[quote user=thejules]I live in the area that I invest in.
I do as well, and I like to for a number of reasons. The first reason is that I believe in looking in someone's eyes before I hire them to make decisions for me worth thousands of dollars. Since I invest in the city I live in, this doesn't cost me $$ in travel expenses.
I also find the process of keeping up with new developments and evaluating neighbourhoods easier and more intuitive here than in other areas. This can be a potential downside, as it is unwise to let potential preconceived notions cause you to miss an area in transition. This requires the objectivity to evaluate neighbourhoods not as if you'd be living in them, but for the purposes of rental income and appreciation.
This emotional maturity to distance yourself from what should be an intellectual process is also required (as mentioned by others above) regarding the management of your property if it's in your own city. Wasting time on unnecessary monitoring could be a risk for some, if they're inclined to micro-manage.
Finally, I like investing near home because I like to buy ugly and improve for better rents, and I prefer to do the work myself. This wouldn't be an issue, except I have a day job, and would find it not very practical to take off the 2-3 weeks it takes me to renovate a suite at the drop of a hat. (I suppose I could do it in less time if I did it all day as well, but I like to save my vacation time for --- Vacation!)
I hope some of that helps with your thought process.
Regards,
Michael