For many investors, the very first question to ask before they buy is, “do I stay local or go national?” Of course new investors will always want to focus locally while the more experience investors look at both local and national markets. It really depends on your comfort level, your experience, and personal resources.
Local Market
Focusing on your local area is always a plus. You have knowledge of the local market, physical access to properties and inspections, and perceived more control over the entire process. Great! You are an expert. However, you limit yourself to your specific geography and that means you have limited opportunities. What if you are located in Cleveland or Detroit, two of the most challenging markets in the country? If you don’t know what you are doing especially in a market such as these, you can get burned very quickly. So local may not always be the best choice.
National Market
Buying nationally gives you unlimited opportunities. You have the ability to target strong markets and build a strong diversified portfolio. There are some drawbacks to this including a limited knowledge of the target market, no physical access to properties and challenges when you try and sell or manage from afar.
However, most of these challenges can be overcome very quickly. There are unlimited resources on the Web to help you become knowledgeable very quickly on specific markets with tools to analyze properties specific to your requirements. The easiest route is to employ realtors in your targeted local markets to find you properties. They will provide you with comparative market analysis (CMA) reports and if you need pictures, have the realtor take them or find a local person to pay $25-50 to go in and take pictures.
Most of the seasoned experience investors I work with have boots on the ground. They target specific areas like Phoenix, Las Vegas and Atlanta and physically have their own local people on the ground to find, secure, rehab and sell or manage the properties. If you are a small shop with limited resources, consider employing a contract for deed strategy with all the services you will need to assist you (Read “Make money like a bank”).
In a strong market, sticking to your local area may be perfectly acceptable but when your market takes a hit, it makes no sense. Think outside the box with unlimited opportunities by going national. With the right resources on the ground, it’s as good as being there yourself.
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