Small Town Real Estate Investing: How to Find Profitable Deals | David Dean

Mike Hambright (00:33)

Hey everybody, welcome back to the show. I’m really excited to have my good friend David Dean here today. He goes by coach and he’s gonna we’re gonna talk about investing in small markets. He has crafted this over decades and now he’s sharing with other people how to really take advantage of investing in small markets, which are a lot of people that invest in major markets don’t even think about much. So coach, great to see you, buddy.

David Dean -Small Market REI (00:51)

Hey Mike, thanks for having me. Great to see you again.

Mike Hambright (00:53)

Yeah.

Of course, absolutely. So I’m excited to talk about this because I think, you know, a lot of people of course there’s somebody like you that’s been investing in small markets your whole life. and then there’s people that just like are in a major market like mine, like Dallas or Chicago or somewhere, and they feel like the grass is greener in some outskirts land, some small market out there. And they usually go out there and they get their they get their butt handed to because they don’t know what they’re doing out there. They don’t have the same relationships and you know

So often in my experience it’s easier to buy but it’s harder to sell and they just end up in a pickle out there. But there is a craft and I know you’ve done it. So I’m excited for you to share that with listeners today.

David Dean -Small Market REI (01:27)

Yeah, absolutely, Mike. I mean we see that a lot, but to me, the small markets are where it’s at. I mean, that’s where the real opportunity is at, whether it be sometimes flips, and then there’s definitely a lot of potential for rentals and creative finance type deals in those small markets.

Mike Hambright (01:40)

Yep. And it’s interesting. I try to not watch the news too much because there’s so much BS, but I did just see a headline that there’s been this resurgence of essentially small markets in the Midwest, like a lot of population moving there. And I think what’s happening right now, and probably part of what’s benefiting, you and what you teach is people are just on the hunt for affordable housing now because there’s not a whole lot of it and what is out there tends to be in smaller markets, right?

David Dean -Small Market REI (02:04)

Right, you take the small markets, let’s just say my market here in Charleston, West Virginia, Huntington, West Virginia, you can still buy houses very affordably. And what we’ve seen is through the years during the COVID years into now is people have targeted these smaller markets. you’ve got people that want to move out of the bigger cities and they want to move into a rural area and have ten acres and have two goats and a cow and a horse and

have some chickens and kinda get off the grid a little bit and maybe have their own well and their own septic and that’s what we’ve seen here. We’ve seen a huge influx of out of state buyers over the last six, seven, eight years.

Mike Hambright (02:39)

Yeah. Yeah. And that’s kind of what we did at our ranch. I mean, I would say that what we built out there, we were talking about that a little bit, is I wouldn’t call it affordable housing because we went got a little carried away out and we bought a hundred and four acres, but it’s in a very small town, a population of like I think twenty-two hundred people, and it’s very much a small town feel. And honestly, we love it out there because it feels like you’re stepping back in time about fifteen or twenty years and

David Dean -Small Market REI (03:00)

Yeah.

Mike Hambright (03:00)

life just feels simpler out there, other than mowing a hundred and four acres, you know.

David Dean -Small Market REI (03:05)

Yeah,

yeah, definitely.

I mean when I go off to, any major city, I go to Las Vegas a lot. I have a sister and family that lives in Las Vegas. My mom lives there, so I go out and I spend a lot of time in Las Vegas. And you know, coming from small towns, I grew up in the town of nine hundred in southern West Virginia in the coalfields. You know, going to Las Vegas and spending two weeks and it’s just a different energy. I’m like, man, I’m exhausted when I leave and

Mike Hambright (03:27)

You’re ready to

go home. Yeah. I get it.

David Dean -Small Market REI (03:28)

Yeah, I

and when I come back into West Virginia and I start seeing the green on the mountains, the trees and stuff, you just like, Well, I feel so much better after you know, I I don’t know, it’s just something about it. Yeah.

Mike Hambright (03:38)

Yeah.

Yeah. Yeah. Well, that’s awesome. So tell us a little bit more about your background before we kinda jump in. I wanna start talking about what a small market is and what some of the opportunities are there.

David Dean -Small Market REI (03:47)

Well my background, Mike, I started as a real estate agent way back in nineteen eighty nine. I w I was I played football at Marshall University and I played a few years and then my last year I didn’t play so I had to find a way to make some money. And my mom, who was a school teacher, went to real estate school that summer and she said, You’re going with me and I’m like, I’m not

And she you’re going. And so I got my real estate license and started selling real estate while I was a senior in college and moved into opened my own brokerage in ninety four. I think I bought my first rental in maybe ninety seven, flipped my first house in ninety nine, in nineteen ninety nine I bought a course from Ron Legrand about lease options.

That was my first course that I bought and I bought this house on a lease option, a lease with an option to purchase and done a little bit of work to it, turned around, sold it. They were out of state owners and I made ten thousand dollars and I thought I was ten foot tall and bulletproof. And so from that day forward I I’ve been flipping houses, doing creative finance, rentals.

commercial, multi unit, you know, just a y a another thing when you’re in these small markets, everybody says, well, you need to be a storage unit or you need to be multifamily or you need to be a flipper or you need to be but you can’t be one thing.

It’s very difficult to make a living doing

Mike Hambright (04:59)

Right.

David Dean -Small Market REI (04:59)

just one strategy. So you you you kinda gotta be Batman a little bit and have several tools in your Bat Belt. So that’s that’s how I think you you find a lot of well-rounded investors in these small markets because I’ve done the multifamily, I’ve done the commercial, done light industrial, done all these different things to make a living and have enough to be where I wanna be.

Mike Hambright (05:19)

Yeah, yeah, yeah. And I know we’re gonna talk about relationships, but that’s part of it is once you build these relationships, if you have multiple tools in your tool belt, there’s lots of ways that you can kind of monetize that in your business. So how do you define a small market? Like what is a small market?

David Dean -Small Market REI (05:32)

Mike, what what we call a small market is less than two hundred and fifty thousand people in your market area. And some people say, Well, that’s a big market. Well, w that’s the market we have here in West Virginia, but if you look at the geographic area and the time it would take, you know, it takes to drive from one end of that to the other, it’s you know, we’re kind of a rural area. Our our cities here, even Charleston, West Virginia, our capital city, has less than fifty thousand people in it now. So

We’re kind of a rural state and we’re spread out and and and like so many other investors out there in let’s say the Dakotas and Wyoming and rural Oklahoma and you know, all across the country, you know, people are out there, they’re in that same same kind of area, you know. They they hear people talk about, I done this list and I niched the list down, I done this, this and this and I had, you know

120,000 people that I marketed to and we’re just sitting there going, I don’t have a hundred and twenty thousand people anyway. Yeah. That’s crazy. So you know

Mike Hambright (06:22)

Yeah. That’d that’d be that’d be every house in your market, yeah.

David Dean -Small Market REI (06:26)

Yeah, that that that would be everybody. So yeah. So that that’s kind of what we

Mike Hambright (06:28)

Yeah. And and isn’t there

David Dean -Small Market REI (06:31)

what we define as a small market. We call we call

Mike Hambright (06:33)

Yeah, I mean

David Dean -Small Market REI (06:33)

one stop light towns.

Mike Hambright (06:35)

Yeah, yeah. And are there markets that are too small? I mean, you know, it’s hard to I guess the smaller the market, the hard the harder it is to make a living from just one small market if you’re like the town again, the town that our ranch is in is twenty two hundred people, so that’d be too small to make a living there. But there’s probably people that tie it several small markets together, maybe

David Dean -Small Market REI (06:52)

Yes.

Mike Hambright (06:53)

regionally.

David Dean -Small Market REI (06:53)

Yes, and that a that’s what we do here. So we tie Charleston, West Virginia and Huntington, West Virginia, and there’s about, I don’t know, forty, fifty miles between the two and then all the towns and areas in between, to kinda get that two hundred and fifty thousand thereabouts.

the way our market is and then when you move north or south from Charleston you really get into counties and areas that have a lot less like the county that I grew up in and spent a majority of my life there was thirty eight thousand people in the entire county. So

Mike Hambright (07:21)

Right.

David Dean -Small Market REI (07:21)

I’ve kinda learned to work in those markets and teach people to work in those markets and how to

tie those markets together and how to reach the people in those markets. a lot of people in those markets are not crazy internet savvy and things like that. So we’ve learned to kind of to maneuver in them.

Mike Hambright (07:36)

Yeah. And the people for your students or obviously you live in your market, but is that a common thing? to give some perspective or some context. There’s over the past several years, especially a few years back, there were several people that were teaching how to be a national wholesaler, like how to invest nationally, right? And the big problem there is, lead gen is actually easier to go nationwide and in many ways. And

What ends up happening is you catch a lot of the rural markets where nobody’s advertising. So it’s a little bit easier to buy. It seems it’s a little bit easier to buy in small markets. And then the dispo side is a little bit harder. But those are people that are going nationally buying, getting deals or getting leads in markets they never even heard of. They have like Google it, right? And so

when

David Dean -Small Market REI (08:18)

Right.

Mike Hambright (08:19)

you teach people, are you typically teaching people that might live in California and they want to invest in, you know, North Dakota? Or is this typically people that live

in or near their markets that are operating like locally f locally for them.

David Dean -Small Market REI (08:30)

Yeah, Mike, it’s mainly people that live in these markets and they’re trying to scale up. They’re a small operator. Let’s say they’re doing four to ten deals a year and they want to scale up and try to do fifteen to twenty deals a year and kind of take their business to the next level. We’ve kind of developed a lot of different avenues of making money and finding deals and selling deals in these small markets that kind of make sense. And so that’s really who we target most of the time.

Mike Hambright (08:55)

Yeah. So let’s talk about like how to find, you know, buyers and sellers. I mean, maybe we could start with buyers. Like how do you do things differently in a small market than maybe folks that are in major markets would?

David Dean -Small Market REI (09:05)

Well, in the small markets we still will pull a list, okay? We can’t niche lists down much in our markets because we don’t have enough people. So if we put two or three niches, let’s say we go on a Deal Machine and that’s what we use a lot as deal machine and we try to niche down, you know, it we’re down to nothing. So we kinda lean in on inherited probate type properties.

We lean in on tax properties, stuff like that. We do that with we still use Direct Mail. Direct mail it still works. we still cold call.

And we do things like that, you know, kind of old school. We still talk to people, we still get deals from agents, we get deals from insurance agents, real estate agents, bankers, people in our market that know us, and they just refer these deals to us. And so we kind of teach a hybrid of how to use the lists, how to reach the people on the lists, and how to create relationships in your community, such as

some of the great relationships that I built in these small communities is working with people at UPS, FedEx, getting to know mail carriers in the communities. if we find a vacant house in an area and we can’t really find the owner, we wanna know what’s going on, you can find a UPS man or woman and talk to them. They’ll know who the family is, they’ll know who the family in the neighborhood is. And in these small markets that’s what you find is is a lot of family and people living together and they know what’s going on.

Mike Hambright (10:22)

Everybody knows

everybody out there. Yeah, I think about like where our ranch is. Anytime we need anything, there’s a local Facebook group and it’s like a community bulletin board. Like I just say, Hey, does anybody where would I find this? And they’ll people will literally start connecting you and it’s unlike anything I’ve seen. I mean, it doesn’t happen that way in Dallas.

David Dean -Small Market REI (10:37)

Right,

and we use Facebook groups. We you you know it it we use spirals but we use Facebook groups a lot. we do a lot of of dispo in Facebook groups and we do a lot of marketing for sellers in in our Facebook groups. And we use the community, the bulletin boards, the trade and sell groups, all that stuff in our market is one of the ways that we reach out and get a lot of leads out of Facebook.

Mike Hambright (11:00)

Yeah.

Yep. And how about buyers? So in my experience, like I said up front, in my experience, you know this better than me, it seems like buying house is a little bit easier than dispo for certainly for somebody that’s not in that town. There’s just not it’s not like you got a you know, a list of five thousand wholesalers that are cash buyers or anything in any one of those markets. So let’s talk about when you go to sell the property on the dispo side.

David Dean -Small Market REI (11:22)

Well, on the dispo side, you know, lots of times we lean in on people looking for number one, looking for rentals in our market. we’re still in these small markets, you can still buy a property at a price to where it will cash flow and it’ll meet the one percent, one and a half percent, you know, metric and it’s attractive to people in other markets that maybe let’s say someone’s in

California where you know has a high dollar market and I think it’s very difficult out there for them to find quality rentals that will cash flow. But they see properties in small town USA that still has a good rental demand. Maybe there’s you know hospitals, small universities, colleges, steel plant.

Manufacturing plant, so there’s demand for rental and housing in those markets and in those types of towns, the houses themselves carry a good rental value. And that’s what we see a lot of is people coming from out of state, buying in in these small markets for rental property, or they’re looking to get away.

And they’re looking to scale down and they’re looking to simplify. And so in those same small markets, if you take a house and you make it really nice and you bring it up to date and it’s got a little bit of land with it and you know, usually decent schools and things like that, we have a lot of buyers that move in here. we see a lot of people from the Midwest and different places coming into West Virginia and

buying houses that we flip. We we have a steel plant here, Nucor Steel. We have a Toyota manufacturing plant, so they’re big drivers in our market. And we sell a lot of houses to to to those people working

Mike Hambright (12:55)

Mm, that’s great.

David Dean -Small Market REI (12:56)

at those plants, yeah.

Mike Hambright (12:57)

So talk about the power. One of the things about small towns, we just kind of alluded to this, is just the power of relationships. I think in big markets, it’s easy to hide behind the fact that the market’s big and nobody could ever know everybody. And you know, you might have some key relationships in your business with tile companies and a few people here and there, some other investors, but in smaller markets, relationships play a very different role.

David Dean -Small Market REI (13:18)

Yeah,

very different role. In a small market, everything is about your reputation. So if you’re a quality house flipper, you better do a good job, you better not cut corners, you better not do those things, you better do it right because the reputation will precede you, the agents will know.

Yeah, so you gotta lean in on that and so that’s why you gotta be a man of your word, do what you say in these markets, treat people the right way, reach out, develop those networks with insurance, real estate, banking, contractors.

it’s definitely relationship driven. So for the small market operator out there that thinks they’re in this small town and and they can’t do any more business, well you can. you can use and reach out and and get to know everybody in these towns, in in your town and the the towns around you and you can develop quite a good business with your reputation of doing the right thing and doing right by people and the business just flows to you. It really does.

Mike Hambright (14:11)

Yep. Yep. That’s amazing. Yeah.

So let’s talk about the role of creative finance. I think that’s one of the things that makes a lot of deals in smaller markets work. Sometimes when you sell them, it’s it’s a little bit harder, maybe on the sales side, and you correct me if I’m wrong, a little bit harder to sell full retail sometimes. Creative finance makes things a little bit more appealing. and I know you have a tremendous amount of experience in the creative finance side. So tell us more about the role of creative finance in small markets.

David Dean -Small Market REI (14:34)

Yeah, that that’s something that a small market small market operator, investor, that’s something you really gotta lean into is the seller finance, owner finance type side of the business. So I buy a lot of properties on finance, owner finance, seller finance, and I sell a lot of properties the same way on seller financing. I can’t stress enough that’s something that you really gotta lean in on and you really gotta know because to me it’s the best way to buy a property.

I mean if I’m buying rentals or I’m buying anything and I can get a seller carried note, that is that’s gold to me. I mean, I love it and in these small markets we do tend to lean on

Let’s the tired landlord lists and stuff like that. And that’s another thing in these small markets, get to know all the landlords, everybody that owns properties in the towns and stuff around you in your market area, because landlords are without a doubt the best source of

owner financing for rental properties. They own single family homes that they rent, but you can turn those into flips. You can turn them into whatever you want to do. And they’re the people that you really wanna look into because I’m a landlord, a longtime landlord. I’m a tired landlord. I think everybody is if you’ve been in it for fifteen, twenty, thirty years. And if you want to buy one of my properties, I’ll make a deal.

And if you’ve got some skin in the game and I trust you and you’ve got a good reputation, I will finance that property to you. So there you go. from a landlord, I’ll do it. And so that’s something that we teach our students is lean in on the landlords.

Mike Hambright (16:02)

And a lot of people, a lot of sellers in small markets, like their houses are I think this is a blanket statement. I don’t know if this is true a hundred percent of the time, but they’re just generally less liquid in a small market. Like the days on market, I think, typically are longer for selling homes in small markets versus larger markets, because there’s just not as many buyers, right? So sometimes they have to be willing to get creative with you if you’re gonna buy their house and maybe provide financing or do a sub two or something else, right?

David Dean -Small Market REI (16:28)

Yeah, absolutely. that’s the gold in the small markets is exactly that. Is a little less liquid and so people have to be a little more creative in the way they get rid of their properties. I’ve got several multifamily. I sold a twelve unit building in the town I used to live in when I moved here to in the Charleston area. It was a twelve unit and that was ten years ago. I’m still carrying the note.

money’s in the bank every month and yeah, made the guy a great deal. It was a great deal for me, great deal for him. So yeah, that’s one of the beauties of the small market. And when you’re dealing with landlords, people that’s

owned rental property, they understand financing, they understand notes, they understand interest carrying. They get that. And so you can always structure a good deal to let’s say a landlord or I I call them sometimes accidental landlords. Sometimes

Mike Hambright (17:16)

Yeah.

David Dean -Small Market REI (17:17)

they inherit and they’ve got two houses for mom and dad or more or you know whatever. And and so now they’re all of a sudden they’re landlords and they’re out of state. And so that’s why we kind of we lean in on that and

The landlords understand and if you’ve got a landlord that has properties for sale, you can usually work out a deal with them. And now a landlord may not be interested in carrying a fifteen, twenty, thirty-year note, but you can carry a three-year amortized

Mike Hambright (17:42)

Mm-hmm.

David Dean -Small Market REI (17:42)

over twenty or thirty years and and get out get them out of the deal in three years once you can kinda take it over, get in your name, stabilize the rent, you get some rent roll, now the bank wants to work with you, they’ll give you the money and off you go. So

Mike Hambright (17:55)

Yep. Yep.

David Dean -Small Market REI (17:55)

That’s what we teach.

Mike Hambright (17:56)

and you’ve been doing something kind of interesting as you found some opportunities to sell your house. That’s I think one of the challenges to dispo houses in small markets is just the list of buyers is just not that big typically, right? And so, but you’ve found some ways to attract out of town investors through auctioning your properties, is that right?

David Dean -Small Market REI (18:14)

Yeah, yeah, that’s something that we’ve been doing. We’ve really leaned into and and it’s just been it’s been a great option for us to sell properties. Once again, we talked earlier about people from out of state wanting to buy houses in this area that still have cash flow in You can still buy for sixty, eighty, ninety, hundred thousand, fifty thousand and you know, generate good cash flow. And so we’ve been buying properties and we’ve been auctioned off. I call them auction flips. So we buy

Clean them up.

Get some good pictures of them and then we put them on an auction platform here in West Virginia. it’s a local auction company that’s kind of statewide, and they’re in Pennsylvania, Ohio, and Kentucky. And we run them on that for 60 days on the 60-day auction. And it can be online and in person. We do a lot of online stuff. And we’ve got buyers buying these properties. I mean, if I sell, if I sell 15 properties, three will be in-state buyers.

The other twelve will be everywhere from Colorado to Utah to California to the Carolinas to the last two properties I sold on auction, they were in Miami. And the people bought both of those properties on auction off it’s two different auctions, but it was the same couple that bought both properties here in West Virginia. Yeah. Yeah.

Mike Hambright (19:27)

Yeah. And that’s people that are just

trying to find rentals that make sense typically.

David Dean -Small Market REI (19:32)

Yeah, you know, they’re down in the markets where where it’s just such a high rent and and high you know, it’s a high barrier to entry in a lot of these markets to go in and buy

Mike Hambright (19:40)

Sure, yeah.

David Dean -Small Market REI (19:40)

Yeah, I mean so they’re spending a quarter million dollars to make a two hundred dollar a month cash flow. And

Mike Hambright (19:45)

Right.

David Dean -Small Market REI (19:46)

they found these smaller markets

such as West Virginia and a lot of other small markets out there have these rentals and that still have a good housing demand that you can you can buy a a house for sixty thousand dollars and get nine hundred thousand dollars a month out of it. And and you know, the numbers work for people and the the the insurance is is very affordable.

the tax base is very affordable. I mean, people that live here, we think our taxes is high, but when you when you compare our taxes, real estate taxes, to other parts of the country, you’re like, no. sorry, I didn’t I didn’t even mean to mention it, you know, talk about

taxes. we

Mike Hambright (20:21)

Yeah, yeah.

David Dean -Small Market REI (20:22)

have, a very affordable tax base as well. So

You know, that makes it nice and usually the utilities are not too bad. So people like it. They buy one th and they like it, then they buy another one, and then then several people that I’ve sold to are repeat buyers in this market over and over and over and over. And so they’re spending a lot of money and and accumulating a lot of units in in these smaller

Mike Hambright (20:41)

That’s great.

David Dean -Small Market REI (20:42)

markets. And as I talk to j it’s just not West Virginia. They’re buying in other smaller markets.

you know, outside of let’s say the population centers. Yeah.

Mike Hambright (20:51)

you and I both know that it’s not passive to be a landlord, but I think it’s gotten easier to have properties in multiple markets because a lot of the property management software, a lot of property management companies have figured out ways to kind of make that a little bit easier versus just having everything in one market, right?

David Dean -Small Market REI (21:07)

Yeah, absolutely. And you know, when you can be driving down the road and you can sign a lease and, check deposits and do all the things that we can do now, it it definitely makes owning in other markets much more doable. And yeah, I mean even in your own markets, everything is so automated now and the

the days of going and collecting checks and cash at rental properties are over with. So I quit doing all that stuff. You know. So

Mike Hambright (21:31)

Yeah. Yeah. Well, coach, if if folks wanted to

learn more about like what you’re doing, I know you you have some some different boot camp stuff where you kind of teach people how to do these things. Like where would they go to connect with you or and or learn more?

David Dean -Small Market REI (21:42)

Yeah, they can go to small market REI, that’s real estate investment, small marketrei.com. And Mike for your viewers, I’ve got a free gift that I could give away if that’s all right.

Mike Hambright (21:52)

yeah.

Yeah, of course.

David Dean -Small Market REI (21:54)

Yeah,

it’s a small market playbook, so it goes over our system, how we find deals, how we sell deals in our small market that we and that this is something that we teach in our boot camps and a lot of different things. So if you want that, it’s free. Just go to smallmarketrei.com/playbook.

Okay, and you’ll get it, it’s free. Take it, learn from it, and I hope you enjoy it and I I hope you buy something from it. And if if you have any questions, feel free to reach out to me. yeah, I’m on Facebook, just a David Dean, you can find me, you know, pretty easy to find.

Mike Hambright (22:26)

We’ll add some links down below here for folks to find all that stuff. So Coach, great to see you, my friend. Thanks for sharing some insights with us on how to invest in small markets.

David Dean -Small Market REI (22:35)

Yeah, Mike. Thank you for having me. It’s always a pleasure, man.

Mike Hambright (22:37)

Yeah, absolutely. Everybody, hope you got some good value from today. David Dean’s a great great guy, old old friend. It was great to catch up with him today a bit and somebody that I would definitely rely on. So if you if you’re interested in if you live in a small market and you’re thinking about how it’s a struggle there, maybe you’re just not kind of following the right playbook. So check out these resources down below and reach out to David Dean. So appreciate y’all for joining us on today’s show. We’ll see you next time.