New Out of state Investing what location is best??

Property Manager · Los Angeles · Member since 2023 · 4 posts · 16 votes

Hi there, I am new to the Bigger Pockets forums and want to buy my first Investment property, ideally a 2-4 multifamily property I would buy and hold with long term renters. I live in Los Angeles so I wont be buying here as finding a cash flowing property here is almost impossible and I am a property manager and I already live rent free. So I want to buy in another city and state where I can put 20% down. From all the articles I have been reading there are several possible cities that could be good areas to look in and since I would be an out of state investor and I don't know these places well it feels overwhelming to know which one to pick. Detroit, Cincinnati, Huston, Springfield, Philadelphia, maybe even Saint Luis. Oh my! I would love to hear from anyone and everyone who has invested in any of these areas and what they have to say. If I could narrow it down to one or two of these places that would help me to decide and then I can go to them and really start looking! Thank you!

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Eric FernwoodBusiness Member

Realtor · Las Vegas, NV · Member since 2014 · 989 posts · 1k+ votes

Hello @Lisa Talbot,

When choosing an investment location, it's important to consider both short-term and long-term factors. The initial return can be estimated using typical return calculations, but these only predict how the property is likely to perform on the first day under ideal conditions. They don't provide any insight into the property's likely future performance.

In my opinion, what happens in the next 10 to 30 years is more important than how it performs initially. Your financial future depends on the long-term economic growth of the city where you invest. Here are some location considerations to keep in mind.

Population Growth

Population growth or decline determines where property prices and rents will increase, stagnate, or fall. Below is a table showing population change between 2020 and 2022 for the cities you listed and I added Las Vegas, which is where I live. Source

Moving to another city can be emotionally and financially costly. Typically, people move only when things become unbearable in their current location. Detroit, Houston, Philadelphia, and St. Louis have had a decline in population. Due to this, I would not consider these locations because prices and rents are driven by population growth.

Overhead Costs

Every dollar lost to overhead is one less dollar available for living expenses. To illustrate the cost differences between cities, I compiled overhead costs for the listed cities.

Sources:

To put this in perspective, below are the annual operating costs for a $400,000 property with a taxable $15,000 annual cash flow. I sorted the cities by overhead cost.

To have the same net cash flow, a property in Springfield would need to generate $7,051 ($10,595 - $3,544) annually than a property in Las Vegas to have the same cash flow.

Overhead costs make a huge difference when selecting a location.

Rent control and Evictions

Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.

I researched the time it takes to evict a non-paying tenant for each city. Please note that the times shown may have changed due to court backlogs caused by the eviction moratorium.

Springfield - “The entire process from notice to set-out can run from 4 weeks to multiple months depending on your specific situation.”
Houston - “Evicting a tenant in Texas can take around one to three months, depending on the type of eviction. If tenants request a continuance or jury trial, the process can take longer.”
Detroit - “On average, it would take anywhere between for a complete eviction process.”
Cincinnati - I found no clear timeline. From what I read, 2 months to several months. If anyone has a better answer, please post it.
Philadelphia - “…from eviction notice to removing the tenant, could take roughly 2-4 months”
St Louis - Several months. “It takes about 30-60 days before a landlord can start filing an eviction. If the case is about failure to pay rent, then they have to wait 1 month before they can start filing an eviction lawsuit.”
Las Vegas - One month.

I view nightmare evictions like I view cancer. The odds of getting cancer are relatively small, but if you do get it, it is devastating, and "odds" mean nothing.

Summary

The location is the most important investment decision you will make. Take the time to evaluate locations based on long-term factors such as population growth, overhead costs, and the landlord-friendliness of the city.

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Dan Portka
Real Estate Agent · San Pedro, CA · Member since 2019 · 253 posts · 128 votes
3y
hey @Lisa Talbot welcome to BP! One important thing I think people should consider when selecting an out of state market is - where do you have an advantage? Do you know anyone in any of these markets (ie potential business partner or boots on the ground)? Do you personally know any of these markets? Having people you can trust and understanding the lay of the land and various neighborhoods is important when investing out of state. Start building relationships/networking with agents, PMs, and investors in a few of those markets to build your team and once you start seeing deals come across your desk pick the market that has what you're looking for.

5 Reply
Sam McCormackBusiness Member
Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
3y
@Lisa Talbot
Hi Lisa, I am a realtor in Cincinnati, primarily work with investors. My team lead and investors can speak out of experience. Let me know if you are wanting to look at Cincinnati some more!
[email protected]859-443-4952
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Greg ParkerBusiness Member
Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
3y
In a number crunch of 300 cities using 10 metrics ranging from home prices to tax rates to vacancy levels, WalletHub determined that Montgomery, Alabama, was the nation’s most affordable city for homebuyers. Rounding out the top 10 of affordable homeownership cities were Flint, Michigan; Toledo, Ohio; Detroit; Akron, Ohio; Warren, Michigan; Pittsburgh; Yuma, Arizona; Springfield, Illinois; and Palm Bay, Florida.
And, Alabama has the second lowest property taxes in the nation behind Hawaii.
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9 Reply
Alex Deacon
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
3y
@Lisa Talbot Pittsburgh PA is a very good market and still affordable. You will need to raise your IQ on the market here and get a good team of advisors before you dive in. That goes for any market
4 Reply
Anthony L Amos Jr
Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes
3y
Quote from @Lisa Talbot:

Hi there, I am new to the Bigger Pockets forums and want to buy my first Investment property, ideally a 2-4 multifamily property I would buy and hold with long term renters. I live in Los Angeles so I wont be buying here as finding a cash flowing property here is almost impossible and I am a property manager and I already live rent free. So I want to buy in another city and state where I can put 20% down. From all the articles I have been reading there are several possible cities that could be good areas to look in and since I would be an out of state investor and I don't know these places well it feels overwhelming to know which one to pick. Detroit, Cincinnati, Huston, Springfield, Philadelphia, maybe even Saint Luis. Oh my! I would love to hear from anyone and everyone who has invested in any of these areas and what they have to say. If I could narrow it down to one or two of these places that would help me to decide and then I can go to them and really start looking! Thank you!

Which Springfield? lol
Check out Ohio, where we have a mixture of markets for different exit strategies. Columbus is best for cashflow and appreciation, while Cleveland, Toledo, Dayton & Springfield :) are good cashflow markets with much lower entry prices.
4 Reply
Kerry Noble JrPro Member
Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
3y
my market.....Central IN
2 Reply
Account Closed
Columbus, OH · Member since 2023 · 427 posts · 254 votes
3y
Hi Lisa, what peaked your interest in Cincinnati? Ohio is a great place to invest in OOS, we see a ton of Californians choose to invest here. If Cincinnati caught your eye, I'd recommend looking into Cleveland for very strong cashflow, and looking into Columbus to capture strong appreciation!
5 Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
3y
@Lisa Talbot
You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/member-blogs/3094/99854-deep-dive-into-metro-detroit-cities-ecorse

(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)

Doubt you'll find this much info for any other market in the country. So, why would you invest remotely anywhere else?
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
3y
Quote from @Lisa Talbot:

Hi there, I am new to the Bigger Pockets forums and want to buy my first Investment property, ideally a 2-4 multifamily property I would buy and hold with long term renters. I live in Los Angeles so I wont be buying here as finding a cash flowing property here is almost impossible and I am a property manager and I already live rent free. So I want to buy in another city and state where I can put 20% down. From all the articles I have been reading there are several possible cities that could be good areas to look in and since I would be an out of state investor and I don't know these places well it feels overwhelming to know which one to pick. Detroit, Cincinnati, Huston, Springfield, Philadelphia, maybe even Saint Luis. Oh my! I would love to hear from anyone and everyone who has invested in any of these areas and what they have to say. If I could narrow it down to one or two of these places that would help me to decide and then I can go to them and really start looking! Thank you!

It doesn't really matter which market you pick. Most all of those are about the same. What matters is what you buy in the market. How you manage it, etc....
2 Reply
Scott JohnsonBusiness Member
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
3y
Quote from @James Wise:

Quote from @Lisa Talbot:

Hi there, I am new to the Bigger Pockets forums and want to buy my first Investment property, ideally a 2-4 multifamily property I would buy and hold with long term renters. I live in Los Angeles so I wont be buying here as finding a cash flowing property here is almost impossible and I am a property manager and I already live rent free. So I want to buy in another city and state where I can put 20% down. From all the articles I have been reading there are several possible cities that could be good areas to look in and since I would be an out of state investor and I don't know these places well it feels overwhelming to know which one to pick. Detroit, Cincinnati, Huston, Springfield, Philadelphia, maybe even Saint Luis. Oh my! I would love to hear from anyone and everyone who has invested in any of these areas and what they have to say. If I could narrow it down to one or two of these places that would help me to decide and then I can go to them and really start looking! Thank you!

It doesn't really matter which market you pick. Most all of those are about the same. What matters is what you buy in the market. How you manage it, etc....

James, I've been seeing your posts and I like you. You bring a solid, optimistic, no-nonsense vibe. Keep on rockin' it brother!
[email protected]
4 Reply
Brian Schroeder
Homeowner · springfield, IL · Member since 2008 · 67 posts · 11 votes
3y
hello
I am an Investor and I live in Springfield Illinois. I was born and raised here and I am 58 so I have some history around here. LOL I have 4 properties. I am a long-term investor, so if you want some information in the Springfield Illinois area, I would be happy to help. I would also be happy to help anyone else interested in this area. good luck everyone!!!!
1 Reply
Lisa TalbotPro Member
OP
Property Manager · Los Angeles · Member since 2023 · 4 posts · 16 votes
3y
WOW thank you all for your thoughts!
0 Reply
Dan Powers
Real Estate Agent · Philadelphia, PA · Member since 2020 · 294 posts · 245 votes
3y
@Lisa Talbot I'm an agent and investor in Philadelphia who specializes in investment properties. The majority of the houses in this market will be priced around 50-300k depending on the neighborhood and cashflow can range 200-500/per door again based on the area. There are plenty of properties here that easily pass the classic 1% rule. Please reach out if you want me to go into anything in more depth.
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Lisa Talbot:

WOW thank you all for your thoughts!

There are plenty of choices in the midwest and south, just be careful where you buy, down to the street level.

But consider "distance to resolve issues" - and there will always be issues

Remember the lockdowns? Lack of Availablity to travel? Eviction Moratoriums? What is your time and aggravation worth?

That didn't happen in Arizona. I find off market properties for great discounts, so that is quite popular and when investors couldn't get to the midwest, it was even busier with people from SoCal here.

LA to Phoenix VS LA to Detroit MI - you wouldn't drive to the midwest to resolves issues of course, you'd have to fly but you can actually drive to Phoenix.

3 Reply
Patrick DruryBusiness Member
Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
3y
@Lisa Talbot
I would recommend looking at Columbus, OH. You can get good cash flow and solid appreciation at the same time. Columbus has a lot of job opportunities and population growth. Especially with Intel coming to Columbus as well as Hyperion, which is a company that makes hydrogen fuel cells. Columbus is home to the HQ of Chipotle, Wendys, White Castle, L-Brands, and Hunnington. Columbus is also home to OSU, which constantly develops real estate, employs lots of jobs, and attracts students from the US and internationally to attend. On top of all of that, it boasts one of the best college football teams Ohio state buckeyes, which is very well known and has a cult following, and attracts a lot of people to the games. If you don't care about appreciation at all you should look at Cleveland OH. Cleveland has a bit higher cash flow than Columbus in exchange for the appreciation.

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Logan Williams
Real Estate Agent · Scottsdale, AZ · Member since 2022 · 11 posts · 16 votes
3y
While each of the cities you mentioned has its own unique characteristics and investment opportunities, I work with investors across Arizona so would be happy to answer any questions. Here's why it might be worth considering:
1. Strong Real Estate Market: Arizona has experienced steady growth in its real estate market, making it an attractive destination for investors. Cities like Phoenix and Tucson offer a diverse range of properties suitable for long-term rental strategies.
2. Cash Flow Potential: Arizona's real estate market presents cash flow opportunities, with many properties available under $150,000 per door. This affordability compared to high-priced areas like Los Angeles can easily generate positive cash flow for investors.
3. Population Growth: Arizona's consistent population growth drives demand for rental properties, providing a steady pool of potential long-term renters. This contributes to the stability and profitability of your investment.
4. Investor-Friendly Environment: Arizona is known for its favorable landlord-tenant laws and business-friendly environment. This simplifies property management and provides legal protections for landlords.
5. Proximity to Los Angeles: Since you already live in Los Angeles, investing in Arizona offers the advantage of being within a manageable distance. You can easily visit and manage your properties without the need for extensive travel or long-distance property management.
7 Reply
Tim Ryan
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 621 votes
3y
Hi Lisa, I live in LA also and have been investing out of state since 2009. I was in Chattanooga for years before many other investors showed up. I'm now in probably the hottest growth market in the country but it's not listed on your post. DM me and I'll tell you. My advice for you is to find one area and really bear down in that market. You'll have to travel periodically if you want to find good deals. I can tell you a lot more about how I've been doing this successfully. let's connect especially since we are close and both know we have to invest OOS.
3 Reply
Najma Osman
Real Estate Agent · Columbus, OH · Member since 2023 · 161 posts · 217 votes
3y
Hi @Lisa Talbot,
It depends on what you're goals are. Are you looking for more cashflow or long term appreciation? Like many of the investors here, I also invest in Columbus, Ohio. I think we have a great market for both cashflow and appreciation with many jobs and developments coming to the city.
2 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Lisa Talbot
can you travel there? it's all about the team. it's not possible right now to push Internet button and make sweet cash flow, even in the midwest.
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
3y
Quote from @Scott Johnson:

Quote from @James Wise:

Quote from @Lisa Talbot:

Hi there, I am new to the Bigger Pockets forums and want to buy my first Investment property, ideally a 2-4 multifamily property I would buy and hold with long term renters. I live in Los Angeles so I wont be buying here as finding a cash flowing property here is almost impossible and I am a property manager and I already live rent free. So I want to buy in another city and state where I can put 20% down. From all the articles I have been reading there are several possible cities that could be good areas to look in and since I would be an out of state investor and I don't know these places well it feels overwhelming to know which one to pick. Detroit, Cincinnati, Huston, Springfield, Philadelphia, maybe even Saint Luis. Oh my! I would love to hear from anyone and everyone who has invested in any of these areas and what they have to say. If I could narrow it down to one or two of these places that would help me to decide and then I can go to them and really start looking! Thank you!

It doesn't really matter which market you pick. Most all of those are about the same. What matters is what you buy in the market. How you manage it, etc....

James, I've been seeing your posts and I like you. You bring a solid, optimistic, no-nonsense vibe. Keep on rockin' it brother!

2 Reply
Sharron Ferrell
Aurora, IL · Member since 2016 · 10 posts · 10 votes
3y
Hi Lisa,
I live in the Chicago area and I am also just beginning my investing career and looking for the best location for beginners to wholesale and eventually move into fix and flips.
0 Reply
Sheryl Sitman
Rental Property Investor · Philadelphia, PA · Member since 2015 · 476 posts · 360 votes
3y
@Lisa Talbot In general, the class of property you are seeking is very competitive. I am curious how you decided that you want to do a small multi as opposed to a couple SFHs. Keep in mind that when you want to sell, your only audience will be other investors and tenants in small multi-family, unless in A and B areas, can be tough. Hard to give any real advice without knowing more. I manage a group of almost 2,000 landlords in Philadelphia and invest in Philly, Lehigh Valley (PA), and FOUR additional states. We believe in strategic diversification and it works when done right. When people tell you focus on one area, I get why they are saying it. But I can tell you that most people I know who have done that, have lost sleep -- no place is 100% resilient. Some markets you mention, I would caution about - you really need to know what you are doing. Same with Philly, but I know what I am doing so doing good there -- still, there are challenges everywhere but some markets have fewer challenges. Last piece of advice is take the spreadsheet numbers with a grain of salt. The markets you are targeting have the potential to be old housing stock with lots of surprise problems and tenant issues. If you decide on Philly, happy to help you out.
3 Reply
Sharron Ferrell
Aurora, IL · Member since 2016 · 10 posts · 10 votes
3y
Hi Logan, Do you think AZ is a good area for beginners to wholesale?
0 Reply
Chad McMahan
Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 751 posts · 504 votes
3y
Quote from @Greg Parker:

In a number crunch of 300 cities using 10 metrics ranging from home prices to tax rates to vacancy levels, WalletHub determined that Montgomery, Alabama, was the nation’s most affordable city for homebuyers. Rounding out the top 10 of affordable homeownership cities were Flint, Michigan; Toledo, Ohio; Detroit; Akron, Ohio; Warren, Michigan; Pittsburgh; Yuma, Arizona; Springfield, Illinois; and Palm Bay, Florida.
And, Alabama has the second lowest property taxes in the nation behind Hawaii.
I used to buy quite a few properties in Alabama. Bear in mind " most affordable" and low taxes does not equate to best investment or best ROI.
1 Reply
Josie Brown
Detroit, MI · Member since 2022 · 118 posts · 49 votes
3y
Hi Lisa! Detroit is a great area to invest in and you definitely could find a small multi-family property there. I'd be happy to chat with you about some areas to look into specifically if you'd like!
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