Why Rural Investors Should Consider Expanding to Larger Markets

Investors often start out in their local real estate market. This provides a sense of familiarity that gives new real estate investors the confidence to get started effectively. Some investors spot an opportunity or inherit a property that kickstarts their investor journey and is becomes first piece of their portfolio. Rural investors, who begin investing in sparsely populated areas may with time,  want to consider expanding into larger markets. 

Rural investing comes with challenges— from environmental regulations to limited demand and property types— and limitations can create stumbling blocks for your investment portfolio. While the rural landscape offers a picturesque countryside and a sense of tranquility, exploring more metropolitan markets can unlock your investment potential, diversify your portfolio, and build resilience within your portfolio. 

Privy is here to help you take the next steps, diversifying how you invest, from rural investing to larger markets. Explore urban developments and city real estate with all the same insights you have of your local market using Privy’s direct-to-MLS data. Explore the reasons for why investing in more substantial real estate markets should be considered when moving on from rural deals.. 

Challenges Facing Rural Real Estate Investors

Real estate investing in rural areas creates unique challenges. Some rural areas are more attractive than others, with urban connectivity playing a major role. Small towns and villages close to urban cities can be more profitable and attractive to investors as they offer a housing option for renters aand professionals looking to escape the city lifestyle. 

However, transportation costs, infrastructure, and limited public works can make nearby areas less appealing to potential buyers and renters. Here are other challenges real estate investors face with rural properties:

• Poor infrastructure and public services

While investors and real estate agents can market urban properties based on nearby facilities and services, rural properties struggle by comparison. Many rural areas need more essential infrastructure, such as hospitals and public transportation, making them less desirable for several buyer demographics. Poor infrastructure and public services can also limit the potential financial returns from rural property. 

• Limited demand and buyer demographics 

Due to lower population density, rural real estate has always had limited demand compared to urban areas and cities. You can expect a rural listing to stay on the market longer than a comparable urban listing. Not every real estate investor will have the cash flow to support this. 

Marketing a rural property can also be challenging, especially for investors or real estate agents unfamiliar with the local market. It’s important to understand local resources and adapt your marketing strategy accordingly. 

• Local regulations and environmental risks

Local regulations can vary from one rural area to the next, especially with growing legislation focusing on sustainability and environmentalism. It’s crucial to stay up to date with these regulations and changes to local law as they can increase the expenses involved with a rural property.

One unique risk to consider with rural properties is the potential for natural disasters. Recent hurricanes, wildfires, and flooding have shown the danger and impact of limited infrastructure in rural areas. Investors and homeowners may pay a higher insurance premium as a result.

Benefits of Expanding to Larger Real Estate Markets

Expanding to larger real estate markets is a natural progression for most rural investors. Urban and metropolitan areas, like major towns and cities, provide a more optimal investing landscape. Higher population density increases demand with broader demographics, creating diverse investment opportunities to suit different risk profiles and portfolio types.

Privy enables investors to access broad data and tools to get insider access to high-demand markets from metropolitan regions and up-and-coming cities or hot zones. Direct-to-MLS data makes it easy to identify good investment properties for faster turnovers and increased rental yields. 

Here are some of the benefits of choosing to invest in urban real estate:

• Increased connectivity and infrastructure enhance properties.

Unlike rural properties, urban and metropolitan properties are closer to amenities and services that are attractive to potential buyers and renters. Educational institutions, restaurants, fitness studios, and cultural centers are easier to find in larger markets.

Access to public transportation also makes urban and suburban properties more attractive for working professionals wanting a more affordable and eco-friendly alternative to commuting by car. These homes can provide a better quality of life for potential buyers and renters.

• High demand, limited availability

Unlike rural areas, suburban and urban areas are built-up with limited opportunity for new builds. These towns and cities face high demand that outstretches availability, leading to higher market prices and property valuations. 

Real estate investors focusing on rental properties can target different demographics to suit their portfolio and financial circumstances. Smaller and more affordable properties can be attractive for students and young professionals. Comparatively, new developments and larger properties are ideal for couples, high-net-worth individuals, and even corporate clients.

The urban lifestyle is almost universally attractive, providing demand within every demographic. The property appreciation potential in metropolitan areas, including up-and-coming cities and commuter towns, far outstretches the potential of rural properties. 

Investors can charge a premium for these properties, especially for fixer-uppers. As investors expand their portfolios throughout urban areas, they can benefit from economies of scale with diversification and added resilience in their portfolios. Market stability provides urban real estate investors with confidence, especially in high-demand areas and property types. 

Challenges of Larger Real Estate Markets

If investing in larger markets was easy, every investor would do it. There are challenges and drawbacks to consider before transitioning from rural to urban real estate investing. Higher property prices require investors to have more capital or financing options, with potential maintenance costs eating into smaller profit margins.

Privy gives you a competitive edge, even in the most saturated markets. Our actionable insights and real-time data identify the best real estate opportunities with instant investment analysis and deal comparison. Get informed of new listings that match your portfolio to take advantage of every potential opportunity.

Here are some challenges investors face in larger real estate markets:

• Higher property value 

Land value in urban areas is significantly higher than in rural markets. Transport accessibility, location, and planning status can influence property valuation and can vary drastically within just a few blocks. These higher property values can make urban markets less accessible for new investors or those with limited cash flow and financing options. 

However, it’s also important to consider the potential of rent control. Regulatory measures can significantly limit the cash flow potential for rental properties and reduce their profitability. Investors may be unable to increase rents in line with market developments and minimize their cash flow potential. 

• Increased competition 

Larger markets mean increased competition. The renting sector in metropolitan and urban areas is highly competitive, making it harder for new investors to enter the market. 

Privy helps you stay competitive with investment analysis personalized to your investing goals with 360-degree market analysis. Our easy-to-navigate platform provides all the information you need, from side-by-side before and after photos to rehab costs and public record data.

• Market volatility and climate change

Market volatility is a potential risk in every real estate market, even in larger areas. Economic factors like interest rates, employment rates, and inflation impact property valuation and affordability, especially for middle-class demographics. 

A potential economic downturn and rising inflation could lead to reduced demand, lower employment rates, and a more challenging financial environment for potential homebuyers to access a mortgage. 

Privy takes the guesswork out of your market research, providing an instant overview of local and national economic trends to keep you informed. Building a diversified investment portfolio with different property types across multiple locations builds resilience against market volatility. 

Climate change is a challenge every real estate investor should consider for long-term property investments. Urban areas can be just as vulnerable to climate change and natural disasters as rural areas. Recent hurricanes in Florida have shown how property valuations can take a hit in the immediate aftermath and long term after a natural disaster. Every property location comes with risk, and an investor should consider these as part of the due diligence process. 

• Government regulations and environmental policies 

Market volatility can also be caused by changing government policies and regulations, particularly with public institutions focusing on reducing carbon footprints and improving sustainability. Zoning laws, financial lending regulations, and changing tax laws can impact a property’s valuation and local demand. 

These regulations and environmental policies can impact the supply and demand of properties in urban and metropolitan areas. Land-use restrictions can harm investors in commuter areas close to major metropolitan regions by restricting property usage.

Privy keeps you ahead of new developments and makes it easy to navigate new regulations, including understanding how they might impact your real estate investment. 

Key Considerations for Rural Investors Exploring Larger Markets

Expanding your portfolio into larger markets adds resilience through diversification, protecting you against regional market volatility and natural disasters. Investing in rural and urban properties comes with benefits and drawbacks. As your cash flow and portfolio grows, exploring larger markets is the best way to unlock new opportunities. 

Privy is your partner in taking your first steps into larger real estate markets to create sustainable growth. Our network of agents and investors empowers you to build local connections to explore new opportunities, from off-market listings to new developments. You can use our advanced filters to find the right deal to suit your investor profile in every market, from New York City to the Washington metropolitan area. 

Diversify your portfolio risk with Privy’s comprehensive data-driven strategies, with national access, get open-door access to larger markets or browse within your state. Whether it’s your first deal or your twenty-first deal, Privy is here to provide transparent direct-to-MLS data to streamline every step of the investing process. 

Here are three things to consider when exploring larger markets as a rural investor:

• The importance of diversification 

Diversification is the key to success with any type of investing, especially for real estate. Investors should always think ahead and consider ways to spread risk, from choosing different locations to investing in various property types. Every location and property niche, such as residential and commercial, will react differently during uncertain economic situations.

Privy gives you real-time insight into real estate trends for accurate market forecasting to give you the confidence to diversify your portfolio. Understand how trends impact demand and allow Privy to automatically identify and highlight investment opportunities. 

• Property management costs

If you’re a rural investor exploring larger markets for the first time, you may purchase a property hundreds of miles from where you live. Property management costs are something to consider when investing outside of your local area. Hiring a property management company can help streamline maintenance issues and turn your property investment into a purely passive income stream. 

It’s worth considering the additional cost associated with this and including it in your expenses for cash flow forecasting to determine if an investment can generate good cash flow.

• Market and regional trends 

Always do your research before deciding to buy or sell a property, including looking at economic indicators and their potential wider context. Understanding the local market is crucial, even with specific neighborhoods and regions in urban areas. 

Privy can connect you with a local real estate agent to give you unique insights into the market, taking Privy’s direct-to-MLS data one step further. An estate agent can share their experience of the local market and any niche trends that might not translate through data.

Don’t lose track of the larger market picture. It’s important to consider long-term trends, from the potential impact of climate change to making properties more environmentally sustainable.