Thoughts on investing out of state?
Saint Louis, MO · Member since 2013 · 108 posts · 19 votes
Thoughts on investing out of state?
Most Popular Reply
Real Estate Agent · Evergreen, CO · Member since 2015 · 126 posts · 73 votes
4y@Brandon Gamblin Great question! I've been investing out of state for years. I invest out of state for a few different reason, but my two primary reasons are as follows:
MI - I invest here because I can get better cash flow than where I live. My initial investment goal was to gain as much cash flow as possible so that I could become financially free from my W2 job. I have since achieved this and now just focus on real estate. Why Michigan over other mid west areas? I have a friend in there and that's what I needed to get started there. Now that I am started and have a solid team, why leave? I'm still able to find deals, so I'm still investing in MI. But if/when that ever changes, that would cause me to look in other areas.
MT - I live in CO, but love MT because it is less crowded then CO. I see myself moving there in the future once my kids are through school. So that was the main initial driver. But the market has also proven to be decent for cash flow. Not as good as MI. But I get better appreciation than MI. So it's a good balance.
CO - I live in CO and I'm an agent that works with investors in CO. So because I am here, it makes it easier to invest here. It also makes it easier to take on more time intensive projects. For example about 2 years ago I finish a project where I build two homes in a ski town in Colorado. I was able to be there on site which helped in this process. And I ended up with two free ski homes out of it! One I LTR to provide housing for the mountain community. And the other I STR and do very well. Given I have $0 into the properties, the cash flow, as you can guess, is better than any other project I've done. Because of the market conditions, I was able to achieve this by pulling all of my money out of the project when I converted from a construction loan to a traditional 30 year fixed. I probably wouldn't have taken on this project at a distance. But I did because it's only an hour from my house and I could be there if needed. Now that I have done it, well I would do it from a distance. But I needed to have the experience of first attempting a project like this closer to home to build that confidence. (Come to think of it, I should probably write an article for BP on this as it was a pretty interesting project that could be duplicated.)
46 Replies
- 4yKerry Noble JrPro MemberInvestor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
absolutely......every deal ive ever closed was with someone that didnt live in my market.....and im interested in other markets
- Real Estate Agent · Evergreen, CO · Member since 2015 · 126 posts · 73 votes4y
@Brandon Gamblin Great question! I've been investing out of state for years. I invest out of state for a few different reason, but my two primary reasons are as follows:
MI - I invest here because I can get better cash flow than where I live. My initial investment goal was to gain as much cash flow as possible so that I could become financially free from my W2 job. I have since achieved this and now just focus on real estate. Why Michigan over other mid west areas? I have a friend in there and that's what I needed to get started there. Now that I am started and have a solid team, why leave? I'm still able to find deals, so I'm still investing in MI. But if/when that ever changes, that would cause me to look in other areas.
MT - I live in CO, but love MT because it is less crowded then CO. I see myself moving there in the future once my kids are through school. So that was the main initial driver. But the market has also proven to be decent for cash flow. Not as good as MI. But I get better appreciation than MI. So it's a good balance.
CO - I live in CO and I'm an agent that works with investors in CO. So because I am here, it makes it easier to invest here. It also makes it easier to take on more time intensive projects. For example about 2 years ago I finish a project where I build two homes in a ski town in Colorado. I was able to be there on site which helped in this process. And I ended up with two free ski homes out of it! One I LTR to provide housing for the mountain community. And the other I STR and do very well. Given I have $0 into the properties, the cash flow, as you can guess, is better than any other project I've done. Because of the market conditions, I was able to achieve this by pulling all of my money out of the project when I converted from a construction loan to a traditional 30 year fixed. I probably wouldn't have taken on this project at a distance. But I did because it's only an hour from my house and I could be there if needed. Now that I have done it, well I would do it from a distance. But I needed to have the experience of first attempting a project like this closer to home to build that confidence. (Come to think of it, I should probably write an article for BP on this as it was a pretty interesting project that could be duplicated.)
- Accountant · Lexington, KY · Member since 2019 · 100 posts · 66 votes4y
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Brandon,
I currently invest out of state in Tennessee. I worked in the Nashville area for three years and got to know it well. My house there started as a house hack but then I turned it into a full time rental property! The ROI is CRAZY and I expect good things to come with some of the large companies moving there.
My biggest hurdle was being comfortable managing from afar but Tenant Cloud has made it easy on me!
- 4yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
We think the Midwest is a GREAT place for OOS investors to consider!
YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...
Your biggest question shouldn't be WHERE to invest, but HOW you will invest!
Many OOS investors set themselves up for failure because they don't truly take the time to understand:
1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.
2) The Class of the PROPERTY they are buying - which is relative to the overall area.
3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.
4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.
5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.
6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.
7) That OOS property Class rankings are often different than the Class ranking of the local market they live.
8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.
9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.
10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.
11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?
Good luck with whatever you decide😊
Logical Property Management4.9462 Reviews - Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes4y
I personally like the midwest and I've been looking at Michigan for out of state properties however my city is great. You can still find on market turnkey deals here. I'd be happy to discuss more. The other market I am considering is Grand Rapids, MI.
Are there any RE investors interested in investing outside the state of where you currently reside?
Yes, I reside in Northern Virginia and decided to invest in Cleveland, OH.
And what is it about it that compels or stops you to invest this way?
I have continued to invest out of state since 2020 because of the returns, available inventory and ability to scale the portfolio. The strategy that I used was working with turnkey companies to help me build my portfolio. Let me know if you want to connect and I can go over the purchase process and answer any other questions related to real estate.
- Investor · Multiple · Member since 2019 · 175 posts · 150 votes4y
I am a Marine stationed in California and I invest in Cleveland and Milwaukee. I love the price point and the slow steady markets that exist there.
- Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes4y
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Honestly, with how hot the market is here in Columbus Ohio I have not wanted to invest in another state. Over half of my clients are actually OOS investors. The price-to-rent ratio makes for great investments here. Not to mention our appreciation has been 8% higher than the US national average, because of the high demand for affordable housing. We are also a landlord-friendly state.
Here is an article that has some of the states and trends of our market. https://learn.roofstock.com/bl...
- 4yRichard AdvaniPro MemberDeveloper · Oklahoma City · Member since 2022 · 26 posts · 15 votes
I have been investing out of state for over 14 years. I live in CA and own properties in various markets across the country. While I do have a few rental investments in CA, investing out of state has allowed me to invest in strategic growth markets that were out of range in california. Positive cash flow and lower cost of entry is the main reason most investors venture out of state. That being said, its important not to generalize all out of state investments in to a single bucket as each market offers its own set of pros and cons. Invest wisely.
- 4yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
I started purchasing small multifamily in Columbus, Ohio over 4 years ago. The cost of entry is low while the cash flow is high. Columbus is the only Ohio market that has seen rapid growth in jobs and population. - I’m in TX and FL. Worked out.
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
- 4yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
I recommend you consider Houston, TX!
I personally have rentals here in Houston, the cash-on-cash return and appreciation are steady.Investing out of state requires specific attention to various factors like understanding the local market, cap rates, rents and other critical information.
Do market analysis on current rents, potential rents, appreciation, etc.
You need a team of local professionals like property managers, contractors, agents etc.
A local Investor-Agent can help shorten your learning curve and save you a lot of headaches as they tend to understand the market better.You should select a market that will meet your investment goals.
Here are four key reasons why investors purchase rental property out of state:
- Invest in geographic areas with population and job growth is strong.
- Diversify a rental property portfolio with markets that best match your investment strategy.
- Focus on the type of returns you’re looking for, such as maximum cash flow, high appreciation, or total yield over the targeted holding period.
- Operating expenses are lower in markets with fewer regulations, lower property taxes, and landlord-friendly laws.
Finally, as mentioned earlier, it's crucial to build a great network of professionals to help you and to occasionally visit your property yourself.
All the best!
NETWORTH BUILDERS5237 Reviews - Real Estate Agent · Queens, NY · Member since 2015 · 83 posts · 39 votes4y
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Yes! Actually all of my investments are out of state because I live in NYC and not only is it expensive, I am not in love with the tenant friendly laws and the returns.
I've had investments in NC, NM and FL that I've sold.
And I am currently in Milwaukee, Memphis, Athens GA and Oklahoma!
The biggest key is to establish a rockstar team that you can trust. If your agent, PM, lender, contractor etc is a big weak link, the whole operation suffers TRUST ME. But it's not the end of the world, you just cut ties and get someone else in there ASAP and you should be good to go! - Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
@Kerry Noble Jr
How are you going about closing deals while being out of state? Do they have a such thing as a virtual closing?By the way, I see you are from the Indianapolis market. That’s exactly where I'm looking to invest as we speak. Ill literally be moving there this time next year. So I'm glad I ran into you.
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
@Michael Glunk
Oh wow. Congratulations to you on your accomplishments. I know I'm not the only one that’s using the real estate game to escape working a 9 to 5. All of what you said is very inspiring because knowing you can have passive income from real property and still have more free time than you would with w2 job is what motivates the pursuit of our dreams. So are you favored more towards getting cashflow from SFHs, Multi Families, or do you go even bigger? Like commercial or industrial? - Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Matthew Cervoni:
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Brandon,
I currently invest out of state in Tennessee. I worked in the Nashville area for three years and got to know it well. My house there started as a house hack but then I turned it into a full time rental property! The ROI is CRAZY and I expect good things to come with some of the large companies moving there.
My biggest hurdle was being comfortable managing from afar but Tenant Cloud has made it easy on me!
@Matthew Cervoni
Why was managing properties from a distance a hurdle for you?
And what kind of investment opportunities did Tennessee have that Kentucky didn’t (Im assuming that you’re from Kentucky based on what your profile says.) - Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Drew Sygit:
We think the Midwest is a GREAT place for OOS investors to consider!
YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...
Your biggest question shouldn't be WHERE to invest, but HOW you will invest!
Many OOS investors set themselves up for failure because they don't truly take the time to understand:
1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.
2) The Class of the PROPERTY they are buying - which is relative to the overall area.
3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.
4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.
5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.
6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.
7) That OOS property Class rankings are often different than the Class ranking of the local market they live.
8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.
9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.
10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.
11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?
Good luck with whatever you decide😊
Thank you a lot. I’m going to read the blog for more insight. 2 questions though.
Since most investors are coming to the Midwest to invest, why do you think that is? Why aren’t more people going out to the east coast, or west coast to invest?
This may not mean anything, but it seems that most of the homes in California are always priced high. I’m thinking if you can get your foot in the door on those, then you’ll probably make more money when you sell the property right? And those agents out there seem to make more on their commissions. I don’t know. I’m just beginning to understand how important it is to know your market, but I only know so much. - Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Stephen Brown:
I personally like the midwest and I've been looking at Michigan for out of state properties however my city is great. You can still find on market turnkey deals here. I'd be happy to discuss more. The other market I am considering is Grand Rapids, MI.
What are turnkey deals? Those are cash flowing rental properties, correct?
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Aj Parikh:
Are there any RE investors interested in investing outside the state of where you currently reside?
Yes, I reside in Northern Virginia and decided to invest in Cleveland, OH.
And what is it about it that compels or stops you to invest this way?
I have continued to invest out of state since 2020 because of the returns, available inventory and ability to scale the portfolio. The strategy that I used was working with turnkey companies to help me build my portfolio. Let me know if you want to connect and I can go over the purchase process and answer any other questions related to real estate.
Yes Id certainly like to go over some things with you to get a better understanding of the purchase process. You mentioned returns, available inventory and scaling your portfolio. What kind of return is a good return? Or does it depend on the market and the property? I’m not 100% sure how the idea of available inventory comes into play in real estate investing. And when you say scaling your portfolio, I’m thinking you mean adding more properties with the collection of properties you already have?
I know we all would want a good return on our investments, but I’m not quite sure how important available inventory is and how important scaling a portfolio is either. Neither do I know how to build my own portfolio.
- Miami, FL · Member since 2017 · 7 posts · 8 votes4y
Not technically a state but Im very interested in Puerto Rico. Mainly Vieques and Rincon. If anybody has any experience or can put me in contact with someone who does, thatd be great.
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Travis Hill:
I am a Marine stationed in California and I invest in Cleveland and Milwaukee. I love the price point and the slow steady markets that exist there.
Can you explain what you mean by Price point? And what does a slow steady market look like? And how does that benefit an investor? - Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Steven Foster Wilson:
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Honestly, with how hot the market is here in Columbus Ohio I have not wanted to invest in another state. Over half of my clients are actually OOS investors. The price-to-rent ratio makes for great investments here. Not to mention our appreciation has been 8% higher than the US national average, because of the high demand for affordable housing. We are also a landlord-friendly state.
Here is an article that has some of the states and trends of our market. https://learn.roofstock.com/bl...
I've always wondered what causes appreciation or depreciation. As well as what data source I could go to and get this type of information. I even wonder if this type of information is accurate and up to date. And I always hear about a hot market. Exactly what is a hot market? Is that a market where cash flow investors, and fix & flip investors all profit and get great returns? Or does this have something to do with price or value of homes in a specific area? I'm not 100% on what it means. I just know that its a positive or good connotation behind it.
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Richard Advani:
I have been investing out of state for over 14 years. I live in CA and own properties in various markets across the country. While I do have a few rental investments in CA, investing out of state has allowed me to invest in strategic growth markets that were out of range in california. Positive cash flow and lower cost of entry is the main reason most investors venture out of state. That being said, its important not to generalize all out of state investments in to a single bucket as each market offers its own set of pros and cons. Invest wisely.
How does the market in California where you do hold those rental investments, compare and contrast with those out of state strategic growth markets you’re referring to?And what do you mean by “strategic growth markets”?
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Remington Lyman:
Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
I started purchasing small multifamily in Columbus, Ohio over 4 years ago. The cost of entry is low while the cash flow is high. Columbus is the only Ohio market that has seen rapid growth in jobs and population.When you say, “the cost of entry is low” are you saying that properties are easier to purchase?
And you’re the second person on this thread that has mentioned Columbus, Ohio. Now I’m interested.
- Saint Louis, MO · Member since 2013 · 108 posts · 19 votes4y
Quote from @Allen Wu:
I’m in TX and FL. Worked out.Quote from @Brandon Gamblin:
Are there any RE investors interested in investing outside the state of where you currently reside? If so, which states? And what is it about it that compels or stops you to invest this way?
Are one of those your original state? Or are they two states outside of your home state that you're now investing in?
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