Report: Why Investors Should Consider Properties in Small Towns

Major metro areas such as Phoenix and Atlanta aren't the only places where investment opportunities abound.

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Small towns with populations between 200,000 and 500,000 have plenty to offer investors despite their smaller size, according to a quarterly report from Local Market Monitor (LMM) and HomeVestors of America, Inc., (known as the ""We Buy Ugly Houses"" company).

""Many of these markets not only have unemployment rates well below the national average, but they show strong job growth and housing prices have bottomed out,"" said Ingo Winzer, president and founder of LMM.

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Winzer added that smaller markets are ""great places to rent out single-family homes because strong economic growth can quickly absorb the existing housing options.""

LMN and HomeVestors ranked Lafayette, Louisiana as the top smaller market, followed by Fort Wayne, Indiana; Erie, Pennsylvania; Corpus Christi, Texas; Houma, Louisiana; Fayetteville, Arkansas; Tyler, Texas; Longview, Texas; Lincoln, Nebraska; and Ann Arbor, Michigan.

The smaller markets named were described as safer investments where the risk premium is low.

On the other hand, the top 20 larger markets should be approached with caution, Winzer said.

""Even though the higher risk premiums mean investors may be able to get a higher return relative to their investment, 18 of these markets are in California, Florida, Nevada or Michigan, all areas that have suffered from an overabundance of housing, a poor local economy, or both,"" Winzer added.

HomeVestors' co-president, David Hicks, said smaller markets are the best-kept secret of investing. Using the examples of Fort Wayne, Indiana; Lincoln, Nebraska; or Ann Arbor, Michigan, Hicks noted, ""Many of these smaller markets offer a consistent demand for rental properties. Investors can discover for themselves that the big city isn't the only place with a great deal for investors.""