One common question that aspiring investors ask is whether they should invest in local or long-distance properties. There are pros and cons to each, and the short answer is to do what you’re most comfortable with.
One main advantage to local investing is that you know the area. You know where the good locations are and you have your finger on the pulse of the market trends. You can also have greater personal control.
In some cases, however, more control can actually be a disadvantage. People can get too emotionally invested in properties.
They want to “lick the door knobs,” so to speak. This clouds their judgment. Investing in long-distance properties requires you to be more objective because you will need to hire a property management company.
Also, venturing out of your local area allows you to research and invest in the hottest markets across the country. Your city may be in a slump and have low rental rates, while other markets may be idea for rentals.
Whichever you choose, remember that the name of the game is passive cash flow. Property management companies typically charge between 8 and 10% of the monthly rent. So, there’s a trade-off. You will have less cash flow, which means it will take longer to get to your 5 Day Weekend. But, you will have some- one else managing the headaches, the broken hot water heater, the stopped-up drain, and replacing the roof.
As much opportunity as there is with real estate, there are also a lot of pitfalls and ways to lose money. Nothing beats experience and expertise, but there are lots of ways to learn about real estate before you put any money on the line. Read books, engage with mentors who have successfully invested in real estate over long periods of time, and study the markets you want to invest in. Learn contracts, different investment strategies, and negotiation strategies. I wouldn’t recommend this for everyone, but sometimes it may make sense to get your realtor’s license.
Whatever you do, don’t listen to naysayers who haven’t actually invested in real estate themselves, or to people who have done a poor job of it, had a bad experience, and lost money. The only people worth listening to are those who have done it successfully.
In my next post, I will explore how you can build your real estate cash flow machine.
In the meantime, I’d love to hear about any experiences you’ve had, if you’ve invested in real estate. And even if you haven’t yet actually done it, what have you begun to research to get you there? Thank you for sharing
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