Should I invest in my area or outside of my area?
If you are a real estate investor or you have thought about getting into real estate investing, I’m sure you have asked yourself that question before.
This is a very commonly asked question and it is not always an easy one to answer.
In this post I am going to shed some light on this subject so that it will become more clear as to which way is best for you and your real estate investing business.
What Is the Right Answer?
Real estate investors have been debating this very issue for many years.
Whether or not you should stick to your own market or look outside of your area really depends on what your investing objectives are.
If you are looking to run a house flipping business your objectives are going to be completely different from someone who may be looking for great notes to buy.
The answer for you may also depend on what your comfort level is as well and how risk adverse you are.
Lets talk about the benefits of sticking to your own area.
Investing In Your Backyard
For most real estate investing strategies it is going to be more beneficial for new real estate investors to start in their own city.
When first starting out, whether flipping houses, wholesaling or buying your first rental property, most investors would agree that you should look to your own area first.
By going this route you are able to visit and view potential investments in person to get a much better idea of repairs needed, crime activity in the neighborhood and how well other comps compare to the one you want to buy.
You will get a much more solid idea of this by seeing in person rather than looking at pictures online.
Investing in your own backyard also gives you much more opportunity to build relationships with key players in your area, which can help to amplify your business.
This allows you to meet with local real estate agents, other investors, private money lenders, contractors, title/escrow/closing agents, inspectors, etc.
If you are looking to buy a rental property and manage it yourself, you are not going to want to drive great lengths to check on your property or show it to potential tenants many times over the years.
Investing Out of Your Area
Once you have built a good foundation of real estate investing knowledge and experience it will be much easier for you to expand out of your area.
Being able to invest out of your area can open many doors for you and provide much more opportunities for investments.
You may be located in an area with very low employment, very small population, and high crime rate or even in a recession with declining property values.
By looking outside of your area, even in other states, you can find markets that are booming and benefit from high appreciation, low vacancy rates, low crime, etc.
As mentioned earlier the type of investing you are focused on can play a huge role in deciding whether to invest in or out of your area.
Active investing is a more hands on approach to real estate investing.
Examples of active investing strategies are flipping houses and wholesaling. While these strategies can be used out of your area most investors focus on their own areas.
If you are looking to buy, hold and rent out properties, it can be looked at as active investing or passive, depending on how hands on you are looking to get.
Some investors really enjoy being hands on with their rental portfolio. They enjoy living close to their properties, meeting with tenants, and all of the management aspects involved with owning rentals.
On the other hand, some investors want nothing to do with the management aspects of their rental properties and would much rather someone else handles it.
These investors do not care to see the property in person and they are comfortable with putting the right team in place to take care of everything.
If you are investing in tax liens, tax deeds, notes and using other strategies that are more passive investments you may want or even need to invest outside of your area from the get go.
For example, if you are looking to invest specifically in tax deeds, your state may not even have that option available.
Not all states are tax deed states so you may have to look outside of your state.
Passive investments are more hands off types of real estate investments. They usually require much less of the investors time then active investments.
Just to recap, the answer to the question of whether you should invest in your area or outside your area, can only be answered by you.
It is important to really hone in on and analyze your investment strategies and objectives before you make a final decision.
You may even find that the answer for you is to invest both in your area and outside of your area.
Just remember that you can run a highly profitable real estate investing business either way.
Find out what is going to be best for you and your business and move full steam ahead.
I hope that this post was very helpful to you. If it was, please share with someone who you think may benefit from it.
Here’s to your success!!!