Four Reasons Why Investing in The Same Market Pays Off

Real estate investing to me feels like a well-oiled machine with thousands of different little cranks and levers to make it churn. Our job is deciding not only which piece of the machine fits and works best for us, but also where we want to make it all work.

And for newbie investors living in an expensive market such as myself in Southern California, buying that first property to break into the investing world seems like a corner office CEO job’s distance away. Thankfully, the tips and advice found below here today can be used in any market with any strategy whether you’re living in that market or not! It comes down to leveraging your networking and integrity skills to maximize cash flow to continue toward a lifetime of winning real estate investing deals!

It all started for me when I got my primary residence in my hometown of San Diego, CA. It was a “mini-fixer” as I like to call it, but it needed enough work to where I was forced to interact with a number of different professionals related to real estate from my agent to electricians and handymen. Because they were working on my primary home, I was able to physically be there to make connections with these people, fully assess the work they did for me, and then ultimately decide whether or not they were worth working with again.

So, when it came time to invest in real estate, my team and foundation were already in place to make some serious money for me as I was making money for them as well. I saw the advantage of investing in the same market because, had I invested in different markets outside of San Diego, I would either have had to do the networking side of things all over again, or rely on an agent or property manager’s network to create wealth for me.

Therefore, I feel the best option for newbies is to invest in properties close to where you live or an area where you believe that you will do many deals. Interacting with professionals face to face (even with COVID) gives you the best chance to make an impactful case as to why you are a great client for them.

Here are four reasons why investing in the same market pays off. 

Building a SIS: Successful Investing System

The first deal for a real estate investor is going to be more hectic than the deals which follow, no matter which strategy you go with. You’re just starting out and maybe even a little unsure of the whole process and potential success it could bring you. That’s totally fine, but if you’re like me and wish to feel that feeling as little as possible, creating a Successful Investing System will be your best defense from surprise.

Decide on the strategy first (Fix & Flip, Buy and Hold Rentals, Short Term Rental, Etc.) Your choice should depend on the market you wish to invest in. Not all strategies are going to work in the market of your choice. Decide on minimum returns you would like to earn on your investments ($100/month/door or $20,000 profit on a Fix & Flip) and get to work.

I recommend analyzing at least a few deals before you start reaching out to anyone. Bigger Pockets has several calculators that can help investors out with most (if not all) strategies. You don’t need to find a great deal necessarily but gain some understanding of the market you like and if your preferred strategy will work in the first place.

So, let’s assume your strategy was perfect for the market you chose. Time to build your team starting with an agent who can help you find, analyze, and negotiate rockstar deals. Let the pickiness of this first decision dictate deciding on the rest of the team you will need. If you buy the How to Invest in Real Estate bundle in the Bigger Pockets bookstore, you’ll find included questions to ask all of the essential players in your real estate investing team and a form to keep track of every one! Highly recommended.

Your agent should have experience working with clients who invest using your preferred strategy. They’ll start to put some potential deals in front of you that you may want to make an offer on. How exciting! But don’t allow yourself to get caught flat footed should one of your offers get accepted. What is your next move going to be? How depressing would it be if you landed your first fix and flip deal without knowing who your contractor would be? Or maybe you haven’t decided whether or not to use a property manager on a rental property. Either way getting too caught up in the moment too soon is going to cost you in the long run…literally.

If you find a good agent though, this person is going to find you deal after deal after deal. The more deals you do with them, the better the deals they’ll start throwing your way because they know you are serious, and that you produce.

And this is where your word and actions are going to become more crucial than ever. You don’t want to build a reputation as someone who gets cold feet. You’ll quickly realize that the best person in any field is going to be crazy busy and won’t have time for games. Now this doesn’t mean that you should go for any property they throw at you but be honest and transparent throughout the whole process. People appreciate and understand honesty.

Finding your agent, when handled correctly, sets the tone for the rest of the players you’ll need to do deals. Find people who CRUSH in their field and pay them what they deserve. In Rich Dad Poor Dad, Robert Kiyosaki talks about how much of an asset these people are in your life and paying them isn’t cheap for a reason. They will produce.

Once you have built up relationships with agents, contractors, property managers, and many more along the way, you have your team for your second deal, and then the third deal, and the fourth, and so on. When you have your team in place in one market, you can use that same system to bring you success infinite times over. And because you had success in the previous deals, you know that an attractive lead will produce results, so your stress levels can relax a bit.

Discounted Prices

Okay, your team has assembled, you’re knocking deals out of the park, and you love what you’ve created. You’ve been honest and trustworthy with everyone along the way. You pay for services in full, on time. You’re doing great.

When you get into these situations, the people working for you love that you want to keep working with them. The sad truth is that many people in the real estate, homebuilding, and property management industries get burned and used by far too many looking to take advantage.

In my own investments, repairs, or REI projects, I have found that learning people’s names, asking about their day, paying in full on time, complementing their work, and other similar things really moves mountains. They trust me and know that I hold my reputation with them to the highest standard. In return, they discount a lot of the work they do for me and look for the best possible deals on products that are only going to make everyone more money. Imagine being able to rehab a property to a high-quality home for the price of cheap quality. That is the reality of producing for your team and being a person of your word.

Now, I am not saying that being nice and learning some names is going to help you cut costs, but I will guarantee that it will leave a good, lasting impression on people. And you never know where that will take you.

Understanding the current market and beyond

With the coronavirus affecting the country the way it is, predicting the future of real estate is harder than ever. Rates are at an all time low, homes have become the hubs of our entire existence, and people are fleeing our major, over-priced cities. While I said that I recommend clarity as to whether or not your strategy fits your market, I also understand how difficult that may be. I also know, like many others, how quickly a market can change, requiring a change in strategy sometimes.

So, knowing your market and the changes that take place within it are going to help you subdue the fear of collapse and help you pivot in a successful direction should something major happen. Investing in the same market allows for more of a complete understanding of your market because you only have to focus on one. And I understand that a good agent or property manager can give you insight into the market conditions, but even with a good established relationship, you won’t be their sole focus. Who’s to say they are going to have the eagle eye for the next market correction. Plus, you can’t expect them to see your vision as clearly as you do.

When I chose to invest in real estate, I decided on maybe five or six zip codes that I believe give me the best shot at great returns. I have studied what the neighborhoods have done in the past, the job market for residents, businesses coming in and out, and what the future looks like. In San Diego, where I am based out of, there are major changes in the works that will change the economy. Five years from now could look totally different than what it looks like now. If my mind was in two or three different markets, then I am vulnerable to missing the opportunity of a lifetime.

Finding the opportunity of a lifetime

At this point in your investing career, you have some properties, your team is your greatest asset making you financially free, and you’ve developed a pretty good reputation around town. People know you and what you’re looking for investment-wise. You are a seasoned investor.

You see, when you get to this point, people really trust you as a good person to do business with. Leads will practically fall on your lap. You might get faced with many bad deals, but having that SIS in place, you will be the master of analyzing and realizing good deals and obtaining them. There is a reason why Brandon Turner puts all of this content out and puts himself out there as a good family guy. People trust him and literally send him successful deals through his “Bring Brandon a deal” campaign. He laid out exactly what he wanted and because he was who he was, he found some great deals. And while he does it on a more national level, that kind of investing isn’t for everyone, but serves as an example that can be played out on a local level as well.

Homerun deal after homerun deal is suddenly a major possibility. It could take some time, but the discipline of conducting good business, building a strong reputation overtime in your local market, and producing successful deals creates generational wealth on maybe one of the strongest financial foundations in the world.

Are you ready to get started?