Quote:
Originally Posted by Steely Dan
But that's just me. I'm aware that many others are less risk averse than I am. Detroit is probably a good place for investment by the savvy prospector who knows the lay of the land in the motor City.
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Personally, I'd prefer Philly to Detroit.
I was looking semi-seriously at real estate in the South End in Philly (very tempting but the main reason I didn't buy anything is that I was already too geographically spread for my taste, and looking at reversing that, let alone opening new fronts!) and I was absolutely sure the prices over there were about to go up significantly sooner or later... that was a few years ago, and I was correct in retrospect (I usually am nowadays when it comes to having this instinct that a certain area is on the verge of improvement).
The problem with investing in cities other than your own playground is that unless you have some special foresight and are willing to "pay more" than others, you'll usually get beat by locals who can afford to tolerate a smaller return than the minimum gross threshold required to make sense for you as a remote owner.
Imagine a certain Chicago property, and it's almost guaranteed there's a price point where someone like LouisVanDerWright would snap it up immediately finding it an amazing deal while someone like me would still find it too expensive considering I have to factor in the hassle and expense (mostly due to poorer control) of managing/overseeing property that far away.
Reverse is true too, in my hometown here (a day's drive away from Louis' hometown), the cap rates would have to be crazy high for it to even be on his radar as a secondary investment portfolio, and since I (and plenty others) are willing to buy and operate the properties at higher prices than that (giving us still good cap rates), he might take a look but it's never going to be worth it for him to try to compete with us here in our own playground.
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