Some real estate investors become fixated on in their own communities. This can be a great idea if you want to be your own property manager and you live in a location that's good for investment. The market is always changing and there are more prominent locations for rentals than others, so you will need to do your research. Are you going to get the money in return for rent that you sink into the property for investment? That's a question that you'll need to look at and really run your numbers on to make sure that you're investing in the best place for you.
Some arguments for investing out of the city that you live in or out of state involve the fact that you can't actually drive by the property. It's true that this is going to make personally managing your property very difficult and at times impossible, but that doesn't mean you can't look into a property manager in the area. If chosen well, they can help increase your profits. It might be worth the percentage that they charge to bring in more money overall.
BiggerPockets has a great example here on how choosing to invest in your own neighborhood could actually cost you some of the retirement money you hope to earn.
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