Is it Better to be Good in a Bad Market or Bad in a Good market?

Are you better off investing where you know, even if the market isn't ideal, or finding a location that works better, but you know nothing about? I know this is an age old debate, but I thought I'd give my opinion. 

Obviously this is dependant on how extreme the market comparisons are. Living on the West coast of BC, and growing up in the Great Vancouver area, I know the area fairly well. Well enough to know that the Greater Vancouver area is a poor market to invest in if you want cashflow. I know there are exceptions to every rule, but I don't see how you are going to buy a million dollar house, or six hundred thousand dollar condo and expect cashflow. For me, I'd instead invest in a market where you are more likely to find the golden 1% rule.

Now that I have moved to Vancouver Island, I live close (about a 30 minute drive) to a market where a single family home, with a suite, can be a cash flowing property with a 20% down payment. They are rare, and sometimes you need to do some value add to make it work, but it is possible. I know the town, the good areas and bad areas, I know contractors, I know how to attract the right tenants in the area, and I manage the properties myself. I know that I should be factoring in property management even if I do it myself, but I don't because I can't stand paying property managers thousands of dollars to let my property sit empty for 4 months when I can keep a 0% vacancy by managing myself.

On the other hand, there is a location about 12 hours from me that looks better on paper. Rents are a bit higher, and properties are a bit cheaper. I do own a few properties there, but I am forever frustrated by the lack of control I have. I know BP likes to teach how important the core four are. I completely agree. Your contractors, realtors, property managers and accountants can make or break a deal. I've done my best to vet contractors, and have found some to be ok, but have been screwed by others. There are only a few property management companies in the city, and I am probably with one of the best, if not the best, and yet they are still running at a 10-12% vacancy rate on my properties in a town with a vacancy rate of less than 6%. I'm not a real estate agents favourite client because I'm not local, so viewing properties is a bit of an issue, even though I have bought 3 site unseen with good success.

What it all comes down to is, do all the little losses by not being local hurt enough to make it not worth investing at a distance? An extra month here and there of vacancy do to poor management. Paying 10% more on rehab because I can't keep an eye on the contractor to keep him honest. Not being able to view a property the day it's listed to see if it's worth snatching up fast. By driving my local investment town regularly, knowing the infrastructure of the town and potential development sites, knowing target tenant demographics etc my knife is that much sharper. Yes you can sharpen your knife in any town, but not like you can when you spend hours and days there every month. 

I think there is a tangible gain to be had by being local. Finding properties cheaper, paying less for rehab, and keeping vacancies low all adds to your bottom line. If you can find the perfect core four, that will make all the difference, but in a world where mediocrity is the status quo, finding rockstars in a town you only visit once a year is a long process. If investing in a location far from home isn't going to net you significantly better returns than you can earn close to home, I'd keep it local, at least until you have a portfolio too big to oversee yourself.