How to Pick a Location for Out of State Multi-Family Investing?

14 Replies

Hello BP Community,

My biggest obstacle is how to pick a market for multi-family investing. Our primary goal for investing is cash flow as well as appreciation over time. We have researched Florida, Texas, Alabama, etc. and feel like any could be good options- we just have to try one. I live in Southern California and am ready to jump in out of state.

How did you find your market? Any suggestions on hot locations? Thanks!

@Cassandra Cowen

You need to research as much as you can. After research pick maybe 3 like I did and visit the markets you are interested in. Consider ease of flight from your home state and Consider cost and frequency when there are cancellations helps to have options. As an OOS investor you will be in an a disadvantage vs the locals you will never have their knowledge or ability to visit a property or neighborhood after work like they can. I suggest zone in to a neighborhood and learn all you can about it.

Best of luck

Hi Cassandra,

Check out the free udemy.com videos from Neal Bawa. He goes over how to choose locations, what criteria you should be looking for, and even the spreadsheets on tracking your findings. He can also be found on his website at https://multifamilyu.com/ . Not trying to promote him but I'm only a few months old in this whole real estate investing thing and found his videos to be very insightful.

Best of luck.

Florida and Texas aren't going to give you a lot of cash flow anyways, but specifically for multi-families, MFRs don't tend to cash flow in either of those places well. Alabama, while great for SFR cash flow, isn't good for MFR cash flow either.

Are you wanting to put work into a property? Are you set on multi-families for a particular reason?

Originally posted by @Cassandra Cowen :

Hello BP Community,

My biggest obstacle is how to pick a market for multi-family investing. Our primary goal for investing is cash flow as well as appreciation over time. We have researched Florida, Texas, Alabama, etc. and feel like any could be good options- we just have to try one. I live in Southern California and am ready to jump in out of state.

How did you find your market? Any suggestions on hot locations? Thanks!

We're putting together a syndication for a specific multifamily property in Texas that we've found and the numbers work well for both cash flow and appreciation. Try to find one that is "value add" so you get the most bang for your buck. We've got a second in Arizona that looks promising. It's just a matter of networking and persistence.

@Cassandra Cowen

A good rule of thumb to decide on location is to go where:

1) you frequent now

2) you have friends or family 

3) you would want to frequent
4) you would want to retire

All of the choices entail doing the research and analysis needed to decide on location of course.

Best of luck!

I settled with Kansas City and neighboring cities. I first filtered areas of interest, growth and overall job development. I next looked at cities and states that were landlord friendly. One of the things that attracted me to Missouri was the eviction process for nonpayment. It's pretty straight forward and not that long of a judicial process. If you compare to the Kansas side, you will end up needing an attorney and it takes longer to get possession of property. I have property in California and it requires a lot of patience and time to evict someone for non-payment.

Hi @Cassandra Cowen . People have made and are making money in every market in the country. Each market has it's good areas and bad areas. So I perform submarket and neighborhood level research on Florida, Texas, and Alabama to find the best areas in those markets. You can do Census.gov research on a census tract basis, visit the markets in person, and talk with local owners, brokers, and property management companies.

Cassandra, 

There are a few websites that I use but typically each city has there own specific data. A few of the websites that I use are;

https://factfinder.census.gov/faces/nav/jsf/pages/...

www.bls.gov

www.city-data.com

There are numerous posts here on BP that provide lists of cities that are considered some of the top cities for rental real estate investing.

In fact there was a post that was started by Tom Ott that provides some of these details.

https://www.biggerpockets.com/forums/48/topics/657...

Ultimately, when looking for out of state investments you'll want to look for cash flow and good IRR. I own one rental in Texas and it performs okay because we bought it in 2013 but right now it's hard to find something that makes sense there.

Typically, the mid west such as Indiana, Kansas and Kentucky all provide good opportunities from a cash flow perspective.

@Cassandra Cowen I agree with what @Stuart Hemmes said as I’ve seen Neal Bawa speak at an RE summit. Disclaimer: I’m a newer investor also... Something I have learned and looking more into is that you want to look at cities with high job growth and a steady decrease in crime rate for about a 5 year period or so. Good luck!

Thank you everyone for answering my questions with insightful suggestions. It definitely will take more digging and time spent flying around to visit various markets. After researching, I'm focusing on a few locations and will decide soon thanks to your help. 

I work with quite a few investors out of California. David Greene and Brandon love our market. Brandon was looking at trailer parks last week in Ohio. I live in Louisville and would be happy to talk to you about it. If you go to our board you can see what is currently happening in our market.