I thought I would begine my first real edition presenting reasons for why a real estate investor would want to look beyond their backyard for properties.
If conventional wisdom - if the gurus and supposed experts - suggest you should stay within about a 30 minute radius of your home, why do we see people investing in distant areas? Is it really a bad idea, or is there something else you should know?
First, let me assure you that it isn’t a bad idea…in reality, it’s the opposite…it’s a very good idea. Understand that the late-night infomercial guys (I have nothing against them, by the way), and most of the real estate authors in print are presenting their material for novices and newbies. For the beginner, with little to no experience, concentrating on the backyard is vitally sensible! Folks who are not yet familiar with cash flow, financing, and managing properties do themselves great justice by staying local until they get their feet a bit wet. If, say, you’ve never rented and managed a property before…never experienced the realities of that, then their is great sensibility in staying localized.
But, once an investor like you gets comfortable with the process - particularly being able to detach yourself emotionally from a property and deal with it analytically and business-like, then there’s no fully compelling reason to stay in your home market.
In fact, a motivated investor can miss out on tremendous opportunities by not following strong markets and/or staying with sinking ones. Think about the kind of profits made by investors who took advantage of Las Vegas from 2002-2006. Property there appreciated at times by up to 50% per year! That meant a person could have bought a $150,000 house in a given year, and seen it rise to $225,000 the next…and into the $330’s the year after that! Now that market has slowed, but the signals were there and clear to the public all along. Perhaps you even heard the news from time to time and pondered your own investments there.
Diversification is another reason why out-of-state investing can make a great deal of sense. I reside in Columbus, OH. Our market here is stagnant at best; however, I have properties in places that are appreciating at 10-12% per year, so overall my returns are positive. It’s the same benefit you’ve heard about diversifying a stock portfolio — don’t put all your eggs in one basket. If something happens in one market, you can offset it with returns from another.
Pricing comes immediately to my mind as a draw to many areas across the country. Even today, there are places that have single family homes in the high thirty thousand range. While these are not premier properties by any stretch of the imagination, we’re not talking about war-zone properties either. In many cases, they are solid older homes in rural areas that have not inflated like larger markets. The midwest comes immediately to mind as a region where these kinds of bargains abound.
There are intrinsic benefits as well. An underlying current to The Coast to Coast Investor is that people are naturally drawn to areas they associate with the good life. In other words, you might really want to own a beach house, mountain home, or place by the lake….just because. Not only is that energizing for you, but you are not alone - retirees, in a position to buy their retirement nest, are turning to those kinds of areas for the same reason. And, greater demand by those that want those properties means higher appreciation. Just look at what happened to Florida over the last few of years.
That brings me to a special discussion for those of you in a financial position to buy second, vacation, or retirement homes. Mortgages for those purchases are only marginally more expensive that for a primary residence, and there are substantial tax benefits to owning them. Plus, they need not sit vacant to qualify as your “second home”. You can rent them as long as you meet the guidelines for qualifying the unit as your second home (currently having 2 weeks of exclusive use for yourself per year). It’s important to note that, according to the National Association of Realtors, nearly 35% of all new home purchases in the 2005-2006 time period were of the vacation/second home variety. That means that people increasingly have the financial wherewithall to buy vacation homes, and more important, the willingness to act on the desire. That means more and more recreational areas will see appreciation as baby boomers buy their retirement dream homes.
There are a lot of factors that can make a remote purchase desirable - employment relocation, change of geography or culture…the list could probably be endless given people’s motivations. The short of it is, there are many, many reasons why out-of-state investing makes good economic and strategic sense. All that conventional wisdom you’ve hears or read about may have been for someone at a different place in their investing…don’t let it pigeon-hole you into a limited mindset about your own investing.
Feel free to contact me or comment if you want to dig into this issue more.
Until next time….
Bill Flood
Friday, March 16, 2007
Sunday, March 11, 2007
Welcome to The Coast to Coast Investor
OK…today is inauguration day for the Coast-to-Coast Investor.
So, what’s this blog all about anyway? My intention here is to create a one-of-a-kind blog dedicated to real estate investors who are interested in investing outside of their backyards.
After getting the blog successfully launched, I’ll be pairing it with a Podcast, which I’ll introduce in a future edition. A website is in the works, and a book on out-of-state investing is forthcoming.
Since this is as much my blogging initiation as it is the launch of The Coast to Coast Investor, I thought I’d provide a bit of insight on where I’m going with this thing. What’s the purpose, anyway? Let me start by noting that I am an out-of-state investor myself. In fact, I never had much interest in investing in my backyard. There are just too many exciting, compelling places to invest – recreational areas, the beaches, golf course communities in nice sunny places…you get the idea!
The challenge is, nothing has been written out there that discusses how to do this kind of investing successfully. In fact, the opposite is true – investing authors plainly discourage investing beyond one’s hometown. You are probably familiar with Carleton Sheets the famous real estate guru with the popular TV infomercial; open any of his materials, and within a few pages you’ll find advice to keep investing activities within a 30-minute radius.No doubt, there’s a good argument for investing on the home-front, but many investors, like myself, prefer other locales. Many…perhaps you are one of them…want to pursue hot markets. Those who went in to Phoenix and Las Vegas over the last five years made tons of money! Sunbelt locations like those certainly have a bunch of factors that make them more intrinsically appealing than, say, Detroit or Camden.
I started my out-of-state investing like many people – with a vacation property. One property in Florida led to another; then it was Virginia Beach, then another, another. In all sincerity, I buy these properties probably because of wanderlust. Whenever I vacation somewhere, I always envision living there full-time, and to me the best way to plan for that eventuality is to own something in the community.
Over several years and scores of additional properties, I have developed strong systems (golly, I hate that word…it sounds like I should be promoting one of those late-night infomercials) for locating, acquiring, financing, selling, renting, and managing remote properties. In fact, many of my units I’ve never even seen! That may seem crazy – and it probably is unless you know what you are doing. This place exists to show you how.
A large part of this blog will be part educational/training in nature. Another facet will be to provide you with resources ranging from real estate agent contacts to financing to other valuable tools you’ll need to be effective. I’ll profile locations and their markets. Finally, to provide edification, I’ll narrate deals I’ve been involved in, or which I am pursuing so you can see, first-hand, how they are done.
I’m glad to have you on the journey…it’s going to be an exciting one!
Bill Flood
So, what’s this blog all about anyway? My intention here is to create a one-of-a-kind blog dedicated to real estate investors who are interested in investing outside of their backyards.
After getting the blog successfully launched, I’ll be pairing it with a Podcast, which I’ll introduce in a future edition. A website is in the works, and a book on out-of-state investing is forthcoming.
Since this is as much my blogging initiation as it is the launch of The Coast to Coast Investor, I thought I’d provide a bit of insight on where I’m going with this thing. What’s the purpose, anyway? Let me start by noting that I am an out-of-state investor myself. In fact, I never had much interest in investing in my backyard. There are just too many exciting, compelling places to invest – recreational areas, the beaches, golf course communities in nice sunny places…you get the idea!
The challenge is, nothing has been written out there that discusses how to do this kind of investing successfully. In fact, the opposite is true – investing authors plainly discourage investing beyond one’s hometown. You are probably familiar with Carleton Sheets the famous real estate guru with the popular TV infomercial; open any of his materials, and within a few pages you’ll find advice to keep investing activities within a 30-minute radius.No doubt, there’s a good argument for investing on the home-front, but many investors, like myself, prefer other locales. Many…perhaps you are one of them…want to pursue hot markets. Those who went in to Phoenix and Las Vegas over the last five years made tons of money! Sunbelt locations like those certainly have a bunch of factors that make them more intrinsically appealing than, say, Detroit or Camden.
I started my out-of-state investing like many people – with a vacation property. One property in Florida led to another; then it was Virginia Beach, then another, another. In all sincerity, I buy these properties probably because of wanderlust. Whenever I vacation somewhere, I always envision living there full-time, and to me the best way to plan for that eventuality is to own something in the community.
Over several years and scores of additional properties, I have developed strong systems (golly, I hate that word…it sounds like I should be promoting one of those late-night infomercials) for locating, acquiring, financing, selling, renting, and managing remote properties. In fact, many of my units I’ve never even seen! That may seem crazy – and it probably is unless you know what you are doing. This place exists to show you how.
A large part of this blog will be part educational/training in nature. Another facet will be to provide you with resources ranging from real estate agent contacts to financing to other valuable tools you’ll need to be effective. I’ll profile locations and their markets. Finally, to provide edification, I’ll narrate deals I’ve been involved in, or which I am pursuing so you can see, first-hand, how they are done.
I’m glad to have you on the journey…it’s going to be an exciting one!
Bill Flood
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