Out - of - State Investing

61 Replies

Hello BP Community,

I want to start an in depth conversation regarding out-of-state investing. I have seen and read a couple posts on here with most people usually suggesting the City or State where they live/work without much explanation or comparison with other areas. Some others are usually trying to sell their service. Another thing I see is people suggesting different cities without any explanation or details involving why they suggest there. It would be great to see a breakdown of what neighborhood, was it due to you being able to create an "A" team, were looking for large appreciation and/or cashflow, job growth, population growth, large business influx? What really made the area you chose click for you? What kind of cap rate, ROI, ROE, are you seeing in these areas currently?

I know there has to be a lot of investors out there such as myself that have put in a lot of research and still can't put there finger on one let alone two areas to invest in. I have recently visited NC, ID, UT, and NV to check out the areas first hand. I am headed to TN next month. I have some capital I am looking to move out of the CA market. The reason is to not get hit with capital gains (had to sell). I am not asking you all to do all the research and pass on your hard work... I just think it would be great to pick all of your brains and let the information flow to the whole community. I rely heavily on referrals with life and business so why not do so with my RE business as well.

I think this will be great for all. Thanks in advance!

@Kenny Manchester Columbus Ohio

A few things you may have not known about Ohio’s Capital City:

  1. 2nd Largest City in the Midwest behind Chicago (And Larger than Atlanta, San Francisco, Indianapolis, Charlotte, Nashville, Fort Worth, Denver, Seattle...and many others)
  2. Port Cities are a Thing of the Past- Columbus is the "Center of the Country"
  3. Cost of Living is Quite Low with High Quality of Life When Compared to Other Large Cities
  4. 1st Amongst the 10 Largest Midwest Cities in US for Population Growth, Job Growth, and GDP Growth.
  5. Realtor.com "Hottest Real Estate Market" in the US April 2019/ December 2020
  6. AAA Bond ratings
  7. #2 Metro Market in US for Mobile Network Performance
  8. Average age 31yrs. & Top "Hipster" Destination in the US
  9. 88 Jobs Paying Higher Wages than New York City
  10. Home to 2nd (soon 1st) Largest University in the US ($7B in Capital Projects & 60,000+ students)
  11. Hotbed of Startups and Venture Capital- "Exodus from Silicon Valley"
  12. 1st "SMART" City in the US ($50m DOT Grant)
  13. Intentionally Underbuilding to Hedge Risk...30,000+ units short of demand
  14. 11-County Region with Huge Room for Growth & Expansion (3million+) over the next 20-years
  15. 50% of the Columbus Population Rents
  16. All-time Record Low Homeownership for the Millennial Generation (largest population in America-bigger than Baby Boomer population)
  17. The Average Market Rent in Columbus has Climbed to $2,000/mo. (existing "affordable" inventory becomes very attractive)
  18. "1%" Rent-to-Purchase Price Ratios and 7-10% Cash-on-Cash is Normal.
  19. An Abundance of C/C- Locations in Extreme Transition with Verifiable Upward Trends
  20. Dozens of Neighborhoods with 70% Price Appreciation Over the Last 5-Years
  21. 20,000+ Multifamily Structures in Franklin County; Less than 10% Transact Annually
  22. Market Rents are Impossibly Low Across Existing Small MF Inventory

Our top 20 performing zip codes for MF properties

https://www.biggerpockets.com/...

We can do this for hours...ROI numbers are all "predictive" unless you are syndicating or investing in large commercial properties...market strength and the relationships between purchase price and rental income are about all you need to know to pull the trigger and be successful in a strong market...and there are 50-comparable markets in the US right now

Originally posted by @Kenny Manchester :

Hello BP Community,

I want to start an in depth conversation regarding out-of-state investing. I have seen and read a couple posts on here with most people usually suggesting the City or State where they live/work without much explanation or comparison with other areas. Some others are usually trying to sell their service. Another thing I see is people suggesting different cities without any explanation or details involving why they suggest there. It would be great to see a breakdown of what neighborhood, was it due to you being able to create an "A" team, were looking for large appreciation and/or cashflow, job growth, population growth, large business influx? What really made the area you chose click for you? What kind of cap rate, ROI, ROE, are you seeing in these areas currently?

I know there has to be a lot of investors out there such as myself that have put in a lot of research and still can't put there finger on one let alone two areas to invest in. I have recently visited NC, ID, UT, and NV to check out the areas first hand. I am headed to TN next month. I have some capital I am looking to move out of the CA market. The reason is to not get hit with capital gains (had to sell). I am not asking you all to do all the research and pass on your hard work... I just think it would be great to pick all of your brains and let the information flow to the whole community. I rely heavily on referrals with life and business so why not do so with my RE business as well.

I think this will be great for all. Thanks in advance!

 I would check out Columbus, Ohio for out-of-state investing. A lot of investors have been coming here due to our increasing job and population growth.

As you have read about Columbus, I'd also recommend you look at Toledo, Ohio. We have a diverse job market, great schools; however, we have lower price points than Columbus. You can do very well in both markets.

@Ross Yeager should join this conversation. He lives in CA and has done quite a bit of OOS investing. He is one of our clients in Philly. Hopefully he can add some more color to the reasons this was one of the areas he chose. 

I happen to live here and do work here, but a few reasons for investing here (Philly MSA, including Delaware, Montgomery, and Bucks counties): 

1. Cost of living in most areas is significantly less than nearby NYC and DC, but still very easily accessible to both. Still get the city feel for NYC migrants, or you can have more sprawling suburban like parts of DC. 

2. Meds and Eds- some of the best hospitals and universities in the country. 

3. Moderate climate- Some snow, but most years not major. Manageable temps most of the year. 

4. Several massive banks headquartered in nearby Wilmington (DE tax/legal structure is famously beneficial for large companies). 

Those are all broad strokes. Within the MSA there is a ton of variation in strategies, price points, rent values, LT legislation, etc. Each area could warrant its own post. I post a lot about Delaware County as that is my favorite submarket to invest, but everyone has different goals. Philly has something for everyone. 

@Kenny Manchester

I did an in depth anaylis of markets, you can read about that below. Once you find a market, then you need to find a submarket within that market. I think submarkets are more important than markets. In other words, you can find a submarket within a lot of markets that will work for you. So instead of going to lots of different places go to 1-2 places on the list and then find a good submarket within in. That's my advice and what I personally do OOS investing. I live in CA, invest in Kansas City, and am going to add another OOS market, probably San Antonio. I just went there in December and picked my target submarkets. I'm waiting for a down leg in KC to sell and then I'll exchange into a small MF in San Antonio to get going there. 

https://www.vestmap.com/the-to...

It's 100% possible to invest out of state. I also invest in CA but you really need a ton of capital to do it. When I started I didn't have the capital to invest in my home market (San Diego at the time, now LA) so I went out of state. I talk about it on my podcast 373. I have a lot of resources at VestMap.com to help others do it. I'm a huge fan of out of state investing. Real estate investing in any market is hard at first but you'll get the hang of it. 

I hope this helps and if you don't want to keep your capital in CA what alternative do you really have? Figure out OOS investing, you'll be glad you did. 

@Andrew Postell ...I guess it depends on the source... most city population stats for 2020 look the same as far as population for Columbus and Fort Worth...Columbus has not officially overtaken Fort Worth...but it will in the next 2-years....then onto the top 10 largest cities in the US in the next 10-years.

@Brandon Sturgill

You have provided some great information regarding Columbus Ohio. I have slightly looked at Columbus and Cleveland as I always find a debate on the forums about which one is better to invest into. 

Is there any sub markets in the Columbus area you recommend?

Originally posted by @Remington Lyman :
Originally posted by @Kenny Manchester:

Hello BP Community,

I want to start an in depth conversation regarding out-of-state investing. I have seen and read a couple posts on here with most people usually suggesting the City or State where they live/work without much explanation or comparison with other areas. Some others are usually trying to sell their service. Another thing I see is people suggesting different cities without any explanation or details involving why they suggest there. It would be great to see a breakdown of what neighborhood, was it due to you being able to create an "A" team, were looking for large appreciation and/or cashflow, job growth, population growth, large business influx? What really made the area you chose click for you? What kind of cap rate, ROI, ROE, are you seeing in these areas currently?

I know there has to be a lot of investors out there such as myself that have put in a lot of research and still can't put there finger on one let alone two areas to invest in. I have recently visited NC, ID, UT, and NV to check out the areas first hand. I am headed to TN next month. I have some capital I am looking to move out of the CA market. The reason is to not get hit with capital gains (had to sell). I am not asking you all to do all the research and pass on your hard work... I just think it would be great to pick all of your brains and let the information flow to the whole community. I rely heavily on referrals with life and business so why not do so with my RE business as well.

I think this will be great for all. Thanks in advance!

 I would check out Columbus, Ohio for out-of-state investing. A lot of investors have been coming here due to our increasing job and population growth.

Thanks for the response. Can you suggest any sub markets in the Columbus area that people should investigate deeper?

 

Originally posted by @Stephen Brown :

As you have read about Columbus, I'd also recommend you look at Toledo, Ohio. We have a diverse job market, great schools; however, we have lower price points than Columbus. You can do very well in both markets.

Thank you for adding your input. It would be nice to get a little more rectification regarding the Toledo market. Any input would be appreciated as Toledo is you home market which makes you the most knowledgeable in this market.

Kindly,

 

Originally posted by @Rich O'Neill :

@Ross Yeager should join this conversation. He lives in CA and has done quite a bit of OOS investing. He is one of our clients in Philly. Hopefully he can add some more color to the reasons this was one of the areas he chose. 

I happen to live here and do work here, but a few reasons for investing here (Philly MSA, including Delaware, Montgomery, and Bucks counties): 

1. Cost of living in most areas is significantly less than nearby NYC and DC, but still very easily accessible to both. Still get the city feel for NYC migrants, or you can have more sprawling suburban like parts of DC. 

2. Meds and Eds- some of the best hospitals and universities in the country. 

3. Moderate climate- Some snow, but most years not major. Manageable temps most of the year. 

4. Several massive banks headquartered in nearby Wilmington (DE tax/legal structure is famously beneficial for large companies). 

Those are all broad strokes. Within the MSA there is a ton of variation in strategies, price points, rent values, LT legislation, etc. Each area could warrant its own post. I post a lot about Delaware County as that is my favorite submarket to invest, but everyone has different goals. Philly has something for everyone. 


Appreciate the reply. I have some family in Pittsburgh. Have not really thought about the Philly market. You have some great input regarding the market as a whole and the Delaware County sub market. I will check it out. It would be great to get Ross on here with his experiences as well.

Thank you,

 

Originally posted by @Lee Ripma :

@Kenny Manchester

I did an in depth anaylis of markets, you can read about that below. Once you find a market, then you need to find a submarket within that market. I think submarkets are more important than markets. In other words, you can find a submarket within a lot of markets that will work for you. So instead of going to lots of different places go to 1-2 places on the list and then find a good submarket within in. That's my advice and what I personally do OOS investing. I live in CA, invest in Kansas City, and am going to add another OOS market, probably San Antonio. I just went there in December and picked my target submarkets. I'm waiting for a down leg in KC to sell and then I'll exchange into a small MF in San Antonio to get going there. 

https://www.vestmap.com/the-to...

It's 100% possible to invest out of state. I also invest in CA but you really need a ton of capital to do it. When I started I didn't have the capital to invest in my home market (San Diego at the time, now LA) so I went out of state. I talk about it on my podcast 373. I have a lot of resources at VestMap.com to help others do it. I'm a huge fan of out of state investing. Real estate investing in any market is hard at first but you'll get the hang of it. 

I hope this helps and if you don't want to keep your capital in CA what alternative do you really have? Figure out OOS investing, you'll be glad you did. 

I think you should look to Columbus Ohio. :)

Originally posted by @Lee Ripma :

@Kenny Manchester

I did an in depth anaylis of markets, you can read about that below. Once you find a market, then you need to find a submarket within that market. I think submarkets are more important than markets. In other words, you can find a submarket within a lot of markets that will work for you. So instead of going to lots of different places go to 1-2 places on the list and then find a good submarket within in. That's my advice and what I personally do OOS investing. I live in CA, invest in Kansas City, and am going to add another OOS market, probably San Antonio. I just went there in December and picked my target submarkets. I'm waiting for a down leg in KC to sell and then I'll exchange into a small MF in San Antonio to get going there. 

https://www.vestmap.com/the-to...

It's 100% possible to invest out of state. I also invest in CA but you really need a ton of capital to do it. When I started I didn't have the capital to invest in my home market (San Diego at the time, now LA) so I went out of state. I talk about it on my podcast 373. I have a lot of resources at VestMap.com to help others do it. I'm a huge fan of out of state investing. Real estate investing in any market is hard at first but you'll get the hang of it. 

I hope this helps and if you don't want to keep your capital in CA what alternative do you really have? Figure out OOS investing, you'll be glad you did. 

Hello fellow Californian,

Thank you for providing this great article. I will absolutely utilize your research into OOS investing.

I couldn't agree more that the sub markets become the most important aspect to investing OOS. I have found information overload on the forums regarding to investing in certain areas vs other areas. This is why I am a true believer of getting my boots on the ground to really investigate a state, city, and neighborhoods. I know this isn't possible for everyone. I have found that creating a team gives you way more insight to the area. BP is a great avenue to do so. After visiting ID I created a team to get a in depth analysis on the area, this was the final needed piece to the puzzle. ID is a tough market right now unless you have large capital to beat out the competition.

My CA properties have grown in size so much the ROE is not great. My money can go much further if I take the money out of state. I appreciate the kind words of encouragement in my OOS venture. I am sure I will be successful, just need to get the small amount of fear out of my brain at going OOS. I live on research research research and then pull the trigger. I am literally reading @David Greene book on Long Distance Real Estate Investing again, love the book! He is also here in California which makes it relate even more.

I can't wait to journey outside CA. I appreciate the time you took to listen and respond.

 

Originally posted by @Kenny Manchester :
Originally posted by @Remington Lyman:
Originally posted by @Kenny Manchester:

Hello BP Community,

I want to start an in depth conversation regarding out-of-state investing. I have seen and read a couple posts on here with most people usually suggesting the City or State where they live/work without much explanation or comparison with other areas. Some others are usually trying to sell their service. Another thing I see is people suggesting different cities without any explanation or details involving why they suggest there. It would be great to see a breakdown of what neighborhood, was it due to you being able to create an "A" team, were looking for large appreciation and/or cashflow, job growth, population growth, large business influx? What really made the area you chose click for you? What kind of cap rate, ROI, ROE, are you seeing in these areas currently?

I know there has to be a lot of investors out there such as myself that have put in a lot of research and still can't put there finger on one let alone two areas to invest in. I have recently visited NC, ID, UT, and NV to check out the areas first hand. I am headed to TN next month. I have some capital I am looking to move out of the CA market. The reason is to not get hit with capital gains (had to sell). I am not asking you all to do all the research and pass on your hard work... I just think it would be great to pick all of your brains and let the information flow to the whole community. I rely heavily on referrals with life and business so why not do so with my RE business as well.

I think this will be great for all. Thanks in advance!

 I would check out Columbus, Ohio for out-of-state investing. A lot of investors have been coming here due to our increasing job and population growth.

Thanks for the response. Can you suggest any sub markets in the Columbus area that people should investigate deeper?

 

North Linden, South of Main, Vassor Village, Woodland Park, MT Vernon, Milo-Grogan, Franklinton, Merrion Village, Hungarian Village, Southern Orchards, Driving Park, Olde Towne East, Franklin Park, King Lincoln, Old Oaks, Livingston Park are all but not limited to some areas in Columbus, Ohio I think will gentrify quickly and make for great long term buy and holds.

I have a neighborhood map of Columbus with baseline cap rates and neighborhood grades that I share with the investors I work with to help them familiarize themselves with the city. If you need that feel free to reach out. 

You can spend the rest of your life comparing cites and states across the U.S. and still, in the end, make a poor investment decision.  Every metro area has great, good, fair and poor investment opportunities.  Whether you invest in your own backyard or 3,000 miles away, being able to spot good opportunities is the key.   What constitute good opportunities will depend on your investment goal and time horizon (wealth building? cash flow?), the amount of capital available to you, your risk tolerance and your capacity to conduct diligence.  We invest in our own backyard (SF/Marin County) as well as, both currently and in the past 20 years, in Davis CA, Las Vegas, Rochester NY, Chicago and St. Pete area.  Here is a sketch of our process for finding new markets:

If you are going out of area, start with a metro with which you have some familiarity.  You have family there? Friends? You like to visit? Many online resources exist that will allow you to break the metro into neighborhoods.  Having some personal experience with the area will help immensely in this regard.  Once you develop this map, focus on those neighborhoods/areas consistent with your level of risk tolerance and available capital.  Are you looking for high end properties, working class areas, etc?  From there, check rent to sale price ratios in the selected neighborhoods.  Look into the area's property tax assessment practices and rates (unlike mortgages property taxes are forever).  Subscribe to the online version of the local paper for a sanity check on your neighborhood assessments.  Lastly, pay a meaningful visit to the neighborhoods you have selected.  If one or more neighborhoods continue to appear promising, meet up with one or more local realtors and select the best one to work with in helping you find properties.  

Once you have this process down pat, you can drill down in pretty much any metro in a week or two.