My brother and I purchased an investment property in Wisconsin. This purchase is the first time we ventured out of the comfort of our local market. As we analyzed the numbers and market, trying to determine the feasibility of this new venture, I couldn’t help but notice a few things.
In our investor community there has been buzz around investing in other markets. Many claim the Twin Cities have become too expensive with tighter inventory levels and increased buyer demand making it harder to “find deals.” Others feel the cities are becoming unreasonable with increased fees and tougher inspection requirements. Whatever the reason, many investors are looking beyond our borders for better opportunities.
However, the more I searched for reasons to invest in other markets, the more I was drawn back to our local market for the following reasons.
Leveraging your local network is the best way to find success in real estate. Lance Wakefield, national real estate investor recently presented to the Millennial Investor Focus Group. He is venturing into the Minneapolis/St. Paul market and we asked him “why?” He said the reason wasn’t because of the numbers but because of the people. Lance believes that where there are good people there are good deals. Investing in real estate is not a one person show and takes a team with many resources. If you are well respected and connected, it is much easier to leverage your network to gain momentum in real estate when you invest locally.
Local investors have a unique perspective. When you invest locally you gain an intimate understanding of a real estate market that is very difficult to grasp when investing out of state. We like to call it investing in your own backyard.
By doing this, you have a leg up on outside competition. For example by following the local beer scene you could recognize the growth pattern of a brewery in town and gobble up real estate where the brewery plans to relocate. Or you probably “know a guy” who is a reliable handyman that wouldn’t do work for someone sitting in her California beach house. Or you have access to a friend who’s sister just moved to town scoring her dream job and needs a clean, updated rental unit. Having a local presence matters and can easily be forgotten as we look for cheaper places to invest.
Nothing can replace being able to drive by your investment properties. By doing so you can keep tabs on the upkeep, renter situation, community activities and so much more. You can provide immediate physical response time to your renters which creates a landlord/renter relationship built on service and respect rather than fear and neglect.
It’s not an equation you can build into your spreadsheet or a number you can use to sway a potential lender. It's an innate sense of a community, the people and where they desire to live and raise their families. I think investing out of state is a smart move. However let’s not forget about the benefits of buying local, it may end up being the secret to your success.