Today I want to talk about dominating a market–is it better to try to dominate a small market or to branch out and look for deals all over? Do you want to be a big fish in a small pond, or a smaller fish in a big pond?
My opinion on this changes. When I started out, I was all about dominating one city–knowing everything about a city and how much properties in it go for. I think that’s a good philosophy when you’re starting out because it allows you to get your feet wet and start your business without spreading yourself too thin. That said, I was starting out in 2008 when there was a huge collapse in the real estate market and there were tons of foreclosures. There weren’t that many investors around, so you could really do tons of deals in one small area. I don’t think deals are that concentrated in one area anymore.
I have since branched out and I am very open to deals in other cities. I still won’t drive for hours and hours to find a deal, but I think that an hour radius from where I live should be able to sustain my business and let me grow for the foreseeable future. However, if you’re in a rural area, you might have to drive a bit farther away.
In any case, I think that, as your business grows, you’re going to have to branch out geographically as well as in terms of the type of real estate you invest in. I want to open myself up to as many options and possibilities as I reasonably can.
If you’re new, I suggest you try to stay local, but don’t ignore the numbers. If you can’t find a good deal in your city, then you’re going to have to branch out.
I’m not a fan of investing out-of-state if you’re not a seasoned investor or at least have a great relationship with another investor out-of-state. It takes a very seasoned investor with a high risk tolerance and some capital to invest out-of-state without strong connections.