In short the answer is yes and no! Yes, if the fundamentals stack up and the area is at the right stage and No, because you are likely to be too emotional about it, getting involved when you should be delegating.
There is one technology now that made the difference in my portfolio and allowed me to buy anywhere around the world (almost) without having to see the properties or know the area. This simple technology changed property so profoundly. I will qualify that statement by saying that doesn’t mean you shouldn’t visit.
Hey, guys. Property search… Think Gladfish. I’m Brett Alegre-Wood, and this is Property Rant.
So today, another question from an investor. “Do you have property in my area?” In other words, the client’s saying, “Do you have property in my area? I only want to invest in my area. I’m only interested in being local so I can go and see it.” Now, look, the answer is normally, “Yes.”
But actually, who cares? And the reason I say that is, sometimes buying in your own area is not the best thing. Obviously, I’ve mentioned before, “Set and forget.”
Your compulsion to go past and get involved with the property is there if you buy local. Normally, when you start off investing, it’s an emotional choice. But actually, the real investment, if you’re looking at being a real investor, a numbers investor, you don’t care where the property is.
You don’t care where the property is as long as it’s making you the return on investments. See, for me, as a numbers investor, I don’t care about where it is. I don’t care about whether it’s got nice doors, walls, whatever. I don’t care anything about that. All I care about is my return on investment. Both in terms of capital growth and in terms of rental yield. And when you look at them both, your cash flow and capital, they’re the two things that, for me, turn out and go into the return on investment.
The assumption is that I don’t have to get involved with the investment as well. So, my investors, they don’t have the time to invest on a day-to-day, month-to-month, week-to-week, year-to-year basis to drive this investment. They virtually want to sit back, relax, set. And forget it on a day-to-day basis for periods of normally about two years.
So, yes, you can buy in your own area. But the problem with that is normally that’s an emotional response. That’s not based on a numbers investor. You want to know what the numbers are, the return on investment. And the key really is… If you look back…and I’ll qualify this. Back when I first started property in the 1990s, the first thing I did was, I had to go local. There was no internet. There was no way to go if I wanted to go down to half an hour out or an hour away or four hours away, it was too far to get there. It was expensive to get there. So what I did was I chose a place around my area, I learned the fundamentals of that area. I learned street by street. I came up with a strategy. I learned the rules of the game in that particular area and then I applied them. And I was successful.
Nowadays, that’s changed. It used to be that I used to spend Friday afternoons going around all the real estate agents, finding out where they were drinking in bars that afternoon or I’d go and have a beer with them because that way I would get the best property as soon as it’d come on. In fact, before it’d come on. And that used to be the strategy. Nowadays I jump on the internet, I type away a few of the searches, I do a bit of research, I’m on a few databases, I get emails, and based on that, I then go, and of course, then I get local.
But the reality is, these days, you can do so much. I mean we probably do 60% of our research and due diligence online before we even have to go and see a site. Before we even have to speak to somebody. So it is totally possible now, with the right framework and with the right process to actually do your research and due diligence online and rely largely upon that. So it’s not a case that you have to, have to, buy locally.
All right. The key is, if you’re going to buy in an area, wherever it is, whether it be local or anywhere, make sure it’s got the fundamentals. Shops, schools, transport, major employers, major investors. Make sure you’re buying in the right stage of the market. If it’s just gone up 30%, it’s unlikely to go up another 30%. It’s likely to stagnate for a while. So maybe a ripple effect, out to the next place, it hasn’t gone up and get there. So buying local, yes you can do it, but ask yourself, “Am I just being emotional? Am I just wanting to be in control? Or do I want to learn how to be a numbers investor?” And maybe take a little bit more time and research online and work out how the best or where the best areas are. Where the best fundamentals are. Where the ripple effect is at and then based on that, invest wherever it is.
Okay. All right, guys, have a great day. Live with passion.