What area should I invest out-of-state?

Question

Just starting the journey of real estate investing. I live in Washington state, so I'm looking to invest in a market out-of-state where I have no contacts. I want to find a market that cash flows and hopefully has some appreciation as well. I know that appreciation is where the big gains can be, but I also can't be eating money every month. I know that cash-flow markets are typically in the Midwest and cash-flowing assets would allow me to build up money for future purchases too. I've read through several posts where people recommend Ohio, Indiana, Oklahoma, etc.

I'm looking at long-term rentals in the residential space (SFH or 2/3/4-plex).

I know that the sooner I take action the better, but I also don't want to pick a market without doing my research. Ideally, I would love to continue purchasing rental properties so sticking to the same market and keeping the same realtor/contractors/PM/lender would be great.

Any recommendations on what market to pick or how to choose a market? I'm open to any other suggestions as a newbie or related to any assumptions I made above :)

Bill B. · Answer

Start with the obvious. A state without income tax or severe weather. That should narrow it down to about 7 states, maybe less. You want to buy where people are going, not where they are fleeing.

Beyond that you can look for “landlord friendly” Does the local government hate landlords? Look for cities attracting big employers from other states or new factories/warehouses. (Tesla, Amazon, intel, battery factories, etc.).

Then look at the housing stock. Is it an old city with old houses that lack todays open concept or still have cast iron pipes, single pane windows or other outdated features that ar hard or expensive to replace. Not to mention lead paint/asbestos, knob and tube wiring, kitec plumbing or substandard insulation.

No matter where you chooses, someone is making that city work, so it can be done. But you don’t have to choose the hardest places. Learn from others mistakes. Good Luck.

James Wise · Answer

Whenever you are buying a property out of state below is a nice little punch list I put together for new investors to go by. Following this punch list should help you mitigate your risk quite a bit in whichever market you end up investing in. To be honest most folks spend too much time thinking market and then they miss on the stuff below, which is what really matters in a macro sense.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

In addition to the above, if you are curious about which market to go in I put together a list of some of the most popular ones for you below.

• Cleveland, Ohio
• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Myself, I work in Cleveland so that's the one market I have the most knowledge on. I put together The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama you may want to check out but full disclosure, I am not an expert in those markets by any stretch. Thing is, any of these markets should work for you so long as you do the right due diligence BEFORE you buy.

Good luck out there!

Gloria N Gear · Answer

This question got me thinking because I hadn't researched the migration companies or top companies lately, and I found a couple of cool articles.

Here is one on the migration patterns over the last two years.

https://www.census.gov/library....

And then I was looking up top companies in Indianpolis to see if rankings had changed and found this article.

https://livability.com/in/indi...

I think the economic diversity is the best thing Indy has going for it. Pharmeceutical, Medical, Manufacturing, Chemical, Research, Distribution.

Let me know if you would like to have a conversation about Indianapolis.

Kit Serrell · Answer

North Carolina is a really hot market to invest in and is still on the upswing. I live in Raleigh and all of of the surrounding counties (Wake, Durham, Johnston, etc) are hot. Apple, Google, Xerox, Fuji film, and Meta are all coming into the area. 5k people a month move to the area which has created a housing shortage, rent spikes, major appreciation (not just due to inflation) and you can still find single family homes for sale on the MLS in good condition for ~250k+ Tenant-landlord laws are landlord-friendly and taxes are low. The Triad (Greensboro, Winston Salem) and Charlotte/surrounding areas are also good and have good units for less than 250k. I have lived in or around Raleigh most of my life. Happy to connect, answer questions, and help in anyway I can.

Robert Finn · Answer

Gold Advice from Bill!

When we chose San Antonio we looked at cost of acquisition, location, and inward migration. Most of my rentals are STR's but can easily convert to LTR's and cash flow based on recent singed leases in the area. Knowing your area's school district and proximity to downtown, attractions, theme parks, military bases, airport, are all important depending on your end goal. Negotiating interest points paid down by the seller or closing costs on your aquisition are not out of the realm of possibility in today's market. I'd also interview realtors and lenders to get a sense of if they have really worked with investors before and how many. Having a one stop shop makes things much easier investing long distance.

Natalie Perez · Answer

Fayetteville, North Carolina! Great price point, consistent buyers, and stable renters with the huge Army base.

Brendan Harrison · Answer

Have you looked into Oklahoma? Our numbers are staying strong, cost of living is low and the state is very landlord friendly. We're also growing like crazy, so tons of cashflow opportunity.

I'm a real estate investment specialist in the Oklahoma City and Tulsa markets and I work with a lot of investors like yourself to help connect them to investment properties. My team is moving 35 properties/month across Oklahoma. I'd love to connect and share some info on the market. Feel free to reach out if you're interested in a phone call at some point!

Nathan Murith · Answer

@Jake Pickett welcome to BiggerPockets and congratulations on doing the work!

We specialize in out-of-state residential long-term investment. Happy to share all the mistakes, successes, tools, tips, tricks, and resources we have.

WRT the market, it really all depends on what you are looking for in your investments. Cash flow, appreciation, a mix of both?

As Jonathan says, the Midwest can be good for cash flow. That is where we invest. I know a bunch of people of invest in the states you mention and are happy and successful. But again, I would keep in mind that market selection should also be made based on what is important to you (things like: population, demographics, industries, weather, major sports team, population trends, etc).

In any case, if you want to chat more about this, happy to help. Do not hesitate to reach out, connect, and DM me.

Austin Steed · Answer

Would look into Columbus with Ohio being on your list!

Columbus has a great population growth and we remain a city where you can cashflow.

Ruchit Patel · Answer

Jake, just wanted to come back and ask if you had any progress or luck on buying an out-of-state rentals.

What area should I invest out-of-state?

What area should I invest out-of-state?

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