Most of the times, investing in your local market can be simpler and safer. But what if your city is expensive, not suitable for cash flow investing or no longer attractive? Why not going elsewhere to get larger properties, higher cash flows and better return on investment?
Investing local is easier
- You can drive by your local market to look for properties
- You live there so you know the market and the trends
- You know the demographics and therefore the type of people you will rent to
- You are familiar with local landlord / tenant laws
- Eventually, you will feel safer
Going long distance may be worth it
- Properties are more affordable outside large cities
- With lower price points, you can buy larger properties
- Potentially, higher cash flows and return on investment
- Eventually, you can build your portfolio faster
- Take advantage of other long distance investors who failed to manage their properties properly
- The benefits of long distance investing are likely to outweigh the risks
What long distance investors do wrong – Learn from the mistakes of others
- They invested beyond their knowledge
- They were under-capitalized and ran out of money
- They did not manage their property managers
Best practice for long distance investing – the MOP methodology
- Market knowledge (income = rents ; entry point = price per unit ; exit point = market cap rate)
- Operations (expense ratio, expense per unit, CAPEX for big ticket items)
- Property management (have a system in place to manage the manager to keep them accountable for the money, the marketing and the maintenance)
Acknowledgement
Thanks to Peter Harris from Commercial Property Advisors in this video