lot of people getting older right now. Lot’s of people want to escape to the country and for this reason, there are a lot more buyers than you think.
One difficulty with rural area investing has to do with comps. There will be a lot less comps and the properties that you’re selling are going to be unique. Some are going to be on more acreage, a big house, older house, or big barn. This variety is going to make it more difficult to compare the property to others that have recently sold. It will be difficult to accurately determine the value. However, the real estate agents and homeowners in the area are going to have that problem as well.
Despite this, I see this as an opportunity. I have spent a lot of time training my apprentices on how to handle situations with difficult properties to comp. You can start to learn by studying what comps are there and connecting with local agents that have been doing deals in that area for a long time. The more you learn, the more empowered you are to negotiate better, get better deals under contract, and make more money.
3. Utility Considerations
Utility considerations are one of the things you run into with rural properties that you may not have had to deal with only flipping in the city. This includes things like septic, water or well water or propane. Make sure you do a septic inspection to ensure it’s functioning correctly. You need to inspect the well and check water quality because if you end up putting in an RO system it is going to be expensive. You also could have a propane tank deal with and will need to ensure that the propane agreements are current. Understanding the utility considerations of a rural property can be a major hurdle when you’re first getting started, but if you make sure and check all these things before you close, you’re going to be fine.
I know I listed land as an opportunity, however land can also be also hazard. Land can be a problem when dealing with easements, environmental concerns, or whether it’s wetlands or in a flood zone. Another possible consideration is any new changes happening in the county. Again, my video 10 Tips for Buying Land can help guide you in the right direction on this subject.
There’s Plenty of Opportunity in Your Own Back Yard
If you have been doing this business in an urban area for awhile and you’re struggling, you might want to consider focusing your efforts on rural areas. We had an apprentice who was concentrating on a major metropolitan area. He made some good money, but he wanted to make more, and he was getting frustrated.
I looked at his situation and his marketing details and suggested he focus on a rural market in his area. He pushed back because it was a two-hour drive and he insisted he couldn’t make the kind of money that would make it worth his while. But he listened to my advice and started running some marketing out in this very rural area that didn’t have a lot of jobs but had a decent population.
The first deal he picked up was a property with a house and garage for $500. He flipped it to an investor for $12,000. The next deal he has under contract for $40,000 and all the comps say it should be selling for $130,000. With a little bit of cosmetics, it should sell for $170,000. So, while it’s a long drive for him, he’s going to be making a considerable profit. I hope his story encourages you, especially if you live in the country. There’s plenty of opportunity for flipping houses in your own backyard.