What’s up Everybody,
Do you ever wonder how some people become super successful investing in real estate?
I had always wondered this before I purchased my first rental property back in May 2005.
I was under the impression that in order to become successful in real estate investing, all I had to do was buy one rental property a year. That was the extent of my plan. I thought that if I did this, I would instantly become successful in real estate investing.
Although I had the right idea, I was missing a key component in my strategy. This was a key component that I did not realize until some years later.
This key component that I was missing was: Geographic Specialization.
For those that do not know, geographic specialization with regards to real estate investing means that you grow your real estate portfolio by purchasing the same property type in a defined geographical area.
For example, over the years as I have become a better real estate investor, I have chosen to invest in condominium townhouses (property type) on The Mountain (geographical area) in Hamilton, Ontario Canada with joint venture partners.
Personally, I have come to realize the importance of geographic specialization with respect to real estate investment. This however, did not happen overnight for me. This realization came from a few years of studying strategies being taken by successful real estate investors such as Don R. Campbell.
In an effort to help those of you new to real estate investing, I have provided a list below of the steps one needs to take in order to become a geographical specialist.
Here they are in no particular order:
1) Research your area
If you are going to purchase multiple rental properties in a given area, make sure that it is a good area to invest in not only today, but tomorrow as well. You want to make sure that the area that you have chosen to invest in will also be a good area to invest in, in the future. You will want to ask yourself questions such as:
- Are people going to be moving into this area in the future?
- Is the municipal government promoting the area as a good place for businesses to relocate to?
- At what level are businesses being taxed?
- What industries are going to fuel the growth in this area, in the future?
*what other question do you think you should ask yourself? Leave your comments in the section below*
2) Once you have chosen your area, don’t buy anything outside of it
Most experienced real estate investors will admit that this point is easier said than done.
The purpose of picking a geographical area and sticking to it, is to become an expert in that given area. The more knowledge you have of that particular geographical area, the better you will become as a real estate investor.
Here is an example to demonstrate my point.
This morning I traveled to my geographical area of ‘The Mountain’ in Hamilton, Ontario, Canada. I was there to visit one of my properties and speak to my tenants who had just moved in. Before I headed out to Hamilton in my car, I checked some of the recent listings for condominium townhouses for sale on ‘The Mountain’. As I was driving through the area, I noticed the for sale signs on the properties that I had reviewed earlier, in addition, I also saw a few more for sale signs on other properties.
The cool thing about this is that because I know so much about this geographical area, I know exactly how much these properties should sell for, and I know exactly how much rent can be charged for each of these properties.
Because I have such specialized knowledge in this area, there is no chance that I will every overpay for a property there. In fact, because I know the area so well, there is always an opportunity to purchase a property slightly under market value.
Purchasing a property slightly under market value is always a good thing to do if you can, because you are able to create built in equity from the moment you purchase the property.
So there you have it…a short list with only 2 items!
It is a short list, however, it is a super important list. There is no question, that if you specialize in a specific geographical area, you chances of success with real estate investing will increase.
What do you think? In order to become a geographic specialist, what other things do you have to take into consideration?
Leave you comments in the comments section below.
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[youtube]http://www.youtube.com/watch?v=GkIO6ra-xDE[/youtube]
Hey Neil,
I like it!!
Focus is important … it also saves you time and effort and you’ll find WAAAAYYYY better deals by being focused but over time I think it’s worth looking around a little bit. Sometimes shifts in the market will mean it’s a wise idea to begin investing somewhere else. Your returns can go down in an area over time especially if you find “up and coming areas” to invest in. Over time they come into their own and your return might go down on new investments.
I guess it’s the same old thing … always question what you’re doing because the worst thing you can do is do something because that is the way you have always done it.
That said – when you first start out – your advice is spot on!!! Where were you in 2001?!!! HUH?!! That is when we needed to get this kind of advice. 🙂
Hi Julie,
Thanks for your comment!
I agree with you.
There are so many different strategies that one can use as a real estate investor.
Some chose to focus on a specific geographical area, others decide to invest in multiple areas, while others focus on purchasing new construction.
Focusing helps some, as it gives them direction and purpose. While others can still maintain their direction and purpose with RE investing, investing in different areas. 🙂
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