Should you invest where you live, or live where you invest?

[Ryan M.]

Just wondering what everyone's thoughts are on this subject.
Did you end up picking an area because you wanted to live there, or because you thought it'd be a great place for your niche of real estate?

[Llewelyn A.]

I have been investing in NYC for 2 Decades.

In my experience, ALL of my friends and family that did not buy their homes or if they didn't buy their homes, didn't invested in NYC where they actually would have loved to live, have regretted that decision.

Buy not buying where they wanted to live in the long term, the ones who did not buy anything, whether or not it was for living or just investing, are forever priced out.

When I was teaching, I always encouraged my students to make sure they buy their first investment (or home) in the place they will want to live in the future for the long term. If they do not, they take the risk of never being able to live in the place they actually want when they get much older.

Certain cities like NYC and SF is a must if this is where you want to eventually live for the long term.

Rents spike and continue getting higher.

Every year for the last 2 decades I keep hearing all the excuses.... it's too expensive to buy in NYC.

2 decades ago, when I bought my first Investment, a 2 Family in Brooklyn, was $350k.

Today, I can sell that investment for $1.5 Million.

BUT, instead of being happy that I have made so much money for that one single property.... what makes me more happier is the fact that I live in that Investment now (I moved back in to this Investment Property this year).

All of my relatives that lived in Brooklyn but moved out, either never bought or had bought but sold a long time ago..... cannot any longer afford to buy in Brooklyn anymore.

Even renting has become incredibly expensive.

As another example of this phenomenon, I had a friend, Steve, who lived in Manhattan.

We both invested similarly in to two different properties in 2004.

I invested in a 4 Unit property with a Purchase Price of $800k in Brooklyn. He invested in 3 rental townhouses, a 3 are 3 Units each, for a total of 9 Units and a total Purchase Price around $500k, in Bristol, CT.

Fast forward to today.

Steve's 3 buildings are still worth $500k. His cashflow has remained the same, approx. $1k per month.

My Brooklyn 4 Unit building, however, is vastly different. It started out at a slight negative cashflow in 2004. But today, it's cashflowing over $3k per month. The value skyrocketed to $2.2 Million.

Steve, unfortunately, could not afford Manhattan anymore. He moved to another State instead.

Had Steve purchased his home here in NYC instead of Bristol, CT........ Steve would have had the ability to settle down his roots here instead of being priced out of the NYC location.

I know Investors tend to think of only in terms of Today and find it very unpredictable to think of tomorrow, but please remember that even Squirrels think about tomorrow as they put away their Nuts for the Winter. If they didn't do that, they would starve when winter arrives.

The Future is VERY important.

Another analogy I like to use is to Drive your Investments like an Investment Vehicle.

When you look at past Data such as previous Sales, you are looking at the Rear View Mirror of your Investment Vehicle.

When you look at current data, such as the current Rents and Expenses to calculate your Current cashflows or your Cash on Cash Return, you are looking at the side view... watching the action go by as it is occurring.

When you look through the Windshield of your Investment Vehicle, you are looking at the road ahead.... seeing the path that it is taking you... and all the obstacles in the way.

You are less likely to CRASH your investment vehicle by focusing on looking through your Windshield than remaining fixated on the Rear View Mirror or the Side Windows.

If the bridge is out and you fail to see the bright red warning signs..... if your eyes are not looking straight through that windshield........ you will Drive your Investment Vehicle into the abyss down below.

So please..... Drive your Investment Vehicle like you drive your Car..... by MOSTLY focusing on looking through the windshield and occasionally checking your side views and rear view mirrors.

Investor Llew