It’s easy to be tempted by out-of-town investments that seem to be a great opportunity. Sometimes they are outstanding deals, but are they good deals for you? Hurricane Katrina left an extremely devastated area that became the GO Zone. Mega storm Sandy blazed its own trail of destruction that will lead to opportunities for many. However it could also be an investment disaster to some. Investing out of your own geographic area is not for everyone.
I’ve had my own experience with long-distance investing and learned a number of hard lessons. My first foray into that arena was investing in Las Vegas real estate while I lived in New York. This was back in the 1990s, long before the real estate bubble. The properties were a good deal and great rentals yet I didn’t make much money on them by the time I finally sold them. The problem was that distance magnifies your cost and diminishes the amount of control you have. You have to rely on property managers unless you want to hop on a plane every time there’s a problem. After that experience I stuck with investments in my own back yard for many years. I eventually did try out-of-area investments with much more success because I refined my strategies.
Keeping it Close
After that first foray I kept my investments extremely close. I actually lived in houses as I rehabbed them. I kept doing that until I moved to Las Vegas about ten years ago. My time of living in my rehabs was over at that point and I began to hunt for other opportunities near where I lived. Unfortunately the market had started to heat up and I found nothing that I thought was reasonable. That was when I started to look outside my area again. I would be smarter this time.
My number one priority was that I needed to be able to drive to my investment area and return in the same day. That limited me to about 250 miles. That’s not to say that I was commuting to these properties, but I could get there quickly when the need arose without getting on a plane. That’s something I have had to do quite a few times over the years. It also allowed me to make short trips of a few days to meet with contractors, property managers, and real estate agents. Those were things I wasn’t able to do easily with investments that were further away.
Factor in Other Costs
When looking out of area be sure to factor in the cost in both time and money of dealing with you properties. These are not small issues. Airfare, hotels, rental cars, and other travel related expenses add up very fast. There is also a significant amount of stress involved. Time away from family, friends, and other investment properties takes a toll of its own. Some of these things are hard to put a monetary figure on. So if you are tempted by the opportunities presented by Sandy, or some other out-of-town deal, think it through before you act. I know several people who jumped on the Katrina GO Zone and lived to regret it. There are opportunities for sure, but are they right for you?
When written in Chinese, the word “crisis” is composed of two characters. One represents danger and the other represents opportunity. – John F. Kennedy
Photo Credit: U. S. Fish and Wildlife Service