3 Reasons To Invest in Multi-Tenant Property Where You Don't Live
Location and the market are among the most critical factors when analyzing a commercial multi-tenant property—they impact profitability, and appreciation and can help indicate trends. Restricting your investment options to your immediate local area can cut you off from a range of lucrative and successful deals you may never encounter if you don't expand your investment horizons.
Luckily, through group investment opportunities such as private real estate syndications, investors can build their passive income and equity in properties nationwide. These deals are often driven by syndicators with a profound knowledge of the area, meaning you can feel safe in your decision—no matter where the property may be.
This blog looks at three reasons real estate investors should consider investing outside their local area and a private investment group offering forecast-breaking deals in Baltimore and surrounding areas.
Why Invest Where You Don't Live?
There are certainly cases where it will make sense to invest in your local area. For example, in the single tenant vs. multi-tenant question, investors looking to purchase a single-tenant property to invest in and manage will require access and a more profound knowledge of the local market, meaning they will most likely look locally.
Conversely, for large-scale commercial options, deal syndicators examine a vast range of factors such as demographics, local job market, amenities, projections, financial indicators, and performance metrics, which can highlight high-value opportunities from anywhere in the country.
3 Factors To Consider
Analyze the following three factors to help determine whether investing in multi-tenant real estate outside your local area is right for you!
1. Emotional Objectivity
You want to limit emotion-based decision-making as much as possible, as investing is often full of biases and emotional tendencies.
Before investing, create a well-defined investment plan that outlines your investment goals and risk appetite. Doing this will assist with discipline and help with a more objective investing strategy, meaning you are less swayed by an emotional or sentimental attachment to your local area.
If your investment objectives and guidelines, such as cash on cash returns, net operating income, and cap rates, don't align with opportunities in your local area, then that's fine—it just means you need to broaden your search and be comfortable with the decision.
Finally, if you're investing in a syndicated deal outside of your local area, you're putting a lot of trust into the hands of the dealmakers. However, at the same time, if they're a trusted investment group with a track record of delivering real value to investors over a long time, then this can be a relief and successful strategy for the patient investor to mitigate short-term stressors or panic.
2. Increased Flexibility
The real estate industry is subject to a wide range of controllable and uncontrollable forces. From inflation to state and federal laws, each region has its ecosystem creating a real estate market that may suit some requirements while being at complete odds with others.
By restricting your real estate prospects to your local area, you're blocking a range of real estate options and new opportunities that may arise in more lucrative markets you may have yet to consider.
At Kenwood Management, we focus on Baltimore and surrounding markets as it's a substantial market for commercial multi-tenant property. Since 1994, each of our properties has exceeded projected returns by locating and managing value-add opportunities that are lower risk and allow us to make tangible value-add corrections to the property.
For long-distant investors, entering these markets with an investment group that has been syndicating deals in the region for the last 22 years is investing in a thriving economy with a demand for tenant spaces to conduct commercial business.
3. Portfolio Diversification
Unexpected events such as covid-19 or massive shifts in demographics such as internal migration can mean danger for your portfolio if it is not diversified.
By investing in local and interstate real estate deals, you're building a portfolio strong enough to weather unexpected local events by reducing overall risk exposure. Additionally, holding a diversified portfolio can mean access to more excellent tax reduction strategies and tools.
Holding different investment instruments in multiple locations can stabilize your income and offset any periods of downward pressure or decreases in cash flow.
Let Kenwood Management Help You With Long-Distance Investing
Non-local investing means putting your trust (and money) into deal managers or property syndicators who act on your behalf. This means you want the best who work with your best interests and understand the market inside and out.
Our longstanding reputation and foundational relationships with tenants, investors, brokerages, and financial institutions mean the Kenwood Management team has the background and experience to create real value for our investors. Reach out today to discover how our unique investing and tenant-first strategy can help realize investing goals of investors locally and interstate.
Get more insights into why multi-tenant commercial real estate is the best way to build long-term wealth! Download our free guide, "Why Multi-Tenant Commercial Real Estate Is a Good Investment."