That was the same question I struggled to wrap my head around when I first left banking to run Castle Rock. Having lived in the Tampa area for over 20 years, I had become accustomed only to this market. It was tough to climb outside of my comfort zone to buy assets (both non-performing loans and real estate) in other areas of the country. Once I did, however, it really opened up our portfolios to great opportunities. A great byproduct of doing that was gaining geographic diversity. If your home area starts to slump, you’ve got other areas in the portfolio to pick up the slack a bit.
My best advice would be to get great boots on the ground in each market you want to deal in. Great Real Estate Agents are few and far between. When I speak at conferences, I get to sit down with real estate brokers from other areas of the country. I always probe to see if they would be the right people to trust for advice and counsel in a particular market. I’ll then dip my toes in the water with a single deal or two to see how they handle the transaction. We flip a lot of the properties, so the commission they get from selling the deals means that they are usually more than willing to point out great local contractors that they recommend. They want repeat business, so I have found that the good ones will work hard to ensure that you have a good experience.
The bottom line is that I won’t do business in a market where I don’t have good boots on the ground. I hope that helps answer your question.