edited in 2021
Great, you’ve decided that you’d like to invest in real estate! The next questions that usually come to mind are how and where. Understanding some of the benefits and risks of investing in local and out of state real estate should help you make an informed decision.
Let’s review! Benefits of investing in local real estate:
Control over management – whether you choose to manage the property yourself or you engage a property management company, being local gives you greater control in managing the property
Distance – it’s much easier to get to the property to check on things like renovation status, etc.
Market knowledge – you’d likely already know (and be more comfortable with) the local market, the happenings, city plans through newspapers or other local outlets. You are much more likely to keep up to date on the market since you live in the area.
Ok, that sounds good – so why wouldn’t you just stick with local real estate? Well, the biggest reason is:
Missed opportunities – your local market may not have the level of opportunities as other emerging markets do. You risk limiting yourself to a potentially already saturated market.
On the other hand, what then are the benefits of investing in out-of-state real estate:
More emerging markets – you may have heard from someone or you’ve done your own research on market trends and current news, such as, big companies planning to settle in certain areas, or people migrating elsewhere. You found signs of emerging markets.
May be a lower barrier of entry – depending on where your local real estate is, it may be a lower cost of entry to purchase properties that aren’t local.
Diversification – by investing in different areas, you diversify your own real estate investment portfolio since real estate is hyperlocal in nature.
So, what do you need to do to successfully invest in out-of-state properties? Simply said, make sure you have a local partner (that you trust) in that market who actually KNOWS the market and have the right network. If you’re an active investor/general managing partner on the property, you also likely would need to make regular trips to the area especially during times of value-add renovations. If you’re looking to be an active general manager, we recommend starting out with local real estate unless you have already built a strong partnership in out-of-state market. Once you have your footing, then branch out. At the same time, start building your network. If you’re looking to be passive, we recommend you do your research on which markets you may want to invest in and engage in syndications that are already operating in those markets.
Right now in 2021, we are prioritizing our focus on local real estate and beginning to branch out to other emerging markets where we have trusted partners. Want to hear more about how to get started? Let’s chat!
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