Investing Beyond the Mystical 25-mile Radius
By Robert Greenberg, VP Marketing, B2R Finance
Many real estate investors limit their investments to their own city or even their own neighborhood, but getting rid of that mystical boundary can open up a whole new world of investment opportunities.
First let’s talk about why investors often prefer to stay local.
If you’ve lived in one place for a long time, perhaps your whole life, you have amassed a wealth of expertise about your local market. You know what neighborhoods have the best schools, the lowest crime rate and the best amenities. As a longtime resident, you’ve probably seen different neighborhoods and the local political environment evolve over time, and you most likely understand your local community like no newcomer possibly can.
“It’s a natural comfort zone,” says Greg Rand, CEO of Own America, a national brokerage network for real estate investors.
Local owners also have the opportunity to meet their tenants face-to-face and, if they desire, they can manage their rental properties to maximize returns rather than outsourcing to a property management firm.
There’s also a certain level of comfort derived from being able to drive by your real estate properties — whether to check for damage after a spring storm or to assess the curb appeal of the property.
LOOKING BEYOND YOUR BORDERS
Rand agrees that there are many good reasons to expand your investment strategy beyond your city limits.
“The residential market is as diverse as the stock market,” Rand said. “Active stock market investors study a company’s fundamentals and try to pick winners. Real estate investing can work the same way. Real estate investors study the fundamentals of a metro market and try to pick a winner.”
Sometimes your hometown might not have very good fundamentals and it may not make sense to buy “stock” in it. Perhaps the town’s biggest employer and civic supporter has left for another locale or the city’s population is decreasing.
Migration patterns cause people to leave one part of the country for another. The losses experienced in the Rust Belt have contributed to the gains in the Sun Belt. The reasons people leave one area for another may include quality of life, the cost of living, employment opportunities, and political and business environments.
If you want to consider investing outside your backyard, it’s important to do your homework. That can start over the Internet where many third parties have already done a lot of demographic research to let you know where people are moving and why. You might find some valuable information about good prospective rental markets in our recent post about rental markets on the rise.
And, if you’ve enjoyed the comfort that comes with investing in your hometown, you might first pick another city to consider that fits into your comfort zone. Perhaps you’ve been vacationing every summer in the same beach city and it’s like a second home, or you have close relatives in a place you visit every year so you’ve become familiar with its amenities.
If you don’t know another city well that appeals to you, you can still research one on your own. Population growth and projected growth are key drivers of rental demand. Are jobs and population growing in the city you are considering? Why? What’s forecasted to happen in future years?
Once you pick a market, a real estate agent well-versed in rental investing can advise you on neighborhoods in high demand.
Investors willing to look beyond their own city will find a world full of opportunities they maybe didn’t think to consider.
For more information about how B2R can help you obtain rental property financing to grow your business, just call 800-227-8107 or visit http://www.b2rfinance.com/borrowers and follow us on Twitter @B2RFinance.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.