Hey Real Estate Investors: Stick to What and Where You Know!
I am constantly surprised by all of the real estate investors I speak with that do not have a specific area they invest in or do not know what types of projects they want to be involved with. They seem to be chasing around any deal they can get their hands on in any area, even if it is halfway across the country.
There are two specific questions you should ask yourself –
1) What areas do I want to invest in?
2) What types of projects do I want to invest in?
Real Estate is a very localized business model. Although you could buy properties in different areas around the country, it makes the most sense to invest in your local market, which you know the best. The main reason being you can drive to all of your properties and personally put your eyes on them. In addition, it is likely you will also have more resources locally, including contractors, lenders, real estate agents, investment clubs, title companies, and more. Having these resources nearby makes it much easier to run your business, especially since these people will know the ins and outs of your local market.
There are plenty of situations that will arise during the life of your real estate project. Dealing with these situations will be much easier if you can get to the property quickly. We all know construction costs constantly go over budget and sometimes you need to be able to get to the property within hours or even minutes to access or clean up any issues. Being local will save you time and money.
In addition, there are many different investment strategies, projects, and property types within real estate investing. You are even required to determine if you want to invest in residential or commercial properties, which are vastly different. Make sure to stick to and master a small niche before moving on to the next. When I say master it, I mean really hone down on everything, including your marketing campaigns, transaction flow, project costs, and business processes. Know why and how it all works.
Remember, there are plenty of real estate deals all over the place. You should define your market area and invest in deals you understand, in places that you know close by.
Before you know it, you will be an “expert” in your market and investors will be coming to you for advice. Master what and where you know first, then venture out to different areas and project types.