Many investors and investor groups only invest locally. Perhaps more important, many investors only invest with principals are local. At the same time there are many firms that are very successful and that work on a national basis. While that is true, the practical reasons for investing locally are strong ones and should be considered carefully.
Investing locally provides the opportunity to understand the fine nuances of your community or city. In fact, I overheard one investor say to another about investing in a major Eastern Seaboard city that he looked at properties on a street by street basis because sometimes a good street could be only a block or two from a bad one. For the investor knowing how to choose the property in the right location had everything with whether you could succeed in his market or not. While these points may not be true in your market and are perhaps overstated or can be construed as overstated, the fact is local investors who know their markets very well often perform much better than the out of towner who zooms in with capital and resources only to find his or her investment stalled out later.
Markets are made or broken by a variety of very subtle influences. Investing locally allows you to understand where the school district boundaries break. You know which schools have good test results and which do not. You learn where the best access to employment is. After a time, you know almost innately how development plans are laid out and how they will evolve overtime relative to the property locations you may be considering for acquisition or the areas you focus on for project targets.
As an operator, years of work in a market provides you inside knowledge on the least expensive way to complete new construction, fix the plumbing, repair the electrical system, repaint a unit, install new carpet, put in new windows, hang doors, and so many other items. For the out of towner using in town management, often the manager feels they can slide a few items past the owners and investors. The opportunity for abuse can be great.
For smaller investors that don’t have the time, resources, or capital to institutionalize processes, gain scale for operations or supplies and services, and other needs, investing locally overcomes many of these shortcomings providing you the investment opportunity that only much more significant capital might otherwise achieve.