An Investor Analyzes: What’s Better, Local or Out-of-State Real Estate Investing?

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What’s better — local or out-of-area real estate investing?

There are very strong advocates for either sticking to loyally investing in your local property market or casting a very wide net. So who is right? Or does it completely depend on the market and your individual plan?

It is very important for every individual to recognize the media spin and bias of different investment operators. It is hard not to be biased, and they may have the best options — just be alert and think for yourself. Make sure the recommendations you are considering are really in your best interest and match your goals.


Stay Close to Home Before Testing Outside Waters

Personally, I normally advise newer investors to stay close to home, especially for the first few deals, before venturing out of state. There are a few reasons I feel this really makes sense. The first is just getting the learning experience. If something goes wrong, you can drive down the street and take over. You also know the local market better than somewhere you rarely visit. It helps to make better decisions and get better value. 

Related: 3 Reasons Beginners Don’t Invest Out-of-State (& How to Overcome Them!)

Eventually, it makes sense for all investors to expand and diversify into more distant markets. This is for different reasons than why stock market investors recommend diversifying broadly. In stocks, even the best and most experienced advisors acknowledge they have no control over performance and have no idea what will go up or down. That’s a little different in real estate because it’s more tangible. Yet it is smart to diversify to optimize performance over time, to keep income consistent, and to defend against factors like earthquakes or even an economic downturn.


When Newbies May Want to Consider Out-of-State Investments

Still, it is true that some investors are better off investing out of state — and perhaps even first. Perhaps you are in a market like California and you simply can’t afford to get started in real estate locally or the numbers just don’t work for finding cash flowing rental properties. In this case, investors should absolutely look further afield. Once you’ve made some money, you can always add a place in San Diego, Los Angeles, or San Francisco later on, when the numbers make more sense.

Related: Interview With a Bi-Coastal Investor: Why I Purchased My First Multifamily Property Thousands of Miles Away

In making your decision, revisit your ultimate goals, your timeline, and your resources. Can you invest into a small portfolio of cash flowing properties with good value locally? Or do you have to look further? Is it smarter to lock into more profitable deals up front and grow with your gains? Or gamble on one property where the numbers are already very tight?

Personally, I prefer to invest in common sense bread and butter markets first. And while I love to travel to more expensive and exotic locations like Miami, any “investments” made there would be more likely to be fun splurges.

Do you prefer to invest in your local market or in out-of-area locations? Why?

Leave your thoughts below!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.


  1. Fay Chen

    I bought a duplex out-of-state last December. 5 months later, I’m still struggling to get it on track. Fortunately, I don’t depend on it, and I’m learning so much from this little piece of **** property. I’m going to push through the problems. But my next purchase is definitely going to be local.

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