- Joined
- Aug 26, 2010
- Messages
- 380
Yesterday my business student and I sent out 107 letters to the owners of approx 120 commercial zoned lots on the main road in one of the two small towns we are using as a test case for how to grow wealth in small town real estate. We are excited as this is our first mail-out campaign.
I will start posting periodic, perhaps even weekly updates, as to how to develop and work a real estate strategy in a specific small town. We hope people find it useful when considering real estate strategies - a city is in some ways a collection of small towns.
Selection - Pick growing small towns that have significant gov't presence and good highway access within an hour of a growing city of 100K plus (or even better, between two such urban centers). These combine high cap rates and good cash flow with protection against price fluctuations due to employment changes.
The biggest issues are management and very limited deal flow of specific property types (ex multi family 12 units or larger).
Our strategy to meet those issues so far is to build a portfolio of different kinds of real estate that meets a 10 % cash on cash criteria on deals requiring 50-200K in capital. As the portfolio grows in our two very carefully selected small towns of 8 and 13 K people, we have taken the management in-house, building a strong incentive based relationship with a single person to oversee each growing portfolio.
To further manage risk, ideally choose one small town with provincial and municipal institutions (education and health, prisons etc) and another with federal institutions (military/prisons/coast guard bases etc). Learn the state of the town's finances, especially its pensions plans, average age of the town workers, projected infrastructure investment, and political leanings of mayor and council.
A lot of work but lucrative combined with laser-like focus.
So far we have done development; rent-to-own; multi-family; and mortgage lending.
Our early small town strategy accomplished financial independence for us in 5 years.
Phase II - learning how to grow an organization to do more deals and more capital - just began.
The journey of 1000 miles starts with the first steps.
I will start posting periodic, perhaps even weekly updates, as to how to develop and work a real estate strategy in a specific small town. We hope people find it useful when considering real estate strategies - a city is in some ways a collection of small towns.
Selection - Pick growing small towns that have significant gov't presence and good highway access within an hour of a growing city of 100K plus (or even better, between two such urban centers). These combine high cap rates and good cash flow with protection against price fluctuations due to employment changes.
The biggest issues are management and very limited deal flow of specific property types (ex multi family 12 units or larger).
Our strategy to meet those issues so far is to build a portfolio of different kinds of real estate that meets a 10 % cash on cash criteria on deals requiring 50-200K in capital. As the portfolio grows in our two very carefully selected small towns of 8 and 13 K people, we have taken the management in-house, building a strong incentive based relationship with a single person to oversee each growing portfolio.
To further manage risk, ideally choose one small town with provincial and municipal institutions (education and health, prisons etc) and another with federal institutions (military/prisons/coast guard bases etc). Learn the state of the town's finances, especially its pensions plans, average age of the town workers, projected infrastructure investment, and political leanings of mayor and council.
A lot of work but lucrative combined with laser-like focus.
So far we have done development; rent-to-own; multi-family; and mortgage lending.
Our early small town strategy accomplished financial independence for us in 5 years.
Phase II - learning how to grow an organization to do more deals and more capital - just began.
The journey of 1000 miles starts with the first steps.