Investing In The Right Regions


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Are most investors investing in the right regions? If they are, most of ’em are merely fortunate they happen to live in one of them.

Transcript: What we want to talk about today is how does a newbie investor get started, or maybe you’re not quite brand new in it. Maybe you have a rental that was your previous primary residence and you’re an investor by default. One of the things that I tell people is that before you do anything, kick back and check out your local market. Is it really worst investing in? Does it measure up to many areas of the country that might be superior and give you overall better results? Look it, we’re all investing for one reason for the most part. We’re investing to have a bigger net worth down the road, but mainly so that when we retire we have more income. The more income in retirement the better it is. We don’t want to spend our net worth. We want to spend our cash flow. Here’s the thing, first check out your market, and even more than that, spread that search out. Make it what I call a macro-analysis. Look at the region, however you may want to define that. For instance, I live in Southern California so I just would look at California in general. I look at California in general, how would they treat people who are landlords vs. tenants for instance. In San Diego, where I live, if you go to court as a landlord you are Satan’s child before you walk into the room. In other parts of the country that’s not true. They treat the contract as the pivotal factor in ruling in a landlord-tenant dispute. Now that’s just one thing. How does your region treat both income taxes for citizens and income taxes for business? How do they treat that? Let’s use California again. In California they tax anything that moves and half the things that don’t. If they can’t tax it they regulate it. California is not fond of investors. The only reason they like free enterprise business is because it provides tax money to the treasury. Now compare that, and before you go to another region for that comparison, look at what you found out. Now if you live in California what you’ll say is “Why would I invest in a place that is biased against landlords, the taxes are very, very high, they’re going into debt at an alarming rate, and all the things with regulations. Then you start digging a little deeper, going a few layers beyond that. You find out that it’s not just people that are leaving my state, it’s business. What’s the main thing business does from a citizen’s point of view? It employs them. We have jobs leaving California right and left. The latest one that will get your attention is the Toyota headquarters. They just moved to a city in Texas called Plano, or they announced it. If you find out all these things and you’re in another state somewhere in the country, and it gives you this bad taste in your mouth, then stop thinking about investing in your own market. I’ll tell you the number one reason that makes uncomfortable, because you want to be able to drive by, don’t you? That’s the worst reason to invest in real estate, because if it turns out well you lucked out if that was your driving force. What you have to understand is that you’re in it for the long haul, and if you’re long-term investing and you’re in a place like California you’re not going to win over the long haul, or at the very least you not going to do as well in a state that welcomes your capital as an investor, that welcomes businesses, that don’t overtax their citizens. In many state they don’t even have an income tax, where their courts are fair and they go by the contract, not each side of that contract. They just see who adhered to it and who violated that contract. Then they rule accordingly. How fast does landlord-tenant justice move? Does it move very slowly or does it move quickly without being too quick about it? That’s why you want to look at places outside your region, your local market, if you’re a newbie, because the second you invest in an area like California, overall, and I have friends who think I’m crazy about this, but I walked my talk, I haven’t done anything in California in 11 years. The key is you need to be confident in how you’re going to be treated and your capital when you start investing for things as important as your retirement. The first thing you can do as a new investor, or rather an experienced one at least, is to do the research. Find out how your state, how your big region treats everything that we talked about. One thing you won’t do at that point, if you don’t like it you’ll save a bunch of time doing the local research because it won’t be necessary.

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