Real estate in the city has always been an alluring investment. People have made fortunes from just some streets, buildings, and a ton of people! But like any other investment, there’s a limit to how much you can grow in a more dense space. We’re only at the peak of this cycle but experts are already predicting that money will soon start to run dry for city properties.
Current landscape of urban real estate
Cities like New York have limited space. Yet every developer wants to build on that limited space. It’s impossible! Sure they’ll be able to find land somewhere to tear something down and put something else up but it’s not the same as creating it where there isn’t anything existing yet. This is why prices go sky high above their real value (overvaluation) — developers buy into the idea that someone out there is willing to pay millions for the same spot next door.
Another issue in cities is when too many properties flood the market to sell at once because everyone suddenly needs more space. This could potentially lead to very uninterested buyers which then makes investors lose money.
Untapped potential in rural spaces
According to a 2023 report by the the US Agricultural Department, the real estate value of agricultural land had witnessed a 7.4% increase in 2022-23. While some people are worried that living in rural areas comes with less sophistication and access to resources, others see potential in peace and quietness.
A 2016 report by the Urban Institute concluded that while the pace of growth for rural real estate is slower than urban properties, the demand will increase in the future. Moreover, property buyers may have to respond to the housing needs of an aging population.
As an investor, you can see this as an opportunity to explore and tap into this new market. There are many people willing to put down their deposit for a house in a quiet, secluded area with some basic amenities and spaces for socializing. Plus, there are other advantages to investing in rural properties.
Rising demand
Many people dislike the hustle and bustle of overcrowded cities. Moreover, now that work-from-home is a common arrangement, they are not particular about staying close to their offices. So now they can comfortably move away from the city and live the life of quiet and peace that they always wanted.
Another factor contributing to this shift in preference is the fact that housing is no longer affordable in USA. Most people of the millennial and Gen Z generations complain that they don’t have enough income to enter the housing market. In this scenario, housing options in the countryside are much cheaper than those in cities. There are many young homebuyers who would be interested in this option.
Lower entry costs
The advantage of lower prices applies to both buyers and sellers in real estate, but in different ways. The biggest reason for anyone to invest in real estate is the amount of money it takes before it starts making you cash. With low entry costs, investors can get bigger properties or more than one for the price of a single urban investment for sale.
Higher Yield Opportunities
Even though the sale prices and rental rates are lower compared to urban properties, you have to spend less on property maintenance and taxes. Also, with rising demand for rural properties, soon you can expect a steady flow of rental income. Sure, the situation looks uncertain now, and if you feel skeptical about it, it is understandable. But times are changing, and it seems that things are going to work out in favor of people who invest in rural properties.
Less Competitors
While rural properties are becoming increasingly popular, they are not yet a staple item on most mainstream portfolios. Because there are fewer people to buy from in rural areas, you have less competition. That means you can take your time when purchasing the property, and not worry about other people swooping in for it.
Diversify your profile
When you invest in a bunch of different places, your risk is spread out among all of them. So if one fails, then you have other sources of income to rely on. Sure, urban properties are high yield and in high demand. But if there is an unfortunate situation, like tightening of government regulations or political instability, you will need options to fall back on. Rural property can be a good backup investment.
Serene environment
The scenic vistas that come with owning a rural home are unmatched. They’re quiet, peaceful and great to look at. These types of environments attract those who want to live a quieter lifestyle away from the city noises. So make sure you market your unique selling point very well!
Challenges to owning rural property
Poor Infrastructure
Some places may not have basic services such as transportation, hospitals, schools and places of recreation. For example, takeout deliveries may be slow, or most shopping malls and supermarkets may not be within walking distance of homes. This would make living here difficult for some, which means low demand for them.
Unstable market
While rural markets have potential, you can’t be sure that your rental income will be consistent. Yes, there are many more listings for people specifically interested in buying rural properties. But if your tenants vacate, you may have trouble finding new tenants, or even buyers, when you want to sell off the property. Basically, it is a smaller market than urban properties, so you have to take your chances.
Limited accessibility
As a rural property owner, if you don’t stay around the same area, maintaining the property can be a hassle. Even when you put up your property for sale or rent, people may have to travel long distances to attend showings and meetings. The problem of accessibility might make it an unattractive option for some.
If you are a real estate investor puzzled about whether to invest in a rural property, it is natural to feel uncertain, because it is not a conventional investment option. It is important to take stock of your financial position, and ask yourself, “How much risk can I afford to take?” A solid understanding of your appetite for risk, and the market conditions, is your key to making sound decisions.
