How to Make Money Flipping Houses in Rural Areas
Several years ago, a friend of mine, Larry, was living in a small rural community of about 30,000 people and had been renting a house for several years. He came to a point where he was ready to buy a house of his own to settle down in with his new wife, and that’s when he reached out to me. I’m pretty well-known with my friends for hunting down good deals on real estate and selling them for profit, so when Larry was considering buying a house, he was constantly emailing me all of the available properties in his area. Although he lives about 10 hours away from where I am in Tampa, Florida, he was still able to give me an idea of the average sale price of homes in his rural part of the country. For about six weeks, emails of MLS listings that were available flooded my inbox and I declined them all. Until one day, he called saying that he found a foreclosure property for sale for about 60% of the asking price of the listings in his area. I did some research on the property and saw that it was less than 10 years old, had a concrete block structure, and nothing major was wrong with the house. It did need some cosmetic updates, but nothing too expensive or time consuming, which is exactly what any buyer should look for. Because the property was located in a rural area, I figured we had an advantage because there would not be a plethora of real estate investors and wholesalers competing to buy the house. I contacted the listing agent who told me exactly what I wanted to hear, that the property was a foreclosure being sold by a bank that just needed to get the house off of their books. There had not been any other showings for the property in the one day it has been listed. However, he had received two other phone calls from Realtors on the property despite the short amount of time it had been listed. When I heard that, I immediately contacted Larry and told him it was GO TIME! He jumped right on it and went out to look at the house and confirm that it was in good condition other than the cosmetic repairs. He also inspected the neighborhood and saw that there was nothing unusual about it that would defer any potential future buyers. We had locked in a great buy. Knowing we were dealing with a property in a small rural community, I was optimistic that we would not have as much competition as I am used to in Tampa, but I also wanted to snatch up this property before anyone else could. My investor instincts told me to make an offer at least $10,000 below asking price. But I considered finding this house at this list price as a homerun purchase. My next move was to contact the listing agent and try to immediately wrap up the deal at full price! We had a contract signed that evening and the house was put in the MLS as pending. My friend was able to purchase the property for full asking list price which was still a great deal. He moved into the house and slowly made the cosmetic updates until he had a very nice house. At the time, we thought it was a great deal for him because he only paid 60% of the retail value of the house and therefore his mortgage payment was extremely affordable and well below what he would’ve been paying to rent a similar house in that area, but two years later he decided to sell the house, and that’s when we really found out what a great deal we had bought. He put the house on the market and had a contract on it in less than two weeks. Including his purchase price closing costs, all of his rehab expenses, and the closing costs when he sold the house, he still made over $35,000. For me, it was really exciting to use my real estate investment experience to help a friend who had absolutely no experience in real estate to buy a cheap house and sell the property with an amazing profit, but I was also able to learn a lesson from this transaction. I now believe that there are great opportunities buying cheap houses in rural small towns. While most people think they should flock to the larger cities in order to find great deals on real estate, what they might not consider is that there’s also a lot of competition in the big cities from professional home buyers just like myself and my team. Unfortunately, wholesalers and investors can drive up the price of wholesale real estate. Since then, my team and I have had success looking for and flipping investment properties in rural areas. It takes a lot of research because we are buying houses in areas, neighborhoods, and cities that we are unfamiliar with, but the lack of competition makes the deal much more profitable and worthwhile. So, there were two happy endings to the story, not only did I get to help a friend complete a successful and profitable real estate transaction, but I also learned that we can keep an eye out for acquisitions in rural areas. While we will never change our core strategy of buying and selling investment real estate in and around Tampa St. Petersburg Clearwater, Largo, New Port Richey, etc. we have added a new tool to our arsenal and will also keep an eye out for available properties in rural areas.