My Big City Is Too Expensive To Invest In!

“I live in ______________, it is too expensive to invest here….where should I invest out of state?.”

I read similar statements to this one almost daily on the Bigger Pockets forum. We are all blinded by what is right in front of us. I live in the Washington, DC metro area, and originally from Boston. Both of these cities are typically ranked in lists of most expensive housing markets and highest cost of living areas. Washington DC has a median home value of right about $500,000. Depending on the source of the information, Ive seen median values listed between $450,000 and $543,000. I think all of you out there can agree that I live in a high cost area.

Yet this is really where market knowledge and a basic understanding statistics come into play. Yes the median value of our homes is very high. But to get to a median value, that means that 50% of homes are worth more than the median, and 50% of the homes are below that median value. So if you think a median value home is too expensive to invest in….then invest in a cheaper home. This very week I looked at properties priced around $20,000 with a client of mine. Now I would not personally invest in properties that cheap….but they do exist in our high cost of living areas, and there are probably a lot more of them than many people think.

The other thing to keep in mind with expensive housing markets is that they tend to be the most expensive at some downtown core. So if those prices are too much for you….drive away from that core and look at properties. I own two properties in Frederick, MD. That is about 40 miles from Washington DC, but still part of the DC metro area. Plenty of people make that commute for work. That is about 30 miles from me, and actually takes me about the same amount of time to travel that 30 miles as it does for me to travel the 5 miles from my house to DC. So if you look a little further away from the city core, you are bound to run into properties that will meet your investment criteria. Within DC itself it is possible to find sub $50k properties. Again, I would not personally invest in them…but there are investors who are out there investing in them and making a good living doing so.

Also understanding how to properly adapt to what your market gives you will be critical. If you are only interested in multifamily investing…then DC is not a good market for you to invest in. We have a severe lack of multifamily housing compared to other major metro areas…but again, the reason to invest here would not be due to the cost, but rather by the availability of the target asset.

We all think the grass is greener in another market….but I am a big believer in the best market to invest in is right where you live.