Does it Really Make Sense to Invest Near Where You Live?
I work with real estate investors from all over the world, one thing these investors all have in common is the desire to acquire the best possible investment. Why would someone purchase property in a different city, state, or as far away as a different country? Wow with so many miles separating them from their investments how do they possibly take care of the investment?.
Isn’t it best to invest within close proximity to where you live?
Growing from a teenager into a young adult I had always heard you should buy within a few miles of where you live so you can take care of the property. So with this in mind why would anyone invest from so far away? The answer is quite simple.
Active investors invest in their own backyards while passive investors invest in the best locations.
• An active investor: is an investor who knows real estate inside and out. They understand the nuances of many aspects of real estate and they will often do their own property management. Being an active investor means you are willing to be entrenched in the day to day activities and decision making process of every detail.
• A passive investor: simply wants to have a great investment secured by a tangible asset, (real estate). To the passive investor they understand the best investment is in the location that will reap the highest and most sustainable returns. The Passive investor never manages their own investment as they do not have the desire to be bothered with the day to day activities.
Years ago I worked in the home remodeling business. Many of my customers were real estate investors. They would hire me to do some capital improvements as their buildings aged. I was intrigued to learn that most of these investors (thought they lived in the same city as their investment properties) have never actually stepped foot in the property. When I inquired about this they told me it is simply an investment. They would say things like I own stocks in products like Coca Cola and IBM also but I never stepped foot in those business either. It is not an emotional purchase to me it is simply an investment. They have people run those companies that I own shares in and I have property managers that run the properties that I own, no difference.
I also learned that many of these investors also owned properties in other cities and other states as well, this also intrigued me big time. So I asked why, of course the typical real estate quote came out. (Real estate is all about Location). What these investors all had in common was they bought in the location that best made sense at the time. This information was totally validated years later as I switched careers into real estate sales and made a move from the northern state of Minnesota (where I owned all my properties) to the Southern state of Florida.
Wow what a different market it was. I stopped investing right away as I could not find anything that made financial sense.
Does it really make sense to invest near, where you live?
Real estate like any other investment always has been cyclical in nature. Values rise, sometimes rapidly sometimes slower, sometimes they even fall. There is no such thing as one market that continues to rise rapidly forever. To win with great investments it is imperative to invest and hold investments with the best possible gains. Within the 50 states and 385 MSA (Market statistical area) (basically metropolitan areas and surrounding communities) there is indeed many different looking markets. For some people they are lucky to be strategically located in an emerging market. For about 75% of the population they live in markets that may be positioned differently and therefore do not represent the best market to invest in. If real estate is all about location not everyone can always be living in the best location for investing. What is best for you and your family to live in can be very different than the location that is best to invest in. I always say” Live where you wish but invest where it is best”
So if my backyard is not necessarily the best place for me to invest where is it best?
The answer to this is of course a moving target, investing in best locations takes time and diligence to uncover. There is some basic principles you want to follow when investing in best real estate locations. Following these principles will keep you riding the economic wave of prosperity in each market. Seasoned investors like to buy in the best market, when the market dictates them to do so they will reposition the investment into the next emerging market. By doing this they always own property that is raising in value and of course you cannot do that by simply holding property within your own backyard forever.