Over a year ago, I was living in San Diego, California thinking about my next move to earn "passive income" with. I threw a dart at a map. Just kidding! After much thought and research (about 3 months of contemplation) , I chose Cleveland. I actually decided to take a field trip to Cleveland to test the waters and see a few properties prior to making the move. A few days in an AirBnb in Ohio City, and 10 showings later, I decided to make the jump. This post is not a discussion of what market is better to invest in but rather, should you move to the market you want to invest in. Oftentimes the city you want to invest in, is not where you currently live and if it is for you...congratulations you're in a great position. But for the rest of us we will need to answer this question:
Should I move to the city I Invest in or Invest from Out-of State?
There are many factors to consider and it's different for every individual but here was my rationale:
Do you know people you can trust in the investment city or foster a team there?
If you have relatives, friends and/or colleagues in the investment city that can provide insight and help, that gives you some advantage. They may have recommendations to agents they've used in the past and/or contractors. They can also provide some local knowledge. When I did my field trip to Cleveland, I found a realtor that gave me an extensive tour of the west side through some of the keystone neighborhoods. He and his team served as the "eye" for my first duplex. It was a Foreclosure, and as you know those get picked up pretty fast and usually ends up in the "Multiple Best and Final Offer". A little bit of luck and a lot of legwork I landed my first foreclosure property. My first question was "Is it move in ready" because I wanted to live in one unit while renting out the other. I wanted to learn the ropes. I wanted to "study abroad." I booked my flight and had my belongings shipped from California to Ohio.
Short Term or Long Term Stay?
I am not planning to call Cleveland my Forever Home. I looked at it like a "study abroad" program to get my hands dirty and see it with my naked eyes. I'm more of a hands on person and as a creative individual, I wanted to get my hands dirty and do some cool work as well (see attached fireplace on a house I just sold). I find gratification from making tangible THINGS. I'm a maker. I'm here to get to know the players, build a team, perhaps network with quality folks and know the good spots that locals know about. Learn. Intimate knowledge gives you the edge. Many of my friends in Cali never experienced a basement nor the implications of snow...ahem.
Can you handle living in the Investment City?
More crime, more grime, scraping ice off your car every morning and blasting the defroster, slipping and sliding in your 2 wheel drive, these are the realities of a lot of the midwest cities that are "good cashflow". Now I know why sunshine states are more expensive. If these things affect your quality of life then it's something you will need to consider. If you are investing in class C blue collar areas and want to live in the Mulitfamily that you buy, your experience may be quite different than living in a Class B or A. The tenant culture may be different than what you are accustomed to. However in terms of interest and activities, I think you can find your niche and people in most cities that you choose to invest in.
Commitments
If you have commitments (ie job, kids) that tie you down to a location, it may be more difficult to be nomadic. However it is not impossible. More extensive research may be required to make a decision on school districts and job market. Perhaps it would be beneficial to secure a job that may even fund your relocation to the area. Having continued W-2 income would help with financing your investments as well with the local banks in the investment city.
Now What?
Now that I've lived here here for about 1.5 years packed with experiences, I kinda get it. I've seen how much the market has changed since the time I perused the MLS in San Diego before I moved here. Those images I created about Cleveland has been solidified with real life experiences, relationships and images. I also have become MUCH more picky with potential candidates for investment. A lot of the properties that I might have considered in the past do not qualify for me anymore.
For those who are thinking about moving to their investment city, I'd say go for it! Your day to day routine won't change that much: you will still have your Starbucks, Gold's Gym and Panera Bread that your boss loves so much.
The things I learned being hands on in my "investment city" has been instrumental to my investing and decision making. The people you meet, the experiences, the regional tenant culture, and landlording ...I gained a deeper understanding having lived it and feel much more confident in my investment here than relying on someone else, sight unseen and unexperienced. I feel moving forward, I'd be ok handing off the task to folks I've met here in Cleveland, with the tenants I placed, knowing I can easily slide right back into the system without missing a beat. I won't be in Cleveland forever, but this experience has definitely had an indelible impact on my investing.
If you moved to invest out of state, let me know if you think it was worth it and the most valuable lesson you've learned.
If you are thinking about investing out of state, do you plan to move or stay and why?
**The Fireplace I Built. What you know about putting crown molding on a 100 year old irregular plaster/lathe wall? lol
