Perhaps the greatest error a real estate buyer can make is to purchase a property in a city or state where he has no contacts or no history of any kind. This situation, which is easily avoidable, too often becomes an unavoidable problem — a financial albatross — because of ignorance by one party and possible indifference by another.
Put another way, when you invest in commercial or residential real estate — when you become the new owner of a rental building or a house in an otherwise strange (to you) locale — expect more problems than prosperity.
I offer this advice not as a false alarm or to needlessly sow panic, but to prevent the latter. In my role as the Director of Marketing and Communications for the Real Estate Knowledge Institute (“REKI”), I issue this admonition to unite buyers and sellers, to create a copacetic relationship between the two, so real estate brokers may also flourish in this environment.
The downside to not acting is, in contrast, potentially devastating because too many things — including maintenance, repairs, inspections, payment of taxes and the timely receipt of rent — are at the risk of chance.
For example: If you live and work in Phoenix, Arizona, and have never been to and have no economic intelligence about Detroit, Michigan, why would you invest in real estate in the Motor City? Why would you buy a house, in a neighborhood you do not know, in a county and state you may never visit, based on nothing but the most extreme form on speculation?
And yet, this scenario is one of the chief challenges confronting real estate investors: They go with the foreign over the familiar, thereby leaving themselves vulnerable to all manner of costly consequences because of unscrupulous contractors, incompetent building managers and overpriced maintenance companies.
The emphasis should, therefore, be on knowledge; knowledge of what to buy, when to buy it and where to buy it; knowledge that you need to be on the ground — in the area, accessible to see and protect what you own — lest you surrender your will, and your money, to forces all too eager to consume it.
The more knowledge that permeates the real estate industry, the better: It represents the rise of a more astute class of investors; it symbolizes the triumph of wisdom over whimsy, thanks to asking — and acting on answers to — the right questions.
Knowledge benefits everyone, creating a more stable marketplace; one less prone to wild price swings and volatility in general, thus removing the uncertainty that bleeds losses, fosters fears and furthers distrust.
We deserve something better than chaos or confusion. We deserve knowledge, yes; but we have a responsibility to apply that knowledge — in our own respective areas — so we advance success as a whole.
Far from breeding contempt, familiarity is a real estate investor’s ally and most potent asset.
It is that very familiarity that we need, now and forevermore.