Thoughts on investing out of state?

Buying & Selling Real Estate
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Thoughts on investing out of state?

Brandon Gamblin
Saint Louis, MO · Member since 2013 · 108 posts · 19 votes

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?

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Michael Glunk
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.)

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  • Travis Hill
    Investor · Multiple · Member since 2019 · 175 posts · 150 votes
    4y
    Quote from @Brandon Gamblin:
    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?



    Sure. Price point is what you are paying for a property, aka purchase price. Is it $100k or $1mil? Slow steady market is how the market appreciates in regards to appreciation, job growth, population growth, rent growth, etc. it benefits an investor because that shapes the 'buy box' (what are the specs of what I want to buy). 

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  • Jonathan Nixon
    Rental Property Investor · Fort Lauderdale, FL · Member since 2018 · 86 posts · 33 votes
    4y

    I'm about 50/50 in state and out of state. 

    I just follow the deals and where I will be able to have a good operator.

    1Reply
  • Michael Glunk
    Real Estate Agent · Evergreen, CO · Member since 2015 · 126 posts · 73 votes
    4y
    Quote from @Brandon Gamblin:

    @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?

    @Brandon Gamblin Not sure if you mean which is better for the most cashflow or which type of cashflow do I like better? So I will answer both.

    #1: From a max cashflow perspective my STRs do the best. My best producer is a SFH STR. It's in a resort area and I always look for ways to differentiate my properties. So besides the design and location, I made it a 6 bed and 4.5 bath that sleeps 15. In my market, there aren't many properties that size. Most are 2-4 beds. So it does really well. From a LTR perspective, for cashflow, I like small multifamily properties.

    #2: What kind of cashflow do I like better? Sounds like a strange question right? I'll take any cash flow! But certain types of properties work better for different types of lifestyles in my opinion. It depends what your goals are. I personally don't think STRs are that much effort once you get your systems in place, but they do take some of your attention. Whereas my LTRs (all but one) are managed by a property manager and about as close to zero effort as you can get. So I'll be looking to buy/build more STRs to increase my cash flow at a faster pace. While using those proceeds to build my LTR portfolio in markets where I have a higher likelihood of appreciation. As LTRs with good property management are about as little effort on my side as something can be. I answer questions for my PMs now and then, but my PMs know what I want done. And I keep my properties in good shape (and get them into good shape when I buy them) to ideally prevent issues before they happen. And they like this as well because it creates less work for my PMs so it's a win win.

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  • Kathryn Morea
    Developer · Member since 2010 · 188 posts · 104 votes
    4y
    Quote from @Jonathan Soto:

    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. 


     I moved from California to Puerto Rico at end of 2020.  I am finding deals here make so much more sense than in California.  I've been to both Rincon (pretty competitive) and Vieques, which is beautiful but remote.  We have a very active real estate group on the island if you would like to connect.

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  • Kerry Noble JrPro Member
    Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
    4y
    Quote from @Brandon Gamblin:

    @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.


     shoot me a message....lets connect

    1Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Brandon Gamblin   
    A lot of investors from California are investing in Columbus, OH. For them, the local market doesn't make sense in terms of the returns, the barrier of entry is quite high, and it's not very landlord friendly. So if you can find a place that would check those boxes of better returns than where you live, has a lower barrier of entry, and is landlord friendly, it's worth investing out of state. As for where, in particular, look for a market with lots of job opportunities and population growth. 

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  • Matthew Cervoni
    Accountant · Lexington, KY · Member since 2019 · 100 posts · 66 votes
    4y
    Quote from @Brandon Gamblin:
    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.)


    For me Tennessee was best at that time because I was living there for work. So I got primary resident terms and a TN first time homebuyer program when I acquired that property. Now that I am back in KY, I'm looking for my next house hack here! 

    Also, managing properties from a distance was only a mental hurdle. I didn't know if I would be able to do it well and maintain my property's performance. But the applications available today really make being a great out of state landlord possible! 

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  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    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?


     A lot of people are investing in Ohio

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  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Brandon Gamblin:
    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. 

     I think what helps a market appreciate is population growth. With the population growth, there will be an increase in jobs and an increase in housing needs thus making the market appreciate. If there is no population growth, businesses shut down, people move away for jobs and the market depreciates. Columbus market is hot because the price-to-rent ratio makes for great investments. People in California maybe could not buy a property there but they sure can buy multiple here. When you buy a property here you are still getting great cash flow after all expenses are paid. There is a heavy need for houses here due to all the companies like Amazon, Intel, The Limited, and more that have all chosen to set up shop. Not to mention the great Universities and hospitals. 

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  • Porter Linton Anderson
    Real Estate Broker · Layton, UT · Member since 2019 · 18 posts · 11 votes
    4y

    Living in a market that provides more appreciation and is difficult to cashflow in I of course have invested in more cashflow focused markets. I have worked in a few other states like Ohio, and New York and chose them specifically because they provide lots of opportunities to find cash-flowing properties that are much harder to find in the market I live in. I think that is probably the most common reason people look to invest out of state, the cashflow and lower entry point to invest. When starting out I was very hesitant to invest in a market so far from me but, overcame a lot of that fear by paying the city I was investing in a visit and meeting agents and managers face to face. 

    1Reply
  • Lynne HartBusiness Member
    Real Estate Agent · Saint Louis, MO · Member since 2015 · 115 posts · 49 votes
    4y

    Hi Brandon, you probably don't need another answer BUT I'm a Realtor and an investor.  As a realtor, my client base is nearly entirely investors, of all types.   I would imagine that a good 50% of my clients are investing in St. Louis Missouri from out of state.  They are buying and holding multifamily apartment buildings that are then managed by a property manager.   Just like many of the others have said, the driving factor in my clients choices to invest in St. Louis from another state is that our price points are very low, especially when compared to other major cities and/or coastal areas.   Our returns tend to be a bit higher as well.   Typically we're looking at about a 4-11% cap rate, which of course is dependent on the location and condition of the building.   As an example, you can get a 4 unit building in a C neighborhood roughly around $250,000.  I have a 12 unit currently on the market at $899,000 with an 8% cap rate.   This year a client of mine got 19 units turnkey for $995,000 and it was somewhere around an 9% cap if I remember correctly.   Hope that's helpful!

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  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    4y
    Quote from @Brandon Gamblin:
    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. 





    What kind of return is a good return? Or does it depend on the market and the property?

    I usually go for cap rates above 7% especially with multi family and SFH. That is already asking for a lot but you have to be patient to find the properties you want to own. 

    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?

    Eventually you want to own more properties so that you can have more cash flow coming in every month. Cleveland has enough inventory for investors to buy more than 1 property and scale their portfolio at a reasonable price. 

    Let me know if you want to connect and we can chat more. 



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  • Ann-Marie Vargas
    Realtor · San Diego · Member since 2017 · 32 posts · 10 votes
    4y

    @Brandon Gamblin

    Yes I invest out of state and I am a CA resident

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  • Richard AdvaniPro Member
    Developer · Oklahoma City · Member since 2022 · 26 posts · 15 votes
    4y
    Quote from @Brandon Gamblin:
    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”?







    My CA properties are short term rentals, the ROI and cash flow on a long term rent would not make them viable investments. I also self manage the STR as well so I save on the high management fees typically associated with using a STR management company.

    In terms of strategic markets - I mean markets that have an inherent growth path based on key metrics like employment growth, population growth, tax benefits, etc. I.E. Austin Texas, Palm Coast FL, Raleigh NC.

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  • Stephen Brown
    Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes
    4y
    Quote from @Brandon Gamblin:
    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?


     Yessir! Not a lot of rehab needed either. Just buy and earn!

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    4y
    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?


    You get a lot of people from areas like Cali, NY, NJ who invest in low cost areas like Cleveland, Toledo, Detroit, Birmingham and down where it likes like you're living in Saint Louis.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Build a solid team, I would fly out and spend a few weeks actually trying to understand the market. You will get to a point where you will be able to find a market and know all the pieces to complete your puzzle. For now I would hire a project manager to run the show 

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  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Hello @Brandon Gamblin,

    Live where you like but invest where you can achieve your investment goals. The need for a dependable passive income location is why many people invest remotely. Of the 150 to 200 clients we've worked with, only 10 or 12 lived locally; all the rest lived in other states or countries. We know remote investing works because over 90% of our clients buy more than one property, and over 80% buy more than two.

    As to where to invest, select a location where you can achieve a dependable passive income. My definition of a dependable passive income is as follows:

    • Reliable - You continuously receive the income with minimal interruptions, in good and bad economic times.
    • Inflation Adapting - Your rental income increases faster than inflation, so you have the additional dollars you need to maintain the same lifestyle.
    • Persistent – The income continues for a long time; you and your spouse will not outlive the income.

    Below is an illustration of the process I recommend following:

    https://www.lasvegasrealestateinvestmentgroup.com/nwassets/images/dependablePassiveIncomeProcess20220812.svg
    • Goals - Start with your goals. If your goal is to acquire low-cost properties, there are many places you can purchase them. You might want to wait on such locations because many have declining prices. If your goal is dependable passive income, the most important consideration is whether the location’s rental income has consistently exceeded the inflation rate for many years before COVID. What happened during COVID is not relevant today.
    • Location - The most important investment decision you make is the location, not the property. The critical decision factor is whether rents consistently increased faster than the inflation rate before COVID.
    • Tenant pool - After location, the most important decision is the tenant pool. The only way to have a dependable passive income is if your properties are continuously occupied by tenants that pay all the rent on schedule, remain employed in good times and bad, stay for many years, and take care of the properties.
    • Property - Only buy properties that your target tenant pool is ready, willing, and able to rent at full rental value.

    If you follow the process above, the odds of consistently acquiring dependable passive income properties are high. I know this because this is the process my partner and I developed and followed for the past 15+ years, and it has delivered over 450 passive income properties that consistently performed in good or bad times (through the 2008 crash and Covid).

    Whatever location you choose, you need a local investment team, not just an investor-friendly realtor.

    In summary, only buy where you can achieve a dependable passive income. Once you select a location, find a good local investment team and work through your team to reduce time, money, and risk.

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  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
    4y
    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?

     We see a lot of clients from more expensive markets looking to invest in Metro Detroit because the housing is more affordable and price/rent ratios are better.

    Real estate is supposed to be passive, so in theory you would use a pm in your home state or a far away market and be pretty hands off either way so might as well go where the numbers are better.

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  • Matt Guignon
    Real Estate Agent · St. Louis, MO · Member since 2017 · 74 posts · 20 votes
    4y

    @Brandon Gamblin St. Louis is an excellent market to invest in for affordable cashflow. Our city has tons of investors from out of state and out of country who have specifically targeted our market. My company manages properties in MO,CO,GA,MS,FL,OK,AR,SC,AL,OH,MI, and VA. Regardless of the market you decide to invest in, it's imperative that you develop a team of bankers, insurance professionals, tradesmen, property managers, lawyers, etc. If you ever want to chat and connect about STL or any of those other markets, I'd love to get together sometime!

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