Should You Invest in Your Local Market or in a Neighboring State?

May 31, 2022

There is no “one size fits all” investment strategy. Whether you focus on your local market or in a neighboring state, the option depends on how you invest in real estate.

Investing in real estate is a broad umbrella term. There are ways to find success using a single strategy among a multitude of different options. You can also do more than one strategy, it’s really up to you and your goals as an investor.

With so many options, perfecting your strategy or finding a winning strategy presents many dilemmas. On one hand, you could double down on your local market, focusing on what you already know. Investing in the place of your primary residence allows you to get the jump quicker on the market outlook, list prices, and you already have a network.

On the other end, you can invest in neighboring states or new markets within your state. Now your portfolio is more diverse and you’re expanding into a different market with opportunities to grow. While both strategies sound enticing, which one is right for you?

What’s your investment strategy?

Before diving into which market you should choose, it’s important to know which investment strategy you’re determined to succeed in. Your investment strategy could be short-term or long term. You could be a house flipper or you could be a single family landlord. The options are endless!

There are all kinds of strategies that pose different levels of risk or even yield more return on investment than others. The key here is to think about your best investment strategy and match it up with the strengths and weaknesses of your market.

Market strengths

Analyze the strengths of your local market or neighboring state and see where the trends are. Is the competition low for buying multi-family buildings? Is there a great education system in your local town with fantastic public transportation? Let’s look at how you could use just a few of these example strengths to your advantage.

Let’s say your investment strategy is focused on house flipping. You look for “as is” condition homes, fix them up, and resell within a short period of time. Your goal is to identify the strengths of your local area to see if your house flipping strategy fits in your market. The first course of action would be to do your research and think about the trends. Your local area might look something like this:

  • Appreciating prices of single family homes
  • Rising population growth
  • Lower labor and remodeling costs
  • Higher foreclosure rates over the last year
  • Less building happening which leads to tightened supply

These market strengths would be ideal for any house flipper. Not only is the entry barrier thin, but there would be an amazing opportunity to invest in this particular market. After analyzing your local market, you can conduct a similar assessment to neighboring states and see where your advantage is.

Can you replicate your system?

Expanding into a new market is powerful and it’s a sign that your real estate investment business is scaling upwards. However, you have to ask yourself if scaling up is a feasible option. Can you replicate your system that’s worked for you in the local market? For instance, an investor who focuses on purchasing multi-family buildings with two to three units each definitely has a working system in place. Maybe they focus on turnkey properties so the building is updated and they could be more of a “hands-off” landlord.

Scaling up to a neighboring state could make sense here. One of the largest cons of being a landlord is keeping your building up to code, listening to the needs of your tenants, and taking up time to make repairs or hiring the necessary people.

A hands-off landlord who focuses on purchasing turn key properties would benefit more than one who constantly travels from building to building making repairs. It doesn’t make sense to buy a long distance property for an investor who can’t make things right when tenants need them. Instead, an investor with the capital and system in place to either buy a building in great condition or hire the necessary people to make repairs would benefit. You have to have a rock solid foundation and system before you’re willing to invest long distance.

Invest locally or far away with Sundae

Investors often struggle with the amount of possibilities they have. On one hand you could become an expert in your local market. On the other, you can expand, diversify, and find better deals in your neighboring states. While it depends on your specific investment strategy, we do have a premium option for you.

With Sundae’s Marketplace, you can take your investment strategy to the next level. Whether you prefer to invest in your local area or want to expand to neighboring states, Sundae is growing with networks in over 20 markets already. Purchase properties off-market with property photos. Not to mention, title and inspection reports are already included for optimized due diligence.

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Composed by a team of experienced content, marketing, and real estate professionals, the Sundae Blog is a go-to authority for tips, instructions, and data-driven insights aimed at helping homeowners maintain, renovate, sell, and buy homes, while navigating a complex real estate market.

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