Small town focus - First mail-out campaign!

[TangoWhiskey]

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.

 

[Thomas Beyer]

Unclear why you target commercial lots ?

Commercially zoned properties are often very weak in small towns as people drive the 1/2 to 3/4 h to but groceries or major items, draining smaller towns of life.

Mix of commercial and residential is better, i.e. condos or apartments on top of main floor retail.

Not necessarily a slam dunk, but the right properties, cheaply acquired, then renovated and/or enlarged, perhaps re-zoned can work well, Tris.

 

[TangoWhiskey]

The primary reason is that there is only one road in and out of town and as the town grows everything on that Main Rd should do great and with very high cashflow during the hold period. It was only the first mail-out, there will be others targeting residential, but this is a very under-served market in terms of commercial real estate for almost everything. We would look for multi-family but there isn't any (3 total complexes and we own one) and there are many dilapidated buildings that are zoned commercial on the main rd that are really ideal candidates for investors to buy, expand and re-skin. Rather than buying one product type in many markets or many areas of a city I am buying multiple product types in one very precise area, starting with one very very specific strip along the main access road. It happens to be commercial.
The RTO program for residential housing kicks off next week although I am waiting for the accountants returns for 2016 and the exits of two RTO properties.

 

[kfort]

Locally, even the small town (10,000-14,000) near a larg-ish city (GMA 250,000) Have waiting lists for self storage. I've always wanted to do some developing of these

 

[Thomas Beyer]

Talking to locals, as a local, often more effective than letter.

Try an ad too in local weekly community paper. I had great success with that when we lived in Canmore, AB.

Try multiple angles. One never knows what works.

An ad such as

Too busy to retire ?

Asset rich but cash poor ?

Tired of managing your tenants ?

Local entrepreneur with cash and good credit seeks to buy local real estate along Main Street. Well maintained, decrepit or just old - doesn't matter. All cash, terms or joint venture depending on your needs. Call or email me at xxx