Choosing A Market - What Markets Do You Recommend?

22 Replies

I'm currently trying to figure out where I want to invest for my first out-of-state investment property. I know some things I definitely do and don't want and am curious if you have any markets you'd recommend for long-term buy & hold rentals. 

Things I'm looking for:

Population growth, diverse industries/job base (all the usual stuff that indicates long term growth)

I'm debating between single and multifamily but I'd love to find a market that has small multifamily properties in A or B (maybe C+) neighborhoods (some places I've looked at only have these in D class areas)

Cash flow but also some appreciation, can be moderate for both I'm not looking for anything crazy

A less expensive market than San Diego (the cost of entry here is nuts)

Things I want to avoid:

Markets that are all cash flow and no appreciation

Markets with very low average income and very low property values like Memphis

Texas because I'm concerned about the power grid

Anywhere that's prone to hurricanes or flooding, especially areas that are newly prone to hurricanes & flooding due to climate change

Anywhere with a disproportionate amount of violent crime. I looked into Minneapolis and while it seems cool, I can't get past the uptick in violent crime there.

I'm currently digging into the Columbus and Chattanooga markets. I'm from the Metro Detroit area and know it well but I just don't see the population growth there that I'd like to see. Where else should I look? I'm totally fine with this not being an absolutely incredible deal. I just want to get started with a profitable deal and recognize my first probably won't be my first profitable and I'm totally cool with that.

For what you are looking for, I would recommend researching popular cities in the Midwest. I am biased to Nebraska because I absolutely love the people here, but I have lived in Minneapolis (and agree with your assessment... it is the reason why I left), I have lived on the east coast, Colorado and all over the US and I have to say that I like the markets in Iowa, Nebraska, Kansas, Missouri the most. I have talked to a lot of investors from the west coast that make a crap ton of money, have a lot of equity in their homes, and choose to invest in the Midwest. I think you should research where the big tech companies are moving to and follow suit. Wherever they go, they bring a ton of population growth. 

Hope this helps!

Originally posted by @Heidi Thompson :

I'm currently trying to figure out where I want to invest for my first out-of-state investment property. I know some things I definitely do and don't want and am curious if you have any markets you'd recommend for long-term buy & hold rentals. 

Things I'm looking for:

Population growth, diverse industries/job base (all the usual stuff that indicates long term growth)

I'm debating between single and multifamily but I'd love to find a market that has small multifamily properties in A or B (maybe C+) neighborhoods (some places I've looked at only have these in D class areas)

Cash flow but also some appreciation, can be moderate for both I'm not looking for anything crazy

A less expensive market than San Diego (the cost of entry here is nuts)

Things I want to avoid:

Markets that are all cash flow and no appreciation

Markets with very low average income and very low property values like Memphis

Texas because I'm concerned about the power grid

Anywhere that's prone to hurricanes or flooding, especially areas that are newly prone to hurricanes & flooding due to climate change

Anywhere with a disproportionate amount of violent crime. I looked into Minneapolis and while it seems cool, I can't get past the uptick in violent crime there.

I'm currently digging into the Columbus and Chattanooga markets. I'm from the Metro Detroit area and know it well but I just don't see the population growth there that I'd like to see. Where else should I look? I'm totally fine with this not being an absolutely incredible deal. I just want to get started with a profitable deal and recognize my first probably won't be my first profitable and I'm totally cool with that.

It does not matter where you start as long as you develop your Core 4. The core 4 is David Greene’s strategy for long-distance and made up of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to confidently invest in any market.

As for picking a specific market - I would go after one with an increasing job and population growth. I invest and work in Columbus, Ohio. I am also looking to invest in Cincinnati and Cleveland.

I get your reasoning and why you think this way Heidi, but a lot of these points come down to your perception or a specific part or aspect of that city. There is no perfect market; they are all imperfect.

The best market for you is one that you know, that is easy to get to and where you have good people you trust. You will always be more succesful this way in a mediocre market, than without it in the best market.

@Marcus Auerbach very well said. I couldn't agree with you more. For Texas I don't think the power grid should be that big of a concern. As I'm sure you know it's still the #1 market Californians are moving too but the cash flow will be lower since the taxes are higher. It's a double edged sword with the appreciation but I find it comparable to an older California market before appreciation fully took over. 

If Memphis isn't of interest to you there are several markets in the Midwest that may be good options. Oklahoma City, Tulsa, St Louis I'm sure Kansas or Nebraska has some as well. Good luck with the search and let us know if we can help! 

I too live in and invest in San Diego. My strategy is to house hack one property a year while buying one property per year out of state. I used similar criteria as you and my research led me to Indianapolis and Cincinnati/ Cleveland/ Columbus because of the future outlook and low property costs. Having people you trust out of state is the biggest key to success. Remember that people will never treat your money like you treat your money!

You are looking for what everyone is looking for.  

Although CA has its tenant friendly problems, the potential cash flow can be huge.  I have a client that makes six figures off of his rentals here in Los Angeles.  

If you don't already own, I would recommend buying your first place and house hack.  That way you can gain the appreciation and additional income right from the start.  

Another thing to consider are your own financial constraints.  What is your budget and how does that fit in your overall strategy?  At the end of the day, everyone needs a roof over their heads so there will be pros and cons to different markets.

Best of luck!

Originally posted by @Marcus Auerbach :

I get your reasoning and why you think this way Heidi, but a lot of these points come down to your perception or a specific part or aspect of that city. There is no perfect market; they are all imperfect.

The best market for you is one that you know, that is easy to get to and where you have good people you trust. You will always be more succesful this way in a mediocre market, than without it in the best market.

This comment is right on. Many who are just starting out can get hung up on which market, or trying to perfectly time their entry. There are good deals and bad deals in every market as well as every phase of the market cycle. There are many successful people investing in every market, both locally and remotely, at all phases of the market cycle. There are many who fail in each of these locations as well, at both the top and the bottom of the market cycle. 

I'm not saying location isn't important. It is very important. Picking the right place to invest can set you up for success. However sometimes the best location for an individual may not happen to be the best for whatever metric fits their random buying criteria. Being able to find good deals, getting them under contract, and operating a rental business efficiently is more important than location IMO. So I would echo Marcus and recommend considering which place you know the best, have the best chance of gaining access to deals, and have the best resources with which to succeed such as a good agent/deal finder, lender, PM, contractor, vendors etc. and not just the macro-economics of an area. Having a beachhead somewhere will give you a big advantage. For most of us that will be our local market but plenty of folks are successful investing remotely as well. 

Hi Heidi, I am from California but started my real estate journey here in Indianapolis. Now, I have almost a hundred doors. I would love to share my experiences and chat you more if you're interested.

Originally posted by @Danielle Jackson :

Here is some good market insight re: investor demand & development. 

Danielle, any background information on what the data refers to? How do they measure investor demand (historically I have seen them use the number of cash offers on MLS; flips can be measured by homes that got sold twice in 6 months etc)

It does not make much sense that Austin is top of the list - a market that apprciated 39% this year and is way too expensive to buy a rental property. And Kansas City and Cincinnatti are bottom? Am I reading this the wrong way?

Start looking in your local market because you'll know it the best. You know what areas the worst crime areas, where the city is building new developments, where the best and worst schools are, etc. Looking out of state for you first property you'd have to put a lot of trust in other people (property manager, real estate agent, etc.), if anything look an 1-2 outside of your local market, somewhere you'd be able to drive to if an emergency were to come up. And different state have landlord tenant laws that may or may not affect your cash flow. Good luck. 

Indianapolis has some affordable multi-family residential and single-family homes. I am an investor, as well as an investor-friendly real estate agent in Indianapolis. I am going to send you a message

There are a lot of good comments here. Being in the Midwest, we've had a lot of attention from out of state investors.  Indy has experienced a ton of growth.  Whatever market you choose, make sure you assemble a local team that you are comfortable with prior to making your purchase.  Having local boots on the ground is essential in getting the information you need to make a good transaction.  

Originally posted by @Jordan Graham :

I too live in and invest in San Diego. My strategy is to house hack one property a year while buying one property per year out of state. I used similar criteria as you and my research led me to Indianapolis and Cincinnati/ Cleveland/ Columbus because of the future outlook and low property costs. Having people you trust out of state is the biggest key to success. Remember that people will never treat your money like you treat your money!



If you're going to go the Cleveland route just make sure you get an understanding of what you are getting when buying here in Cleveland. Quality of the neighborhoods, tenants and the housing stock is going to vary from extremely risky to fairly safe. Check out The Ultimate Guide to Grading Cleveland Neighborhoods for more info on all of that.