Thoughts On Investing Out Of State
Contractor · San Diego, CA · Member since 2024 · 43 posts · 27 votes
Thoughts On Investing Out Of State
Most Popular Reply
Samuel DioufBusiness Member
Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votesHey Diran,
I think it all depends on what your goals are and what you want to get out of real estate. If you're interested in out-of-state investing, there are some great opportunities in the Ohio markets. Many investors from California buy residential homes locally but invest in the mid-west because of the yearly cash returns making more sense in these lower priced markets. I moved from Florida to start investing in Columbus and Cincinnati.
You would definitely need to build your core-4 so you have a solid foundation to build on. The core-4 consists of a realtor, contractor, property manager, and a lender.
Reafco - Samuel Diouf528 Reviews
30 Replies
- 2ySamuel DioufBusiness MemberReal Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
Hey Diran,
I think it all depends on what your goals are and what you want to get out of real estate. If you're interested in out-of-state investing, there are some great opportunities in the Ohio markets. Many investors from California buy residential homes locally but invest in the mid-west because of the yearly cash returns making more sense in these lower priced markets. I moved from Florida to start investing in Columbus and Cincinnati.
You would definitely need to build your core-4 so you have a solid foundation to build on. The core-4 consists of a realtor, contractor, property manager, and a lender.
Reafco - Samuel Diouf528 Reviews - 2yMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 499 posts · 553 votes
Hey @Diran Deukmajian. I was born and raised in San Francisco and ran into the same issues finding properties in 2021. I ultimately chose Columbus as my target market and have been pretty satisfied with my decision.
Pros
- cost effective entry points which will allow you to scale your portfolio easier.
- Depending on your target market, you can get decent cashflow from day 1 + appreciation as time goes on (if you target a market with good population growth and other catalysts)
Cons:
- in the beginning, not being able to see/go to the property and having to trust a complete stranger with your investment. Sam is absolutely correct about the core4. Those are essential to investing out of state.Happy to share my out of state investing experiences.
Good luck with your REI journey and let me know if I can help out.
Reafco - Mike Paolucci 512 Reviews - Real Estate Agent · San Jose, CA · Member since 2023 · 182 posts · 104 votes2y
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
One huge pro, as you mentioned, is the affordability. The barrier of entry is much lower in OOS markets compared to California. Whether it is a bad idea depends on what your goals and strategies are (STR vs. LTR vs. Flips vs. Buy & Holds, etc...). Each market is very different. It is a bad idea if you pick the wrong market for the wrong strategy. I suggest looking into areas that you are at least somewhat familiar with or have someone you can trust who can provide you that information. As @Samuel Diouf mentioned, your core-4 are important. Each one of them can easily make or break your deal. You can start by talking to investors/ investor-friendly realtors from different markets and learning to analyze different types of deals. Best of luck!
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.
Our OPINION for the Metro Detroit market (always verify each area for yourself!):
Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 yearsClass C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
What else can we assist you with?
Logical Property Management4.9455 Reviews - Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
Hey Diran, I live north of you in the Central Coast.
But I invest almost exclusively in Detroit.
The pros to out of state investing are many... you can literally go anywhere. You aren't limited by what's in your backyard.
The cons are things you'd expect. You have to really trust the folks you're working with. You can't get eyes on a property easily, so you're trusting what folks are telling you, photos, videos, etc. It's tough, but can be worth it.
If you don't NEED to go out of state, don't. That means if you can still hit your goals in a reasonable timeframe, then stay local.
I've achieved my initial goals (financial freedom), so I'm now considering how I'll invest going forward. I'll likely continue mixing in some Detroit stuff since I have a great team there. But I'll probably start thinking about investing locally too.
One of my big goals is to buy two houses nearby me just in case my kids want to stay or come back to the area when their grown. What a gift it would be to be able to set them up to do that!
- 2yJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesHey Diran, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
Jimmy Lieu, Red 1 Realty4.9120 Reviews - Contractor · San Diego, CA · Member since 2024 · 43 posts · 27 votes2y
Quote from @Travis Biziorek:
Hey Diran, I live north of you in the Central Coast.
But I invest almost exclusively in Detroit.
The pros to out of state investing are many... you can literally go anywhere. You aren't limited by what's in your backyard.
The cons are things you'd expect. You have to really trust the folks you're working with. You can't get eyes on a property easily, so you're trusting what folks are telling you, photos, videos, etc. It's tough, but can be worth it.
If you don't NEED to go out of state, don't. That means if you can still hit your goals in a reasonable timeframe, then stay local.
I've achieved my initial goals (financial freedom), so I'm now considering how I'll invest going forward. I'll likely continue mixing in some Detroit stuff since I have a great team there. But I'll probably start thinking about investing locally too.
One of my big goals is to buy two houses nearby me just in case my kids want to stay or come back to the area when their grown. What a gift it would be to be able to set them up to do that!
Thank you Travis. It seems as though everyone is investing in either Ohio or Detroit. Why is that? Are the home prices so low that investors can afford multiple properties at a time? Are they even making a monthly profit when they rent it out? If they are making a small profit, is that even worth it?
I would assume since CA home prices seem to have such a large return, why not just invest in CA and wait it out? Wait until the value of the property is way more than what you paid?
- 2yPatrick DruryBusiness MemberReal Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
@Diran Deukmajian
Buy the first couple then add partners into the mix. Make sure you both have goals that are aligned and review each other's roles and responsibilities in the partnership so both of you have clear expectations of who is doing what ahead of time. - Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2yThere’s an incredible amount to unpack here.
Quote from @Diran Deukmajian:
Quote from @Travis Biziorek:
Hey Diran, I live north of you in the Central Coast.
But I invest almost exclusively in Detroit.
The pros to out of state investing are many... you can literally go anywhere. You aren't limited by what's in your backyard.
The cons are things you'd expect. You have to really trust the folks you're working with. You can't get eyes on a property easily, so you're trusting what folks are telling you, photos, videos, etc. It's tough, but can be worth it.
If you don't NEED to go out of state, don't. That means if you can still hit your goals in a reasonable timeframe, then stay local.
I've achieved my initial goals (financial freedom), so I'm now considering how I'll invest going forward. I'll likely continue mixing in some Detroit stuff since I have a great team there. But I'll probably start thinking about investing locally too.
One of my big goals is to buy two houses nearby me just in case my kids want to stay or come back to the area when their grown. What a gift it would be to be able to set them up to do that!
Thank you Travis. It seems as though everyone is investing in either Ohio or Detroit. Why is that? Are the home prices so low that investors can afford multiple properties at a time? Are they even making a monthly profit when they rent it out? If they are making a small profit, is that even worth it?
I would assume since CA home prices seem to have such a large return, why not just invest in CA and wait it out? Wait until the value of the property is way more than what you paid?
I invest in Detroit for cash flow and appreciation. It was the highest appreciating market in the country the other month, beating out Miami.
Yes, for me it’s worth it. My gross rents are something like $18,000/mo. I’m nearly financially free because of the purchases I’ve made there since 2019. Appreciation has been phenomenal as well.
Pricing largely plays a role as well. I’d have a hard time holding LTR’s in CA unless I was already financially free. It’s too concentrated having an $800k+ rental (low end in my area) and if that tenant decides to stop paying it’s going to really hurt! - Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes2y
Dont believe all the bs you read on here. Real life you need self manage in 2024 to make any cashflow. You can self manage if in a good area while out of state but just know the chance of hiring a manager and cash flowing any significant amount is close to 0 regardless of area. Ive sold lots of out of state buyers and still do.
- Contractor · San Diego, CA · Member since 2024 · 43 posts · 27 votes2y
Quote from @Henry Lazerow:
Dont believe all the bs you read on here. Real life you need self manage in 2024 to make any cashflow. You can self manage if in a good area while out of state but just know the chance of hiring a manager and cash flowing any significant amount is close to 0 regardless of area. Ive sold lots of out of state buyers and still do.
Thanks Henry. Yes for the property I invested in a couple months ago is only working for me since I am the one whose managing it. It's my only property, and since it's close to home, I can save so much money by doing it all myself and not hiring a property manager. Thanks!
- Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes2y
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
Hi Diran, there plenty of other opportunities outside of California, my clients are involved in institutional grade properties across the country. We also have investors making investments into funds, which are small portfolios of properties.
There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country.A very good source of local analysis, rereport.com.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes2y
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
I know many investors from CA, that have purchased 100++ homes in the Midwest for years. I live in FL and do all my business out of state. It's all about your team and knowledge. I just picked up another duplex, that will have about a 20% net cap based on cash purchase, all from FL
Good luck
- 2yMin ZhangBusiness MemberReal Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
I recommend reading “Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties” - I found it to be very helpful when I got started investing 2.5 years ago.
Here is a summary of the book.
https://www.nateliason.com/notes/long-distance-real-estate-investing-david-greene
The book also mentions the importance of having a rockstar Realtor, contractor, lender, and property manager.
I invest locally in Columbus and Cleveland. I can send you a list of contacts in Ohio to help you build your team, property manager. Let me know how I can help!
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
having been in the OOS business for 20 plus years as a BRRR lender/JV partner.
I have one simple rule.. I have done deals in virtually every city state that the OOS investor is investing in today.
Rule is :
Pick your market.. research median home price research schools buy at the median price or a littler greater .. this will automatically keep you out of C and D and half of the buyers if not more are owner occ ( thats what you want ). That simple rule will help you immensely form making a big boo boo and chasing yield on paper.
An Option that is closer to you and affordable is Vegas.. some of the lowest prop tax's in the country no big weather extremes find newer homes and ready rental pool.. with mid term rentals a reality.
- 2ySam McCormackBusiness MemberReal Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
You can get partners but I don't think it would make things easier. You definitely need a realtor to start. And then your realtor should be able to connect you with anyone you need from there. Have you narrowed into a city yet? My Cincinnati/NKY investors are doing pretty well here, let me know if you are interested!
Sam McCormack Realtor - Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes2y
You should look for an investor friendly agent and establishing your core 4. The core 4 is David Greene’s long-distance investing strategy and consists of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to invest in any market confidently.
As for picking a specific market - I would go after one with an increasing job and population growth. I invest and work in Columbus, Ohio.
- Contractor · San Diego, CA · Member since 2024 · 43 posts · 27 votes2y
Quote from @Sam McCormack:
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
You can get partners but I don't think it would make things easier. You definitely need a realtor to start. And then your realtor should be able to connect you with anyone you need from there. Have you narrowed into a city yet? My Cincinnati/NKY investors are doing pretty well here, let me know if you are interested!
No haven't made a decision yet. I am not ready to move out of state yet. Still on my 1st investment here in CA. Might do a 2nd one, or maybe a flip, before I start looking outside of my state. A little unsure on what to do.
- 2ySam McCormackBusiness MemberReal Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
Quote from @Diran Deukmajian:
Quote from @Sam McCormack:
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
You can get partners but I don't think it would make things easier. You definitely need a realtor to start. And then your realtor should be able to connect you with anyone you need from there. Have you narrowed into a city yet? My Cincinnati/NKY investors are doing pretty well here, let me know if you are interested!
No haven't made a decision yet. I am not ready to move out of state yet. Still on my 1st investment here in CA. Might do a 2nd one, or maybe a flip, before I start looking outside of my state. A little unsure on what to do.
Oh okay i gotcha! let me know how I can help
Sam McCormack Realtor - Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes2y
Is it doable? Absolutely. I see this with my STR investor clients, many of whom are not from Colorado but want a vacation rental in the state. (Two birds one stone: investment property and awesome place to visit.)
They'd tell you that you do have to do a little more upfront work to get your systems in place and some boots on the ground that you trust, but once that happens, it's not much different than buying in your backyard.
- 2yBradley BuxtonBusiness MemberReal Estate Agent · NV · Member since 2023 · 1k+ posts · 715 votes
CA is an expensive market and if you can get into the market it can be a good way to build wealth. There are challenges investing OoS as other posters have stated and having a good trusted team in place will manage those. There are trade-offs to all investments, I moved out of CA to Nevada because of the tax benefits and it's a much more landlord-friendly state. I've worked with investors around Lake Tahoe and Reno, NV because they did not want the hassle of flying across the country to manage a rental but still wanted to be close to CA. With any strategy do the research, look at job growth, migration, and supply constraints. Think about your goals what type of investment you're looking for and how much time and capital you have to stabilize the investment. It might reveal where it makes the most sense to invest.
- Investor · PA · Member since 2024 · 25 posts · 3 votes2y
@Diran Deukmajian come on over to Pennsylvania.. I help out of state investors navigate our market.
- Realtor · Chevy Chase, MD · Member since 2023 · 74 posts · 51 votes2y
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
Hi Diran! I think these responses so far have fit the nail on the head. Of course there are pros and cons but with a good team you can trust, out of state is a great way to expand your portfolio. I've seen many posts about Ohio- great market. I am personally local in the DMV which is also a great hub for investing. There is constantly a flood of people coming in and out of these cities around the pentagon and military bases. Happy to share contacts if you ever find yourself interested in these markets here. Best of luck moving forward!
- Contractor · San Diego, CA · Member since 2024 · 43 posts · 27 votes2yThank you! Never considered going towards Maryland, but will definitely do some research.
Quote from @Savannah Yingling:
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
Hi Diran! I think these responses so far have fit the nail on the head. Of course there are pros and cons but with a good team you can trust, out of state is a great way to expand your portfolio. I've seen many posts about Ohio- great market. I am personally local in the DMV which is also a great hub for investing. There is constantly a flood of people coming in and out of these cities around the pentagon and military bases. Happy to share contacts if you ever find yourself interested in these markets here. Best of luck moving forward!
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Diran Deukmajian:
Hello. I currently own an investment property in my home state/city (Los Angeles, CA), and was considering buying a rental property in another state. One main reason is because the cost of properties outside of California and much more affordable. What are some pros and cons for investing in a property hundreds, if not thousands of miles away? What should I look for? Is this a bad idea? Do I partner with someone to make it easier?
if you want to make abnormal return don't do investment OOS, invest locally in CA and develop skillsets and creative development.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.