Buy and hold in One area or Diversify? Question on strategy

[Nathan J.]

Hi all,

A question on strategy for buy and hold investors. I hear some investors say they like to buy multiple properties very close to each other. The theory being that they offer quality houses and bring up the average quality of that specific area.
I am not that experienced, but I would have thought it would be better to diversify with different areas. That way your properties don't compete with each other, and you can hedge against the potential decline of one area.

What do folk think here?

[Trevor Ewen]

@Nathan J. 

I struggle with this question often. 

With stocks and bonds, the answer is easy: always diversify. When it comes to a locality, I think it gets much harder.

I would pivot the decision on whether or not you live/have a close connection with the area. As an out of state investor, I have no more personal claim to Memphis than Atlanta. As a result, I would choose to diversify between the two, giving me the best in remote management.

If I lived/worked in Atlanta, that would give me huge incentive to focus heavily there (I would always max out at 80%). My network would be strong, and growing faster. My ability to move quick on deals would be the same way.

That's my two cents, but I'd be eager to hear what others may say.