Beginner looking to purchase first long-term rental out-of-state
New to Real Estate · Seattle · Member since 2025 · 5 posts · 20 votes
Beginner looking to purchase first long-term rental out-of-state
Most Popular Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votesYou’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
Here's some copy & paste advice you might find useful:
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.
Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
|
FICO Score |
Pct of Population |
Default Probability |
|
800 or more |
13.00% |
1.00% |
|
750-799 |
27.00% |
1.00% |
|
700-749 |
18.00% |
4.40% |
|
650-699 |
15.00% |
8.90% |
|
600-649 |
12.00% |
15.80% |
|
550-599 |
8.00% |
22.50% |
|
500-549 |
5.00% |
28.40% |
|
Less than 499 |
2.00% |
41.00% |
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9462 Reviews
31 Replies
- Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes9mo
Hi Swetha,
When evaluating your first deal, focus on cash flow first to make sure rent comfortably covers mortgage, taxes, insurance, and management fees. It's best to be conservative with your numbers. Check local market trends like vacancy rates and neighborhood quality, and always factor in some buffer for repairs or unexpected costs.
Common beginner mistakes include rushing into a deal without proper due diligence, overestimating rent or underestimating expenses, and not having a trusted property manager in place to handle things on the ground.
As for tools, BiggerPockets rental calculators, local MLS data, and connecting with other investors in your target area can be really helpful.
- New to Real Estate · Seattle · Member since 2025 · 5 posts · 20 votes9mo
Quote from @Mohammed Rahman:
Hi Swetha,
When evaluating your first deal, focus on cash flow first to make sure rent comfortably covers mortgage, taxes, insurance, and management fees. It's best to be conservative with your numbers. Check local market trends like vacancy rates and neighborhood quality, and always factor in some buffer for repairs or unexpected costs.
Common beginner mistakes include rushing into a deal without proper due diligence, overestimating rent or underestimating expenses, and not having a trusted property manager in place to handle things on the ground.
As for tools, BiggerPockets rental calculators, local MLS data, and connecting with other investors in your target area can be really helpful.
Thanks Mohammed, this is really helpful. I’m definitely prioritizing conservative underwriting, especially on rent and vacancy assumptions.
For someone doing their first long-term rental, which expense line item do you usually see underestimated the most—repairs, CapEx, management, vacancy, etc.—and how much buffer do you typically build in?
- 9moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
You’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
Here's some copy & paste advice you might find useful:
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9462 Reviews- New to Real Estate · Seattle · Member since 2025 · 5 posts · 20 votes9mo
Quote from @Drew Sygit:
You’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
Here's some copy & paste advice you might find useful:
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Thanks, Drew — I really appreciate the detailed breakdown and the framework connecting property class, tenant pool, and expected outcomes. It’s clear how misclassifying Class B vs. C/D properties can really derail OOS investors.
If I focus on true Class B neighborhoods in Midwest markets like Columbus/Cleveland, what on-the-ground signals do you rely on to distinguish a genuine Class B area from one being marketed as B, beyond just price and rent comps?
- 9moKerlous TadresBusiness MemberRealtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
I’d recommend using real numbers for rent, repairs, vacancy, and management and only buying if it still cash flows. The biggest mistakes are trusting rent guesses and buying cheap in a bad area, so lean on a strong local property manager for rent comps before you close.
Kerlous Tadres | Reafco Real Estate542 Reviews - Memphis, TN · Member since 2024 · 180 posts · 223 votes9mo
Welcome to BP!! I'm a Memphis based investor-focused Realtor and I'd be happy to chat about our team and the ways we support first time out of state investors to source some greta properties. Regardless of the market you choose to get started in, I would HIGHLY recommend building your team there first. Meaning, having a great Realtor( or Realtors ) that are sourcing you on AND off-market deals and able to vet those for you. They should be able to give you reccs for solid property management, contractor, and lender partners as well. I know that's what we do for our clients to make them as successful as possible being remote.
Best of luck!
Hi Swetha! Welcome! For a first out of state deal, I’d keep it simple: conservative rent assumptions, realistic maintenance/vacancy, and don’t force appreciation into the numbers. Biggest beginner mistake I see is underestimating ongoing expenses or trusting pro formas without verifying them. Tools like BiggerPockets calculators or a basic Excel model go a long way, but honestly, having a solid local team matters more than the spreadsheet. Happy to keep the conversation going!
- 9moEvan HoppleBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 285 posts · 420 votes
@Swetha Vedhanarayanan
For cashflow deals, you need to understand the current income and expenses, but also any hidden costs or deferred maintenance that might be looming. There could be a better home with lower rents, but it is in better shape and could rent for more. That's where a local investor-friendly agent can help to project what the property could reasonably rent for.
Reafco Real Estate- New to Real Estate · Seattle · Member since 2025 · 5 posts · 20 votes9mo
Quote from @Evan Hopple:
@Swetha Vedhanarayanan
For cashflow deals, you need to understand the current income and expenses, but also any hidden costs or deferred maintenance that might be looming. There could be a better home with lower rents, but it is in better shape and could rent for more. That's where a local investor-friendly agent can help to project what the property could reasonably rent for.Thanks, Evan — that makes sense. I’m trying to focus on properties where rent comfortably covers all known expenses, but deferred maintenance is something I don’t want to underestimate.
In Columbus, are there particular property types or neighborhoods where first-time investors most often get caught by hidden costs, or patterns you’ve noticed that indicate maintenance risk before purchase?
- 9moEvan HoppleBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 285 posts · 420 votes
Quote from @Swetha Vedhanarayanan:
Quote from @Evan Hopple:
@Swetha Vedhanarayanan
For cashflow deals, you need to understand the current income and expenses, but also any hidden costs or deferred maintenance that might be looming. There could be a better home with lower rents, but it is in better shape and could rent for more. That's where a local investor-friendly agent can help to project what the property could reasonably rent for.Thanks, Evan — that makes sense. I’m trying to focus on properties where rent comfortably covers all known expenses, but deferred maintenance is something I don’t want to underestimate.
In Columbus, are there particular property types or neighborhoods where first-time investors most often get caught by hidden costs, or patterns you’ve noticed that indicate maintenance risk before purchase?
Don't get caught focusing solely on the current numbers and undervaluing quality
Reafco Real Estate
- 9moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Swetha Vedhanarayanan:
Hi everyone,
I’m new to real estate investing and excited to learn from this community. I’m a W-2 professional planning to purchase my first long-term rental and am exploring out-of-state markets, focusing on the Midwest (e.g., Ohio).
I plan to use full property management so I can stay passive while learning the fundamentals — analyzing deals, understanding cash flow, and building a solid foundation.
I’d love advice on:
-
How to evaluate your first deal as an out-of-state investor
-
Common beginner mistakes to avoid
-
Resources or tools that help with analyzing long-term rentals
Thanks in advance for any guidance — really looking forward to learning from experienced investors here!
Welcome to BP, Swetha! For evaluating your first out-of-state rental, focus on key numbers like the 1% rule to make sure the property will cash flow, run realistic expense projections including property management fees, taxes, insurance, and maintenance, and make sure you understand the local landlord laws and neighborhood trends. Common beginner mistakes are overestimating rent, underestimating repairs, skipping due diligence, and chasing the “perfect” deal instead of a solid, manageable property. Tools like Zillow, Rentometer, and local market reports can help you crunch the numbers, but pairing that with insight from a good local property manager or experienced investors can make a huge difference. One market that’s been strong for out-of-state investors is Columbus, Ohio—you can still find single-family homes in the $120K–180K range that hit the 1% rule and cash flow from day one, and the city’s population growth, job growth, and major company expansions like Intel, Amazon, Google, Honda, Microsoft, and LG give it strong long-term appreciation potential while being very investor-friendly. Happy to connect and answer any questions you have!
Jimmy Lieu, Red 1 Realty4.9124 Reviews -
Quote from @Swetha Vedhanarayanan:
Hi everyone,
I’m new to real estate investing and excited to learn from this community. I’m a W-2 professional planning to purchase my first long-term rental and am exploring out-of-state markets, focusing on the Midwest (e.g., Ohio).
I plan to use full property management so I can stay passive while learning the fundamentals — analyzing deals, understanding cash flow, and building a solid foundation.
I’d love advice on:
-
How to evaluate your first deal as an out-of-state investor
-
Common beginner mistakes to avoid
-
Resources or tools that help with analyzing long-term rentals
Thanks in advance for any guidance — really looking forward to learning from experienced investors here!
>Common beginner mistakes to avoi
Buying cheap OOS properties.
-
I am often the contrarian and I will be once again.
I agree that underwriting should be conservative but I strongly disagree to emphasize cash flow.
In any market, do you think the property with the better rent growth outlook will have better initial cash flow than properties with a worse rent growth outlook? Do you think it is different nationally? Let’s assume we agree in general the property with the better rent growth outlook will have the worse initial cash flow.
It then becomes basic math on growth rate on which will have the better cash flow on a long hold. The higher rent growth property will eventually have the better cash flow
Now look at the same argument for appreciation…. In any market, do you think the property with the better appreciation outlook will have better cash flow than properties with a worse anppreciation outlook? Do you think it is different nationally? Let’s assume we agree in general the property with the better appreciation outlook will have the worse initial cash flow.
So you can concentrate on initial cash flow, but realize that it will likely be at the expense of long term cash flow and appreciation.
Before interest rates rose so significantly starting in 2022 I used to actively work to minimize cash flow. Why? Because it is the only source of investment return taxed annually.
I judge my investments by total return.
If you need cash flow on day 1 to live, then there is no option. However, if the cash flow is not required, then look at the total return. Recognize cash flow is taxed annually.
If you purchase the best initial cash flow property this is what is likely if your underwriting is accurate (meaning you actually achieve cash flow resembling the projection), the cash flow will increase slower than inflation and the property will appreciate lower than inflation. If you have not figured out it is a dud of an investment and still hold it in 20 years, it will have less cash flow in inflation adjusted dollars and a lower value than purchase in inflation adjusted dollars.Good luck
- 9moJordan RayBusiness MemberReal Estate Agent · Memphis, TN · Member since 2023 · 642 posts · 337 votes
Quote from @Swetha Vedhanarayanan:
Hi everyone,
I’m new to real estate investing and excited to learn from this community. I’m a W-2 professional planning to purchase my first long-term rental and am exploring out-of-state markets, focusing on the Midwest (e.g., Ohio).
I plan to use full property management so I can stay passive while learning the fundamentals — analyzing deals, understanding cash flow, and building a solid foundation.
I’d love advice on:
-
How to evaluate your first deal as an out-of-state investor
-
Common beginner mistakes to avoid
-
Resources or tools that help with analyzing long-term rentals
Thanks in advance for any guidance — really looking forward to learning from experienced investors here!
Welcome to BiggerPockets! It’s great that you’re being intentional about learning the fundamentals while keeping things passive, and as a W-2 professional that’s a smart way to get started. If you’re open to looking beyond Ohio, Memphis is one of the best out-of-state markets for first-time long-term rental investors because you can still find properties that hit the 1% rule, cash flow with professional management in place, and operate in a landlord-friendly environment. When evaluating your first deal from a distance, focus heavily on the basics: analyze ARVs, realistic market rents, expenses, and overall neighborhood trends, and spend time learning the layout of Memphis so you understand what areas fit your goals. The most common mistake new out-of-state investors make is trying to do everything alone or relying on retail-focused agents, so it’s critical to build a strong boots-on-the-ground team early—an investor-friendly agent like myself, a solid property manager, a reliable general contractor, and the right lending contacts. That team gives you real eyes on the ground and helps you avoid costly surprises. Start practicing now by underwriting deals regularly so when the right one pops up, you’re confident in your numbers and your team. Feel free to reach out, talk soon!
Jordan Ray - eXp Realty5109 Reviews- Property Manager · Seattle, WA · Member since 2020 · 80 posts · 32 votes9mo
Quote from @Jordan Ray:
Quote from @Swetha Vedhanarayanan:
Hi everyone,
I’m new to real estate investing and excited to learn from this community. I’m a W-2 professional planning to purchase my first long-term rental and am exploring out-of-state markets, focusing on the Midwest (e.g., Ohio).
I plan to use full property management so I can stay passive while learning the fundamentals — analyzing deals, understanding cash flow, and building a solid foundation.
I’d love advice on:
-
How to evaluate your first deal as an out-of-state investor
-
Common beginner mistakes to avoid
-
Resources or tools that help with analyzing long-term rentals
Thanks in advance for any guidance — really looking forward to learning from experienced investors here!
Welcome to BiggerPockets! It’s great that you’re being intentional about learning the fundamentals while keeping things passive, and as a W-2 professional that’s a smart way to get started. If you’re open to looking beyond Ohio, Memphis is one of the best out-of-state markets for first-time long-term rental investors because you can still find properties that hit the 1% rule, cash flow with professional management in place, and operate in a landlord-friendly environment. When evaluating your first deal from a distance, focus heavily on the basics: analyze ARVs, realistic market rents, expenses, and overall neighborhood trends, and spend time learning the layout of Memphis so you understand what areas fit your goals. The most common mistake new out-of-state investors make is trying to do everything alone or relying on retail-focused agents, so it’s critical to build a strong boots-on-the-ground team early—an investor-friendly agent like myself, a solid property manager, a reliable general contractor, and the right lending contacts. That team gives you real eyes on the ground and helps you avoid costly surprises. Start practicing now by underwriting deals regularly so when the right one pops up, you’re confident in your numbers and your team. Feel free to reach out, talk soon!Exactly what Jordan said. Having a strong and educated team with boots on the ground in the market you are evaluating is critical to your success. It seems like you've gotten a lot of solid advice in this forum. Excited to see more about your journey!
-
-
- 9moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 969 votes
Great question and solid approach starting with long-term rentals and full property management 👍 For a first out-of-state deal, focus on fundamentals over “perfect” returns: conservative rent estimates, realistic expenses (especially maintenance/capex), and strong cash flow at today’s rates. Spend extra time vetting the property manager since they become your eyes and ears. Common beginner mistakes I see are underestimating rehab/repairs, trusting pro-formas without verifying comps, and stretching too thin on leverage early. Simple tools like Rentometer, Google Street View, crime maps, and conservative spreadsheets go a long way. Midwest markets can be very forgiving for first deals if you stay disciplined and patient.
Hey, it's cool to see you're taking the first step in this real estate game.
I'm in the Pittsburgh area, (you mentioned Ohio), and what I will say about these areas is that soooo many houses here are 100+ years old easily. And what comes with that is just straight up weirdness.
Often times "weirdness" is not easy to see from the pictures listed online, or even walkthroughs. So in my opinion, if you're serious, I'd suggest talking with someone on the ground in the area you want to invest, taking a flight out for a few days, and actually walking through some places. So you have a more solid "in person" understanding of what these homes are like.
When I say "weirdness" I'm thinking things like: layouts that don't make sense, ceiling heights in rooms that are too low, unlevelness in floors/walls, basement dampness issues or cracking or bowed walls, old wiring, shared driveways or parking issues. Stuff you really never see in Pictures.
The random stuff that makes a lot of houses around here weird, simply because they're 100+ years old.
I think Seattle is a newer built up city, so you might not be as familiar.Not ALL houses around here are like that. But, often times if you see a house that looks like a "DEAL" or "CHEAP" there's a good chance there's something weird about it. And it's good to have someone you can trust on the ground to check it out, or get a feel for what this all means in person before purchasing.
That's my thoughts. And overall, the midwest is a great place to buy nicely priced, cash flowing properties. Just gotta understand these homes!
- 9moMarc RiceBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
Quote from @Swetha Vedhanarayanan:
Hi everyone,
I’m new to real estate investing and excited to learn from this community. I’m a W-2 professional planning to purchase my first long-term rental and am exploring out-of-state markets, focusing on the Midwest (e.g., Ohio).
I plan to use full property management so I can stay passive while learning the fundamentals — analyzing deals, understanding cash flow, and building a solid foundation.
I’d love advice on:
-
How to evaluate your first deal as an out-of-state investor
-
Common beginner mistakes to avoid
-
Resources or tools that help with analyzing long-term rentals
Thanks in advance for any guidance — really looking forward to learning from experienced investors here!
Hi Swetha, most of the markets in the Midwest, especially OH is a good option for cash flow. I own 50+ units here and I can guide you to make the right investment. Happy to help!
Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews -
- 9moCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
It really depends on what you are looking for- equity, cashflow, passivity, tax mitigation, etc. All of those will factor in to your market and how you approach each potential property and the team that will help you.
I know a lot of people from Seattle who invest in Idaho because it's so close and probably the most landlord friendly state in the country. I'm partial because I live and invest there, but it's been good to me! Happy to make some intros for you if that's helpful.
Best of luck in your adventure!
- 9moEthan HaiglerBusiness MemberReal Estate Agent · Charlotte, NC · Member since 2019 · 111 posts · 58 votes
@Swetha Vedhanarayanan welcome! There are a lot of great comments and recommendations here. If you’d like to talk to someone directly on the phone, I will make myself available. I’m an out of state investor who invests in Detroit, St Louis, and Cleveland. I also have properties in Columbus OH, and areas of TN. I have a process that has become pretty standardized for investing in ours out of state to me. It all starts with a trusted team in the area you area where you are focusing. If you’d like to chat on the phone, please DM me. This community helped me to get started and I’m happy to help others.
- 9moJames WachobBusiness MemberReal Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 893 votes
@Swetha Vedhanarayanan Welcome and congrats on taking the first step into real estate investing. Starting out as a W 2 professional and looking at long term rentals out of state is actually a very common and smart path, especially if you are focused on learning the fundamentals while staying relatively passive.
I have been helping out of state investors build and grow rental portfolios for over 20 years, so I have seen what tends to work well and where new investors often get tripped up.
For your first deal, I would focus less on finding the perfect home run and more on buying something clean and predictable. Look closely at the neighborhood, not just the city. In many Midwest markets, it really can change street by street. Make sure your numbers are conservative, especially around maintenance, vacancy, and property management. If the deal still cash flows with conservative assumptions, you are probably on the right track.
A common beginner mistake is underestimating how important local teams are. A good property manager, solid renovation standards, and realistic rent assumptions matter more than squeezing out an extra percentage point of return on paper. Another mistake is trying to do everything at once. One well performing property that you understand is far better than three that keep you up at night.
Many first time out of state investors choose to start with a turnkey property so they can learn without dealing with heavy renovations or leasing from day one. Markets like Memphis, for example, can offer strong cash flow with professional management in place, which allows you to focus on understanding the business rather than putting out fires.
You are asking the right questions and taking a thoughtful approach, which already puts you ahead of most beginners. Happy to share insights as you continue learning, and I am sure this community will be a great resource for you as well.
- 9moBen FernandezBusiness MemberRealtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
Congratulations on your progress and keep up the good work.
Start by educating yourself on the market you're considering.
- Unemployment rates, if new jobs are coming to the area, crime trend (use spot crime or the crime map in NewsBreak), median income trend, population trends, renters to owners ratio, hot zip codes, best school districts, path of progress and last but not lease price-to-rent ratios.Next (after you've found a deal), be sure to capture the capex expenses based upon the life left of the components that will either need replacement or repair in due time. This is crucial to accurately planning cash flow (to the best of your ability).
Also, be sure to collect the economic occupancy (or if tenants are currently up-to-date with payments vs being behind).
Occupancy doesn't mean they're paying. Hence, due diligence is key in any deal you're undertaking.
This is just one call out to be sure to inquire about. Sometimes landlords should have evicted already and will pass on that problem to you. When they are passing it to you, be sure to be aware so it's considered within your negotiations (or to determine if the deal is of interest at all).
Ping me if you need a tool for this or if you're considering PA 😁
I wish you well in your quest.
- 9moBernice RetzloffPro MemberMemphis, TN · Member since 2024 · 234 posts · 100 votes
Hi @Swetha Vedhanarayanan! Welcome to BiggerPockets! You’re taking a very solid, thoughtful approach, especially by planning to stay passive while you learn the fundamentals.
A few tips based on working with a lot of first-time out-of-state investors:
Evaluating your first deal (OOS):
Focus on boring but predictable: stable neighborhoods, bread-and-butter rentals, and realistic rent comps.
Underwrite conservatively - assume higher maintenance, vacancy, and management costs than the listing suggests.
Don’t just analyze the property. Analyze the team (agent + property manager + contractor). A good deal with a bad team usually turns into a bad deal.
Common beginner mistakes to avoid:
Chasing “home-run” cash flow numbers instead of durability and tenant quality.
Trusting pro formas without validating rents, rehab scope, and timelines independently.
Choosing a market before understanding neighborhood-level differences (this matters a lot in Midwest markets).
Helpful tools/resources:
BP calculators are a great starting point, but always double-check with your own spreadsheet.
Rentometer, Zillow, and property manager rent opinions for validating rents.
Local PMs are an underrated resource! Good ones will tell you where not to buy.
I’m a real estate agent based in Memphis, TN, and I help out-of-state investors build and manage long-term rental portfolios. If you end up looking beyond Ohio or want to compare Midwest markets, Memphis is one many W-2 investors use for steady cash flow with professional management in place. Happy to answer questions or share what we’re seeing on the ground.
You’re off to a great start! Slow, intentional first deals usually lead to much smoother scaling later.
- 9moClare PitcherBusiness MemberProperty Manager · Milwaukee, WI · Member since 2024 · 162 posts · 97 votes
Hey Swetha, welcome and congrats on being able to purchase your first rental property. I think it is essential for out-of-state owners to visit the city they want to invest in. MLS and Zillow can only show part of the story. Next is finding a trusted realtor and property manager. Ask for referrals or meet them in person when you visit the city. This really helps to build trust and understand each others goals. I work for a property manager in the Milwaukee market. Please let me know if you have any questions!
Welcome Home Milwaukee4.4438 Reviews - Real Estate Agent · Central New York · Member since 2023 · 207 posts · 96 votes9mo
As others have mentioned, making sure the numbers make sense is absolutely crucial. Properly estimating rents, expenses, and any sort of renovations can make or break your first year in the property. Ideally, the first deal is a "safe" deal compared to future deals: higher cash flow, less risk, more stability, whereas once you figure out the kinks on the first property you can venture out a bit on the next ones.
As for mistakes to avoid, I would have some sort of vetting process for any team members in the area since you're out of area. This includes, agents, lenders, attorneys, and contractors. Run conservative numbers and BUDGET for when things go wrong. When I assess properties for clients, I add in an extra 25% of gross rent to help account for CapEx, Maintenance, and PM fees. This helps give a bit of cushion of something goes wrong.
For tools, there are paid tools that will work, as well as some resources here on BP. Personally for me, I use a basic Google Spreadsheet with formulas built in to calculate NOI, cash flow, and cash on cash. The simpler the better I've found. Also, its free. Also looking into local investor groups or finding other investors in the area can be paramount for learning what to avoid. Wishing you the best!
- 9moDean HarrisBusiness MemberReal Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
Welcome to BP and welcome to RE investing.
I own a large portfolio in Memphis where I BRRRR'd almost all of them (I can refer all the vendor partners you need)
I sell investment deals exclusively to OOS investors all day, every day
I host a podcast where I teach newbies how to invest in our great city! You can search for The Investor's Guide to Memphis Real Estate wherever you listen or want to watch your podcast.
Im excited to talk with you soon!
CrestCore Realty4.713 Reviews - New to Real Estate · Seattle · Member since 2025 · 5 posts · 20 votes9mo
Thank you all for taking the time to respond — I really appreciate the insights and real-world experience shared here. As a beginner, this has helped me better understand the trade-offs between cash flow and long-term growth, the importance of being realistic about property condition and neighborhood class, and why having reliable people on the ground matters when investing out of state. I’m looking forward to learning more and would love to hear any additional tips or lessons from your experience. Thanks again for the guidance!
- 9moAshish AcharyaBusiness MemberCPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
Hey, welcome to the community! You’re definitely starting in the right spot by being on BP.
From a tax perspective, even before you buy your first property, it’s worth thinking about how this rental will fit into your overall financial picture. Long-term rentals can create solid “passive” income, which is why most people get into real estate. But a lot of high W-2 earners get into it to take advantage of the tax-saving opportunities that are available. With the right structure, deductions, and depreciation, real estate can do more than generate cash flow, it can help offset income (once you understand how passive vs. non-passive income works) and build long-term wealth.
For out-of-state rentals, keeping clean records is key. Repairs are usually deductible, while upgrades and improvements need to be depreciated over time. Save all property management statements, invoices, and receipts, they’ll make your life much easier come tax time.
Some common beginner mistakes I see are underestimating expenses, mixing personal and rental costs, not tracking mileage, and assuming rental losses will automatically reduce W-2 income. Many W-2 earners are limited by passive loss rules, so losses often carry forward instead. Another big one is not having your team in place early, a lender is a good first step, a local agent, and eventually a CPA who understands real estate can make a huge difference in getting your structure set up correctly from day one.
Good luck and happy to connect!
INVESTOR FRIENDLY CPA®4.9242 Reviews - 9moRyan RomingerBusiness MemberReal Estate Broker · Indianapolis, IN · Member since 2018 · 340 posts · 144 votes
Going out of state with full property management is a common and workable way to start, especially if you stay conservative on the numbers. I’d focus on markets with steady employment, realistic rents, and managers who can show you local data instead of just projections. Most early mistakes come from underestimating expenses and overestimating rent, so solid assumptions and good local insight go a long way.
Intrigue Real Estate & Property Management4.6272 Reviews - Member since 2023 · 27 posts · 5 votes2mo
Hi Swetha,
Welcome. You're going to get a lot of "you're always better off investing locally" in threads like this one, so let me offer the other side.
Local feels safer but in practice it runs sloppier. When the property is twenty minutes away you let your guard down and skip the controls you'd never skip from 2,000 miles out. You eyeball a rehab instead of getting it in writing. You take the seller's word on vacancy because you drove past and the lights were off. Distance forces discipline, and that's a feature.
The team argument cuts both ways too. You'd have to build a team in your local market. Your realtor, your PM, your contractor, and your inspector all know that local market better than you do whether you live there or not. Remote doesn't add that work. It makes you do it on purpose.
On your three questions.
Evaluating the first deal. Your assumptions matter more than your calculator. Any of the free ones will do the math correctly. None of them will tell you your rent number is fantasy. So get rent from three property managers in that market instead of Zillow. Get taxes from the county instead of the listing. Get a real insurance quote. Then run it. Then run it again when the numbers move, because they will.
Common beginner mistakes. Two.
First, treating full property management as passive. You're hiring a team, and somebody has to manage the team. That's you. A PM nobody checks on is a PM making decisions you'd never make.
Second, leaning on trust instead of verification. This isn't about people being crooks. Structure protects you and goodwill doesn't. Set it up so nobody gets paid until the work is verified by someone whose paycheck doesn't depend on that work being done. And confirm the property is vacant with eyes you trust on the ground before you wire a dollar. "The seller said so" is not verification.
Related: interview five property managers, not one. You can't call one company, get all your answers, and decide that's the right one. The contrast between their answers is where the truth lives. Every answer any single one of them gives you is an opinion. Stack enough opinions and the pattern shows up.
On resources, be picky about whose advice you take. Plenty of people telling you remote doesn't work have never done it. Find people who are actively buying remotely, in a market that looks like the one you're targeting, and watch what they actually do rather than what they say. Ask them what went wrong on deal one. The ones who'll answer that honestly are the ones worth following.
One last thought. Since you're looking Midwest anyway, put duplexes and fourplexes on the list next to single families. Same loan type, same process, more doors, and a vacancy stings less when it's one unit out of four instead of one out of one.
What market are you leaning toward, and how many property managers have you talked to so far?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.