How to determine where to invest out of state

How to determine where to invest out of state

Member since 2020 · 1 post · 1 vote
I discovered BiggerPockets relatively recently and have become interested in the idea of investing in real estate. I'm from the San Francisco Bay Area, and I don't particularly want to own rental property here for a variety of reasons - very expensive, landlord-unfriendly political climate, and I think the risk of a very destructive Bay Area earthquake is underrated. So none of the strategies for investing locally will work for me, and I pretty much have to look out of state. I'm interested in buying and holding real estate long term that will cash flow immediately.

One of the things I'm wondering about is how to determine what area(s) of the country are places it's worthwhile for me to spend time looking for potential rental properties in, especially as a complete newbie who has never bought any kind of property before. Living in the bay area, pretty much any random part of the country has houses that look pretty cheap to me. And I don't have any relatives or other associates in any other part of the country, so I can't take advantage of any kind of local connection.

I've basically been looking on Redfin for house prices in cities that I picked pretty much at random. So far, it seems like Des Moines, Iowa has some single-family homes that might be good investments based on the 1% rule and assuming a quick look at rents on craigslist is accurate (of course I don't know what I don't know about evaluating properties in any given area). But like I said, I'm picking regions to look at pretty much randomly, and I'm worried I could spend a long time fruitlessly looking at home prices in some place or another without feeling like I know enough about an area remote from me to feel confident in pulling the trigger and buying something (or determining that there are no good investments in a place, giving up and trying again somewhere else). Does anyone have any thoughts on what the best way to approach this is, given my level of experience?
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Columbus, OH · Member since 2019 · 78 posts · 66 votes
6y

Definitely check out the website city-data.com. It has a lot of statistics you can view for a particular city. In terms of picking a state to invest I recommend looking at landlord tenant laws, crime, growth, and price point to entry. It is also depends a lot on your goals, are you looking for cash flow mainly or appreciation as well. The last thing I need to recommend is making sure you have your team in place, that is crucial for out of state investing. Reach out to find reputable contractors, property managers, etc.

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  • Chula Vista, CA · Member since 2017 · 195 posts · 104 votes
    6y

    @Greg Shuflin

    Write out your lists of wants ie. Landlord friendly state, population minimum of x, etc. Realize the higher you spend the harder it is to cash flow (typically) as expensive markets tend to be appreciation plays, single vs multifamily, age of home, appetite for renovations, and many other factors. Figure out what you feel comfortable with and what you don't. Prioritize your key factors and input that into your search criteria. Narrow down to no more than 5 markets. Start searching BP to see if anyone invested or posts about that market, make connections, ask for referrals, start calling people in the market and begin learning. Read David Green's book on long distance investing.

    No such thing as wasting your time, you have to realize what bad looks like so you can pounce on a good deal when it comes along.

  • Darson GranthamBusiness Member
    Realtor · Des Moines · Member since 2018 · 304 posts · 253 votes
    6y

    @Andrew Kougl is correct, the book on long-distance investing by David green is a must-read for those in low cashflow states that want to buy in more cash flowing areas.

    I'm happy to give you a market update of central IA, it is not the cash flow king like some other areas around the midwest & southeast, but from what I understand building a team in an area is the key to success.

    I'm just lucky I live in an area that I really like economy, RE market, and have networked extensively, that stuff just make such a big difference.  It's basically like insider trading, which is legal in RE. 

  • Columbus, OH · Member since 2019 · 78 posts · 66 votes
    6y

    Definitely check out the website city-data.com. It has a lot of statistics you can view for a particular city. In terms of picking a state to invest I recommend looking at landlord tenant laws, crime, growth, and price point to entry. It is also depends a lot on your goals, are you looking for cash flow mainly or appreciation as well. The last thing I need to recommend is making sure you have your team in place, that is crucial for out of state investing. Reach out to find reputable contractors, property managers, etc.

  • Property Manager · Huntsville, AL · Member since 2017 · 302 posts · 246 votes
    6y

    Definitely look in to the Huntsville, AL market.  Our city is growing by approximately 100 people per week with all of the new developments and companies coming into the area.  From the projections, Huntsville is slated to be as big as Birmingham within 10 years.

  • Investor · Minnesota & Kansas · Member since 2020 · 176 posts · 75 votes
    6y

    @Greg Shuflin-3 things we look for when going out of stat are-Job growth, population growth & Diversity in employment. Most of these data you will find in census & some online research.

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