When real estate advice is stale or just wrong

Many real estate investment books written for the US market focus on investing close to home. Some will say to stay within 10 miles of your home. Others argue to keep it under 1 hour’s drive. A few investors talk about a maximum of 2-3 hours away by car.

Real Estate Investing (REI) makes sense only if you keep it local is the message. What if the authors are wrong? What if the world has changed?

As someone who owns property that is up to 11 time zones away I clearly do not subscribe to the advice. I even cross country boarders so deal with different legal systems and credit scoring models.

Rather than just argue the case from my point of view let me suggest you read Real Estate Investing Out of State, on the Living the Dream blog.

Two messages jump out.

1. Do Your Own Research (DYOR) when investing at a distance. With the changes brought about by technology change (Internet, mobile phones, low cost travel and communications, express delivery) the extra overhead & cost to research a remote location compared to your own backyard is almost negligible.

3. Some real estate investment strategies are very time intensive and are best done close to home. Other strategies can be applied locally or at a distance with very little marginal cost triggered by the distance. Door knocking on the doors of new foreclosures after the filing of a Notice Of Default (NOD) is clearly best done locally. Mailing or calling owners of NOD property can be done remotely. Meeting face to face on short notice is not something you can schedule when you need to fly to the meeting compared to buying properties that are ready to rent from an agent. Pick a strategy that works given the distance. In the technology sector this is called a business that scales.

Stick to your knitting is a message companies are told when they want to grow. Rather than diversify into other sectors where the company has no competence the company should expand their primary business into more markets. Do what they do best rather than learn a whole new business. If you have a real estate investment strategy that has worked well in the past then maybe you should change where you practice that strategy rather than give up on the strategy when it stops working in your local market.

Your thoughts?

3 Responses to “When real estate advice is stale or just wrong”

  1. outsider222 Says:

    Actually, long distance research might just not be as reliable as one might hope. Sometimes, in order to find out what’s really going on in a remote location, you might have to find out first hand.

    Hype is cheap.

  2. portlandflips Says:

    I would also add that a sound stratagy for investing in Real Estate is to develop a relationship with a Real Estate Broker. Example : My real estate business strategy as a Broker is to create relationships with Investors. I never look at the ONE SHOT DEAL. I always look at creating wealth for my investors. I they are not making money why would they want to use me again ? It is much easier from my view point to establish a good working relationship and then nurture that relationship. So much easier when one knows the others likes and dislikes.

  3. Al Young Says:

    I would be interested in how you manage to handle investments up to 11 time zones away. Besides the distance, I imagine there are other obstacles to investing outside of the US.

    When investing in property you can divide the world into two slices. That which is ‘local‘ and which you can likely directly handle or visit vs. that while is remote.

    When I invest remotely I tend to focus on areas that I have an interest in, have traveled to, expect to travel to or otherwise a place that is worth learning about. Maybe a place where you can vacation, a place where you like to visit for work, a place that just has great values so you will make a commitment to visit purely for the profit potential.

    Investing at a distance is best done by focusing on deals that are not time intensive. At least not time intensive with you pounding the pavement in the local area. Buying off-plan (pre-construction), buying condos or other properties where much of the maintenance is packaged up, buying real estate notes are all possibilities. What will not work so well is using bandit signs and then expecting to pound nails doing refurbishment work locally. You can use direct mail and wholesale remotely but you can not door knock.

    Learning the local market includes learning how people do business in the local market. If you cross a state or national boarder you need to learn what is different. You can get burned by what you do not know you do not know. Start slow. Do 1 deal and expect it will not be that cost effective initially. Be committed to doing more deals unless you discover there are real problems with the market that you did not see prior.

    What I like about dealing with distance is I can focus on deals that makes sense in the short and long term. I do not have to compromise and do so-so deals just because there is nothing good in the local market. If you can not find property that will cash flow locally you do not have to buy into the mindset that negative cash flow if OK. You just change your market focus.

    Enough as a reply. I can create a new topic if there is continued demand. Send me email if I do not post a fresh topic on dealing with distance.

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