Why Some Expert Real Estate Investors Are Avoiding Major Cities
Real Estate Investors Avoiding Major Cities for Surprising Reasons
When it comes to real estate investing, many people are drawn to the allure of big cities with their fancy properties and high quality of life. However, some expert investors are choosing to steer clear of the largest U.S. cities for their investments, citing a variety of reasons both surprising and unsurprising.
According to DJ Olojo of The Foreclosure Fix Podcast, one of the biggest reasons investors are avoiding major cities is the prohibitively high costs and fierce competition. Olojo explains, “Major cities often have some of the most expensive housing stock in their state, which creates a barrier to entry for aspiring investors who don’t have the capital to purchase in these markets. Additionally, the high demand for properties in major cities leads to intense competition from other investors and potential homeowners.”
Sebastian Jania of Ontario Property Buyers echoes this sentiment, noting that there is a significant amount of competition among real estate investors in large cities. This competition makes it challenging to find properties at a deep enough discount to justify flipping them, as hedge funds and retail buyers are all vying for the same properties.
Another factor deterring investors from major cities is the outdated infrastructure and aging housing stock. Olojo points out that many large cities have homes that are older than their suburban counterparts, with infrastructure that may not be equipped to meet the needs of modern homeowners. This can make investing in major cities financially and emotionally challenging.
Bureaucratic red tape and high taxes are also cited as reasons to avoid major cities for real estate investments. Olojo explains that dealing with large cities can be a hassle due to the volume of customers city personnel have to service, leading to long and complex building permitting processes and lengthy court timelines for evictions and foreclosures. Additionally, high property taxes and insurance costs in major cities can make it difficult to turn a profit on investments.
Furthermore, stagnant growth and a lack of transitional areas are reasons why some investors are looking outside of major cities for opportunities. Jania prefers to invest in up-and-coming areas that have the potential for growth, which can be harder to find in cities that have already reached their peak development.
For aspiring investors who may be priced out of major cities, Olojo recommends looking to suburbs and outlying cities located 30-100 miles outside of big cities. He also suggests considering passive real estate investments like syndications and taking the time to research and educate oneself before diving in.
Ultimately, patience is key for successful real estate investing. Olojo advises investors to wait until they are financially and emotionally ready to make a move, as it can be challenging to lose money in real estate if you have the capacity to hold onto a property through economic cycles.
In conclusion, while major cities may have their appeal, savvy investors are looking beyond the bright lights and high prices to find opportunities in areas that offer more potential for growth and profitability.