Anyone who has spoken with me or read any of my work knows I am a major proponent of Real Estate being a local business.
So what if an opportunity or market presents itself outside of your backyard? Should you stay away from it?
No. Absolutely not. Real Estate needs to be managed, leased, and handled locally, it doesn’t mean that YOU need to be the one doing it!
That being said, I firmly believe, whether you own assets in your backyard or on the moon, you or your organization needs to be the point person on all asset management and leasing oversight.
If you think that you can just buy an asset and let a third party run it and clip a coupon every month, I am here to tell you that it probably won’t workout that smoothly.
But if you are going to run the asset like it sits in your backyard, oversee it properly, and give guidance to an additional individual or team who can be your “boots on the ground,” going into other markets can be a total home run.
There are a few keys to doing this successfully:
1. Market Knowledge – You need to know the market like the back of your hand. You need to understand it like YOUR own current backyard. It essentially needs to become “your” market. Each market has subtleties that need to be understood to be successful. If you don’t have the time to learn the ins and outs of that market, somebody in your organization who is economically aligned with your interest better understand it.
2. Leasing Expertise – Hand in hand with understanding and studying the market comes your leasing game-plan. Who are the players in the market? Who’s expanding and doing deals? Certain asset types can be leased over the phone and via email, other more mom and pop spaces or apartments require much more of a local presence.
3. Scale – The more net operating income you have on a deal or in a market, the more economies of scale you will have. If entering a market for the first time, be sure your first deal supports the additional local professionals you will require. If you can add more assets in a market it certainly helps as well.
Bottom line, if you are able to recreate the same leasing and asset management team and processes in another market and understand that market thoroughly, there is absolutely no reason you cannot successfully open up your deals geographically.
The keyword here is team. If you are one man looking to invest outside of your backyard and leverage off of 3rd party managers without intense oversight and direction, you will most likely fail.