New investors are often frustrated. They see the benefits of investing and start looking for deals. They go on Zillow or whatever other free website and find that everything in their area is too expensive. So, they start searching for ‘how to invest out of state’. This is the worst thing to do.
I’m constantly asked what city or state is the best one to invest in. My answer: your city or state. “But my state is bad for landlords” or “It’s too expensive in my city” or “All the deals have been taken here” they say. These are all wrong!
What’s the #1 most important thing when being a landlord?
Be present. You need to respond when there is a problem. You need to market the rental to tenants. You need to make sure the tenant isn’t a serial killer. You need to collect the rent. And there are so many more. The farther away you have to go to get out to the property, the less likely you are going to go there. You will generate excuses for why you can’t. Sure, you might be able to find a good price in Flint, Michigan, but the amount you saved will vastly be eclipsed by the costs you spend going out there.
“But I can just get a property manager,” you say. Great. And you do need one, no matter where you invest. How will you determine whether you have a good property manager in Flint? You weren’t just going to hire one and forget about the property were you? At some point, you’ll need to go out there and check on the place.
“But I know people that do it and make a killing!” Damn straight. There are those people. Do you know who they are? They are experienced real estate investors, who started locally, and built processes, and found a good property manager in a city that they spent a ton of time researching. They probably have multiple properties in the area and can afford to fly out to Flint to check up on them annually or more frequently.
“But, there are no good deals in my area!” This is a lie. There are good deals everywhere. Why do you think that the Flint deal is a good one? Simply because the price is low? That price is low because people can’t pay as much for rent. They can’t pay as much because there is a lack of good jobs. They don’t expect an immaculate place, so the rentals are allowed to get run down. And because the rent is less, there is less income, and buyers have to pay less. That’s not value. That’s just dumb.
In your location, the prices are higher, but the rents are higher. And in your location, like everywhere else, there are properties that are in need of rehab. Potential buyers will turn up their noses to these properties, or they can’t get an FHA loan due to the condition. These places will have value to you.
Rather than putting effort into market research to find the best city to invest, put your effort into finding deals in your area. Believe me, you should invest close to home, at least until you fully know what you are doing. Invest locally.
