Imagine embarking on a new career as a property investor. Maybe you have chosen residential rentals; perhaps it’s commercial office space. The type of property is less important than its location. Likewise, it is a good idea to pick a local area and stick with it as you build your portfolio. This post will explain why.
No doubt there are those institutional investors who have managed to build portfolios with properties in diverse locations. But they are the exception to the rule. And quite frankly, most of them started by concentrating on one area and then expanding out from there. It is no accident. One of the smartest things a new investor can do is to find an attractive locale and stick with it for as long as possible.
Familiarity Breeds Success
It has been said that familiarity breeds contempt. That may be true in personal relationships, but it’s just the opposite in property. Being familiar with a local area is one of your keys to success. The more familiar you are, the easier it is to find and acquire quality properties. The easier it is to adapt to local codes, establish relationships with local contractors, and so on.
One of the fundamental rules of successful property investing is to know your market. But if you are trying to diversify yourself across too many markets, it can be hard to get to know any of them in particular. Choosing a local market and sticking with it, at least initially, goes a long way toward helping you familiarize yourself with it.
More Efficient Management
Property investing involves more than acquiring properties and forgetting about them. You actually have to maintain what you purchase. You may handle maintenance yourself or turn it over to a property management company. Either way, maintenance is a lot more efficient when you are working with multiple properties in the same local area.
Stretch yourself across multiple locales and management becomes less efficient. Reduced efficiency equals reduced profits, and that is no good for investors.
Easier Access to Financing
Yet another reason to stick with a local area is your ability to access financing. According to Salt Lake City’s Actium Partners, hard money is a preferred funding source among successful property investors. Hard money is easier to obtain, it can be accessed quickly, and it’s tailor-made for the quirks of the real estate industry.
Sticking with a local area gives you the opportunity to develop relationships with multiple funding providers. No matter what kind of deal you have cooking, you will have a lending partner you can turn to. On the other hand, expanding too quickly into too many markets could limit your access to financing partners. That could limit your ability to get certain deals done.
Less Competition to Deal With
Finally, picking a local area and sticking with it generally means less competition over time. You might face stiff competition initially, but every property you add to your portfolio increases your strength and presence. The stronger your portfolio, the fewer investors there will be to compete with you.
They say that location is everything business. It is certainly true in real estate. Choosing the right market can mean the difference between success and failure. Choosing the right location and sticking with it increases the chances of success considerably.
Brand-new property investors should zero in a particular market based on whatever criteria they believe is important. They should work to establish themselves in that market before thinking about expanding elsewhere. Getting into too many areas to quickly amounts to overextending, and that is bad in property investing.
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