For building wealth with income property, diversity is key. But buying multiple properties in the same market can be a smart move too – sometimes. In Episode 553 of the Creating Wealth Show, host Jason Hartman hashes out the pros and cons of putting your investing eggs in one basket with podcast listener and client Jeff Morris.
Editorial
First, though, Jason opens the show as usual with his editorial segment, devoted today to a discussion of upcoming events for investors – and guests.
September on the East Coast means gorgeous fall foliage – and opportunities to connect with like-minded investors. That’s why the Venture Alliance fall event will be held in scenic Newport, Rhode Island at the end of September 2015, with a possible side trip to fabled Martha’s Vineyard. It’s an opportunity for Venture Alliance members to connect and learn – and non-members can attend as guests too.
Finally, there’s still time to get in on the Jason Hartman University live event in San Diego at the end of August 2015. The two-day event prepares new investors to choose and manage properties for long-term wealth building.
Jeff Morris on Chicago Investing
Investor Jeff Morris is a Empowered Investor Network client with a portfolio that includes properties in multiple markets. Now, though, he’s considering a different kind of deal. He has the opportunity to buy six properties in the Chicago area from a single provider. He calls in to the Creating Wealth Show to ask for Jason’s thoughts on this kind of deal.
Does Chicago Make Sense?
As Jason’s recent property tour to the Chicago-Grand Rapids area demonstrated, Chicago is a vibrant world-class city with good opportunities for investors. It’s important, Jason points out, to remember that in discussing investment opportunities in Chicago, he’s referring to the Chicago land area, not just the city proper, since many of the better properties are in suburban areas.
Investing in Chicago presents two major drawbacks. Taxes are high, and the area isn’t particularly friendly to landlords.
On the other hand, Chicago is a vibrant city with many things to offer. It’s also a place with a large blue-collar population able to pay higher rents for good places to live. Vacancy rates are low and there’s a large tenant base to draw from.
Low vacancy rates can be a double-edged sword, though, Jason cautions. A very low vacancy rate could mean that rents are too low. A good landlord should be raising the rent every year –at least by 4 percent. That’s an amount tenants are likely to pay, rather than choosing to move.
Should You Put all your Eggs in One Investing Basket?
There’s a clear upside to buying property in Chicago – but how about six of them? Jeff Morris points out that buying multiple properties at the same time from a single provider saves time and effort and simplifies the process. But if the deal doesn’t work out, it could be a very costly mistake.
Jason almost always advises always to diversify. It protects investors from precisely that kind of mistake. But in this case, he says it’s important to consider the potential of the market and what it has to offer, as well as the “opportunity cost” of money left uninvested.
There’s no black and white answer, only many shades of grey. But on balance, the benefits of investing in a world-class city like Chicago with a steady tenant base and the potential of a good cash flow may well outweigh the potential downsides. It’s an opportunity that illustrates the fact that every investment is unique – and should be considered on its own merits. (Featured image: Flickr/waterboard)
More from Jason Hartman:
CW 553: Buying Multiple Properties at Once, Affordable Living in Chicago with Jeff Morris
Secrets of the Housing Boom and Bust
The Jason Hartman Team
