Flipping Houses in Rural Areas

Is there money to be made flipping houses in rural areas? You dang right! This video will break down the opportunities and the pitfalls of investing in rural areas. Too often, real estate investors overlook deals far from a major metropolitan area and when they do, they are leaving a fortune on the table! Make no mistake, house flippers are making a ton of money in rural areas right now.

There's Money to Made Flipping Houses in Rural Areas

I'm going to share with you the opportunities and the pitfalls of investing in rural areas. In fact, I've done a lot of deals out in rural areas.

Example 1

I did one recently in Ohio with one of my apprentices named Joe. A lead came in, but it was far away from his normal area, and he was a little concerned about it. He was hesitant because it was a long drive and he was unfamiliar with the area. He also didn’t think there was any industry out there. 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.

He ended up putting a lot of work into it, which took a little while because it was a long distance for him. The renovations included a new roof, new HVAC, new kitchen and updated bathrooms. In the end it sold for $273,000. After closing costs, commissions, he gave the buyers a credit and the hard money lending fees, he made just shy of $100,000 net profit.

Example 2

Another one of my apprentices is working on a deal right now in Pennsylvania. He purchased a house for $125,000 and was pretty concerned about doing it because he thought that there wouldn't be any buyers. I looked at the deal. It was a well-built farmhouse and barn on five acres. I told him it was going to sell fast. You would be surprised how many people want properties like this.

He didn’t believe me. He said, "Phil, you don't understand. This is Pennsylvania, it’s Amish country. Nobody will want it." I assured him this was a real deal. He picks it up and does a little bit of cosmetic work to it. Before he gets it officially on the MLS, he puts a sign out front. Sure enough, an Amish individual came up in a horse and buggy and made an offer of $250,000. The buyer is getting the farm credit loan and that should be closing shortly. That deal is going to make over $100,000, just shy of $101,000 is the net profit.

These examples illustrate that there is money to be made in rural areas. For instance, the deal that got me out of living in my truck and being homeless way back in the day, was in the middle of nowhere. I made over $56,000 on my first deal with my mentor. For this reason, I'm kind of partial and I see the opportunity.

6 Opportunities Flipping Houses in Rural Areas

1. No Competition

The first reason why I absolutely love investing in rural areas is the lack of competition. Specifically, competition from the people that are applying creative real estate techniques, either trying to wholesale or trying to market for motivated sellers. That's not happening in rural areas. This allows you to be the big fish in a small pond. Now, that doesn't mean that there aren't any investor buyers out there in the rural areas. There still are those good old boys with mattress money that still want to go buy a beat-up house, fix it up, and resell it. However, when it comes to the competition for you to get to the best leads, they're pretty much nonexistent. I love that about flipping houses in rural areas.

2. Limited Inventory

The next thing I love about rural investing is that you have limited inventory for buyers to choose from. When you are selling a home, you're providing inventory and are typically one of the few that is trying to sell. Unlike trying to sell in a subdivision, you don't have to compete against a bunch of other houses. Having limited inventory makes it easier to sell to buyers, and there are buyers in rural areas, make no mistake. There are still people always buying houses no matter what the economy or market is like. However the key is you don't have to compete with a bunch of other houses because you might be one of the few out there with a nice enough home for someone to move into.

3. Creative Terms

This is something that is almost nonexistent in rural areas but is in huge demand. I'm referring to offering a rent to own or owner financing. This is when someone comes in with a down payment to put down, but they don't have to qualify for a bank loan. There’s lots of opportunity for creative terms flipping houses in rural areas. We do a lot of this in rural areas because they don't have   many creative term inventories. Whereas in certain major metropolitan areas, there's countless other investors offering rent to own or owner financing.

4. Loan Programs

I also love that they have special loan programs for properties in the rural areas such as USDA rural loans and farm credit loans. Sometimes the United States Agricultural Department gives loans. These loan programs make it easier to sell to people who have less than perfect credit and that don't have a perfect loan application. These loan options make it easier to sell these houses.

5. Mobile Homes

Another opportunity in rural areas is mobile homes, specifically mobile homes on their own land. If you have a situation where it's considered a mobile home, and there's something you have to file with the County, or some updates you have to do, you can convert that from a mobile home to a real property. Suddenly, new loans become available and you're able to add tremendous value.

We're doing a lot of mobile home deals and we prefer when they're on their own land. When it's in a mobile home park, you're better off owning the park because the mobile home itself is typically not something that's going to make you a lot of money. Usually, you want it on its own land so you can convert it to real property from a mobile home. 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 because people can't afford stick-built homes. They can be an ideal solution for a lot of people that want to be homeowners.

6. Land

I know this is titled Flipping Houses in Rural Areas, but let's not forget land. There's so much opportunity in flipping land and subdividing land in rural areas. In fact, I have a great video called 10 Tips for Buying Land. When you're buying land in the middle of nowhere, there are some angles you can take that can make huge amounts of money. Incidentally, deer season is coming up for many of you and deer hunters have a lot of money. There are plenty of deer hunters out there and they all want good land with deer on it. There's opportunity there as well. I know people that buy land, split it up and then sell it to deer hunters.

4 Pitfalls When Flipping Houses in Rural Areas

1. Comps

The first pitfall 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, or have a big house, older house, smaller house or big barn. There will be lots of variety and that is going to make it more difficult to compare the property to others that have recently sold. However, the real estate agents and homeowners in the area are going to have that problem as well. That's why the Zillows and other AVMs of the world are not going to be able to accurately determine the value.

Despite this, I see this as more of an opportunity than a pitfall. Although it can be a pitfall if you don't study them correctly. I have spent a lot of time training my apprentices on what you do when there's difficult properties to comp and how do you handle those situations. But if you do this right, and that can start with you studying what comps are there and connecting with local agents that have been doing deals in that area for the past 10 to 20 years, you can start to really learn.

The more you learn, the more empowered you are to negotiate better, get better deals under contract, and then make more money. So, don't look at this as simply a pitfall, look at it as an opportunity.

2. Utility Considerations

Utility considerations are one of the things you run into with rural properties that you may not have had to deal with if you have only done deals in the city. This includes things like septic, water or well water. You may potentially have a propane tank for gas to deal with as well and will need to ensure that the propane agreements are current.  Make sure you do a septic inspection to see if 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 must deal with these things and that starts when you purchase.

Understanding the utility considerations of a rural property can be a major pitfall 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. Of course, you can negotiate with the seller if there's a major problem with the septic or the well.

3. Land

I know I mentioned land earlier as an opportunity, however land is also a major pitfall. Land can be a problem when dealing with easements, whether it's wetlands or in a flood zone. Another possible consideration is if there are new changes happening with the County and the road they're putting in. There are also environmental concerns. Again, my video 10 Tips for Buying Land can help guide you in the right direction on this subject.

4. Assuming There are No Buyers

The biggest pitfall of all is when you assume there are no buyers. There are plenty of buyers in rural areas. 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.

For example, as people get older, they go from wanting to live in the city where all the action is, to moving further away. As I've gotten older, I've noticed it happening to me. As I’ve had kids, 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. For this reason, there are a lot more buyers than you think.

There’s Plenty of Opportunity in Your Own Back Yard

If you have been doing this business for any length of time and you're struggling, you might want to consider focusing your efforts to rural areas instead of toward an urban area. We have an apprentice who was focused in a major metropolitan area. He made some decent money, a little over $50,000 in the first six months of 2019. He wanted to make more, and he was a little frustrated. I looked at his situation and all the details of his marketing and suggested he focus on a rural market in his area. And he said, "Phil, that's a two-hour drive for me." I said, "I know, but is it worth the extra two-hour drive if you're going to be making an extra couple hundred thousand dollars a year?" He said, "Oh, there's not that kind of money out there."

I have these discussions with my apprentices. They don't believe me. So, he started running some marketing out in this area that was very rural, didn't have a lot of jobs but had a decent population. The first deal he picked up was for $500, a real house with a yard and a garage. He flipped it to sold it to an investor for $12,000. Then the next deal, he's has under contract now for $40,000 and all the comps say it should be selling for $130,000. It's in good shape too. 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 in the money in a big way.

I hope this encourages and excites you, especially if you live out in the country. There's plenty of opportunity for flipping houses in your own backyard.