E
xpanding your commercial real estate portfolio into multiple states can be a powerful way to scale your business and access new opportunities. However, each region has its unique characteristics, regulations, tenant expectations, and market cycles that require a tailored approach.

    To successfully expand beyond your local market, you need a clear strategy in place. Robert Dunn, Managing Director at Fairstead, shared his insights on how his firm built a portfolio of over 25,000 affordable housing units across 28 states. His experience offers valuable lessons for investors looking to scale their business.

    Before expanding, define your reasons for going out-of-state and identify what made you successful in your first area. This will help you replicate your model in new markets. A strong operational base is also essential, including in-house management, construction, and asset management teams or trusted third-party managers with local expertise.

    Developing local expertise in every market is crucial to avoid assumptions that work in one market won't apply elsewhere. Establish regional managers who understand the nuances of their territories, such as lease enforcement, utility costs, and tenant expectations. They will help you stay compliant and find local opportunities.

    As your portfolio grows, consistency plays a key role through standardized playbooks for underwriting, due diligence, property onboarding, and capex planning. However, be prepared to adapt to local regulations and market demands. A flexible approach allows you to handle both standardization and customization.

    Scaling a portfolio is a long game that requires patience and persistence. It can take years to achieve your goals, and you'll face different issues that need to be solved. Continuously prioritize due diligence before acquiring additional properties, build an extensive network through brokers, public partnerships, and local referrals, and remain disciplined in your underwriting.

    With the right systems and strategy, you can create a lasting portfolio that outperforms the market. By replicating your previous success in new environments, you'll be able to build a larger-scale portfolio and diversify your holdings.