Investing in a small rural town?

Tyron wrote:

The town in which I’m looking at investing (Wellington NSW) as I grew up there and know the area has a median house price of 160k. Located just 50km is Dubbo, where house prices are much healthier. As I have low capital I’m looking to buy in Wellington. I’ve found plenty of properties with large land size, would it be profitable to buy the block, subdivide, and sell the back block off?
I’m a little concerned with the market in the town and a possible over supply?
Any advise to investing in small towns is greatly appreciated.

Thank you and kind regards, Tyron

I know you say you grew up there which may help but there are concerns with investing in Wellington. The vacancy rate is 4.6% which is highly concerning and may mean you have long vacancies in between tenants (how do you feel about 2-3 months of paying the mortgage by yourself). Also the town has had a well publicised methamphetamine problem which impacted the social quality of the town for years. Please be careful. I know you want cheap but there are better markets than that that are still somewhat affordable (I have written about them here and on my blog before).

2nd point, if you have such low capital it is probably not ideal to be doing a subdivision project. My first one took more capital than I thought it would. You need spare cash to do those in my opinion. What about a simple home in the 200-300k range with perhaps a minor cosmetic renovation? You could get WAY better markets if you can stretch the budget that far.

3rd point, if doing a subdivision in such a cheap town there may be no market for the final blocks? Plus the cost of the civil works may even be more than the market value of the land. There are points of diminishing returns on some of these things.

Sorry for being blunt but you have a few things to consider there. Good on you for having a go and asking!