Avoiding the “Shiny Object” Syndrome in Out-of-State Investing

The Out-of-State Advantage – Part 4

As you embark on your out-of-state real estate investing journey, you’ll likely encounter a dizzying array of “hot” markets promising incredible returns. It’s tempting to chase after each new opportunity, but falling victim to this “shiny object syndrome” can seriously derail your investing success. We’ve seen many new investors struggle with this, so let’s explore how to stay focused and build a sustainable, profitable out-of-state strategy.

Successful out-of-state investing requires disciplined focus on your chosen market. Avoid chasing “shiny objects” by thoroughly researching your initial target area, building a reliable team, and committing to a long-term strategy. Resist the temptation to constantly switch markets, as this can lead to scattered efforts and reduced profitability.

Stick with us, and we’ll show you how to become a focused, successful out-of-state investor. Trust us, the grass isn’t always greener on the other side – sometimes, it’s right where you’ve planted your seeds.

Understanding the “Shiny Object” Syndrome in Real Estate Investing

In the world of real estate investing, “shiny object syndrome” refers to the tendency to chase after every new, exciting opportunity that comes along, often at the expense of your current strategy. New investors are particularly susceptible to this phenomenon, as they’re eager to find the “perfect” deal and may lack the experience to differentiate between genuine opportunities and overhyped markets.

Common “shiny objects” in out-of-state investing include:

Emerging markets with rapid appreciation
Cities experiencing sudden population booms
Areas with new tax incentives or development projects

While these opportunities may seem attractive at first glance, constantly chasing new markets can be dangerous for several reasons:

Lack of in-depth market knowledge: Each time you switch to a new area, you’re starting from scratch in terms of understanding local trends, neighborhoods, and property values.
Difficulty building reliable local teams: Successful out-of-state investing relies heavily on having trustworthy boots on the ground. Frequent market changes make it challenging to develop these crucial relationships.
Inconsistent strategy leading to reduced profits: A scattered approach often results in higher costs, missed opportunities, and lower overall returns.

The Power of Focus: Why Sticking to Your Chosen Market Matters

Becoming an expert in one specific out-of-state market offers numerous advantages that can significantly boost your investing success:

Deep understanding of local trends and opportunities: Over time, you’ll develop an intuitive sense of what makes a good deal in your chosen area.
Stronger network of reliable contacts and team members: You’ll build relationships with local real estate agents, property managers, and contractors who know your preferences and can help you act quickly on opportunities.
Ability to spot genuine deals vs. overpriced properties: Your expertise will allow you to recognize true value and avoid overpaying for properties.

This focused approach leads to more efficient use of your time and resources. Instead of constantly researching new markets and rebuilding your network, you can concentrate on finding and executing deals.

Consider this real-world example: Investor A decides to focus exclusively on the Columbus, Ohio market. Over three years, they become intimately familiar with neighborhood trends, build a reliable team, and complete six successful deals. Investor B, in the same period, jumps between markets in Florida, Texas, and Michigan. They struggle to build consistent relationships, overpay on two properties due to lack of local knowledge, and only manage to complete three deals successfully.

The compound effect of knowledge and experience in a single market can be powerful. Each deal you complete enhances your understanding and positions you for even greater success in the future.

Strategies for Choosing the Right Out-of-State Market

Selecting the right market is crucial for long-term success in out-of-state investing. Here are key factors to consider when choosing your target area:

Job market stability and growth: Look for diverse economies with multiple major employers and industries.
Population trends: Steady population growth often indicates a healthy market with increasing demand for housing.
Rental demand and occupancy rates: High occupancy rates and strong rental demand can lead to consistent cash flow.
Local laws and regulations favorable to investors: Some areas have more landlord-friendly laws or offer incentives for property improvements.

It’s essential to align your chosen market with your long-term investing goals. Are you primarily seeking cash flow, appreciation, or a balance of both? Different markets may be better suited to different strategies.

To conduct thorough market research, we recommend using these tools and resources:

Reputable real estate data providers like Zillow Research or CoreLogic
Local economic development websites for information on upcoming projects and initiatives
Census data and population projections to understand demographic trends
Local real estate investment association (REIA) websites for market insights and networking opportunities

To narrow down your options, create a scoring system based on your most important criteria. Evaluate 3-5 potential markets using this system, then commit to the highest-scoring area for at least 12-18 months before considering a change.

Building a Solid Foundation in Your Chosen Market

Once you’ve selected your target market, it’s time to become a local expert – even from afar. Here are steps to deeply understand your chosen area:

Virtual and in-person market visits: Use Google Street View for initial neighborhood scouting, then plan at least one in-person visit to get a feel for the area.
Join local real estate investment groups: Many groups offer virtual attendance options, allowing you to network and learn from local experts.
Follow local news and development plans: Set up Google Alerts for your target city and key neighborhoods to stay informed about local happenings.

Assembling a reliable local team is crucial for out-of-state success. Focus on building relationships with:

A property manager experienced in working with out-of-state investors
A real estate agent who understands investment properties and can act quickly on your behalf
A trusted contractor for property renovations and maintenance
An attorney familiar with local landlord-tenant laws

Develop relationships with local lenders and other investors as well. These connections can provide valuable insights and potentially lead to deal opportunities.

Create systems for efficient long-distance management, such as regular video calls with your property manager, a shared document for tracking property performance, and a process for approving maintenance requests.

Resisting the Urge to Chase New Markets

Even with a solid plan in place, you may still feel the pull of “shiny object syndrome.” Learn to recognize these signs:

Constant second-guessing of your chosen market
Feeling of missing out on other opportunities
Difficulty committing to deals in your target area

To stay committed to your chosen market, try these strategies:

Set clear, measurable goals for your current market (e.g., acquire 3 properties in the next 18 months)
Regularly review and celebrate your progress, no matter how small
Create a “waiting period” before considering new markets (e.g., commit to your chosen area for at least 2 years)

That said, there may be appropriate times to expand to a new market:

You’ve achieved significant success in your current area and have the capacity to manage multiple markets
Your initial market shows signs of long-term decline that can’t be mitigated by your strategy
You have the resources to fully commit to a second location without neglecting your first

Remember, expanding should be a careful, strategic decision – not a reaction to fleeting market trends.

Conclusion: Mastering Focus for Out-of-State Investing Success

Avoiding “shiny object syndrome” is crucial for success in out-of-state real estate investing. By committing to a well-researched market, building a strong local team, and resisting the urge to constantly switch locations, you set yourself up for long-term profitability and growth.

Remember, becoming an expert in one market offers compounding benefits that far outweigh the potential gains of chasing every new opportunity. Success in out-of-state investing comes from patient, focused effort – not constantly pursuing the next big thing.

Take a moment to evaluate your current investing approach. Are you fully committed to your chosen market, or are you getting distracted by “shiny objects”? If you find yourself constantly looking elsewhere, it may be time to recommit to your strategy and trust in the power of focus. Your future self (and your investment returns) will thank you.

Avoiding the “Shiny Object” Syndrome in Out-of-State Investing: The Out-of-State Advantage – Part 4