Most people understand the appeal of real estate investing, whether they understand the nuances of it or not. They know that real estate investing is a great way to make money, but they’re often turned off from learning more because of the perceived notion that it’s simply too expensive. Many people struggle to afford even a single home for themselves, so why should they contemplate trying to invest in other properties that sometimes go for millions of dollars?
But in reality, there are many low cost of living areas throughout the United States, and nearly all of them offer affordable real estate investing opportunities. How can you take advantage of this and start building your real estate portfolio?
The Advantages of Real Estate Investing in Low Cost Areas
According to Eddie Garcia of Estate.co, there are many interdependent reasons why someone might consider investing in real estate in a low cost area.
- A lower price point: The most obvious advantage here is that low cost areas have a lower point of entry in the form of lower housing prices. A decent single family home that costs $400,000 outside a major city might only cost $150,000 in a low cost area. Considering you only need a down payment to get started, you might be able to secure a property in a low cost area with just a few thousand dollars of capital.
- Lower maintenance and repair expenses: A secondary benefit is that low cost areas typically have low prices across the board, including lower prices for maintenance and repairs. Keeping up with your property is going to be much less expensive in a low cost area, ultimately allowing you greater profitability.
- Potential growth: Just because an area currently has low prices doesn’t mean it always will. Low cost areas typically represent massive growth opportunities, in part because they’re so in demand. Everyone needs a place to live, and many people are beginning to find the unreasonably high prices of major metropolitan areas to be prohibitive. As more people begin migrating to lower cost of living areas, these low prices are likely to rise, allowing you to multiply your holdings many times over. Just keep in mind that this advantage isn’t equal in all areas.
- Portfolio diversification: Portfolio diversification is a key concept in investing, and one that could greatly increase your long-term returns. Essentially, it means holding a variety of different assets so that you can stabilize your returns and minimize exposure to risk. If you have other assets, low cost areas could make it easier for you to get exposure to real estate. If you’re already investing in real estate, getting access to a different type of area could help you balance out potential risks and rewards.
The Remoteness Problem
Of course, the big problem here is remoteness. If you’re not currently living in a low cost area, you’ll have to invest in real estate in a totally different city. This is easier than ever before, however, since digital technology makes it a lot easier to explore remote properties – and because property management companies are available almost everywhere. A property manager can take care of everything related to your property on your behalf, even if you’re not physically present.
How to Invest in Real Estate in Low Cost Areas
So how should you go about investing in real estate in low cost areas?
- Save up the capital: Before anything else, you should work on saving up the necessary capital for a down payment. This way, you’ll be able to move quickly if you find a promising investment opportunity.
- Scout for potential locations: Next, start scouting for potential locations. Look at cities all around the United States to find areas with high potential growth yet low real estate prices. You can use a cost of living index to see the relative expensiveness of various cities.
- Connect with investors and property managers: Once you find one or more interesting target locations, consider reaching out to investors and property managers in that area. They can help you familiarize yourself with the area and potentially lead you to opportunities in the future.
- Get to know the neighborhoods: In nearly every significant city in the U.S., there are multiple viable neighborhoods to consider investing in. Evaluate them thoroughly to find the most promising investment opportunities.
- Make your first investment: Once you’ve decided on a neighborhood, start looking for individual properties that fit your criteria. When you have the right remote team in place, you can make an offer and move forward.
Investing in properties in low cost of living areas isn’t the right move for every person, or even every real estate investor. However, it’s a viable and potentially rewarding option that’s well worth your consideration.
