Near or Far? Local VS Out-of-State Investing

Posted by Chris Clothier on Fri, Dec 4, 2015

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There are a lot of choices when it comes to investing in real estate. There’s always a decision to make, and one of the first you’ll encounter is simple where? Where should I invest? Most investors start out considering their local markets—because why wouldn’t you? Still, there are clear pros and cons to investing locally...and out-of-state, for that matter!

As a real estate investor, the most important thing if figuring out what kind of investments best suits your situation, goals, and personality. If you’re having trouble taking the next step with your investing future, look no further than this evaluation. We’re diving into the pros and cons of both investing locally and out-of-state!

Investing in Local Real Estate

The Pros

You know the market.

You just know. Your local market is yours, and so much easier to learn about than a distant one. You have a solid foundation for understanding because it’s where you live. You may know what the names are of professionals you can trust, you know your competition, you know trends and have an intimate understand of cost of living and affordability. Your market insight is an invaluable asset, period!

You understand nuances.

Of course, just knowing names and numbers is something pretty much everyone can pick up on. But more than that, if you live in the market you’re investing in, you also know the nuances. You know what neighborhoods are up-and-coming. You know the vibe of certain areas, and you can make better predictions about where things are headed.

You’re right there.

Proximity is a big advantage for local investments, particularly for investors who like to be hands-on. You want to see the property? Hop in your car. Check up on renovations? Sure. Talk face-to-face with the property manager? Put it on the calendar for the end of the day. Being close brings a lot of convenience and security with it.

The Cons

It may not be the market you want.

Not everyone lives in a market that they necessarily want to invest in. The recession made a massive impact on housing markets across the country, and recovery has come at different paces in different cities. Some are still hurting, others have exploded (in a good way). Maybe you’re out priced in your current market. Maybe you’re not, but don’t see a favorable future where you are. If you confine yourself to investing locally, you’re at the mercy of that market, that cost of living, and that particular economy.

It narrows your options.

Not every market is full of good investment opportunities. If there are other investors you’re competing with in your local market, that too can be a burden. Sticking to your local market means sticking to your local inventory, which may or may not be big enough or suited for investment properties.

Investing in Out-of-State Markets

The Pros

You increase your options.

Want to invest out-of-state? You can pick literally anywhere. Any market. Dig the idea of investing in Florida vacation homes and coastal villas? What about housing near your alma mater? The sky’s really the limit! You can tailor your investments to fit your interests as well as your price point.

You get access to great markets.

If your own market isn’t in the best of shape, that’s okay. You can go to a hot market like Dallas. You can dodge high, inflated prices and heated competition in Memphis. You aren’t subject to your own market’s changes: no, you get to pick and choose what markets you’re interested in and which ones are up-and-coming in the real estate investment scene.

You aren’t limited to your cost of living.

For many investors, it’s very possible to be priced out of your own local market. In places like San Francisco, it might not be prudent to try to buy investment properties, simply because of the extravagant expense. Investing out-of-state allows you to scale to your needs. The cost of living a few states over may be considerably lower: meaning you can snag excellent properties at a much lower cost elsewhere without trading quality. Everything’s relative.

The Cons

You can’t always be right there.

Hands-on investors will probably be bothered by the fact that they have to fly out to see their investment properties. While we encourage visiting your out-of-state properties (especially before you buy!), it’s not always that easy. When all communication is long-distance, there’s a certain level of detachment from it all. Some investors like that. Some really don’t.

It’s a market you aren’t used to.

Yes, you can learn a market. But it takes a lot of research and study, and nothing will be the same as being there and immersed in it. The nuances are a lot harder to pick up on and you don’t necessarily have the full picture. That can be scary!

It’s harder to trust.

The number one thing people struggle with in making the leap to invest out-of-state is trust. How do you know the property is what it’s advertised? How do you know your managers are doing a good job? What if something goes wrong? What if I’m being scammed? These are things people worry about: and for good reason.

But there is a solution.

Turnkey Real Estate Investment

For those thinking about investing out-of-state, there’s no better option for you than turnkey real estate. Period. When you find a reputable, proven company to handle your investments, you can rest easy. You can trust. They know the market, and they want you to succeed. If you don’t know where to start out-of-state, start with turnkey investment companies.  And you can learn about one company that is not only the largest in the country, but has been in business longer than any other!

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image credit: Will Grant



Topics: out of state investing