Out - of - State Investing

Out - of - State Investing

Vacaville, CA · Member since 2018 · 36 posts · 22 votes

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!

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Lee RipmaPro Member
Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
5y

@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. 

See this reply in the discussion

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  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5y

    @Bob Persichetti

    I mean PM, agent, GC, lender. Local ones that know the area. Turn key same principle

  • Investor · NJ · Member since 2020 · 17 posts · 18 votes
    5y

    Thanks Caleb

  • Flipper/Rehabber · Sacramento, CA · Member since 2020 · 72 posts · 49 votes
    5y

    I like to do basic "research" (not real bona fide research), so I went through all the markets that are listed on BiggerPockets as having sub-forums. I chose to look up: 

    1. the median home value from Zillow
    2. the Rentometer average rent
    3. the resulting price to rent ratio
    4. the property tax
    5. population growth since 2010
    6. change in income since 2000
    7. change in home value since 2000
    8. unemployment change since 2010 to 1st Quarter 2020 (which was not helpful due to rebound from the Great Recession)
    9. crime percentile for the country (also not helpful since most metros generally have relatively high crime)

    I started out going through all the markets, but quickly saw that I could not afford some. So I started to eliminate any market higher than $180,000 in median home price. Then I eliminated

    1. any market with a price to rent ratio above 12
    2. property tax above 2%
    3. population growth lower than -3%
    4. change in income lower than 20%
    5. change in home value lower than 4

    That cut out a bunch of markets and reduced my workload. The markets that made it through were:

    1. Tuscaloosa
    2. South Bend
    3. Des Moines
    4. Kansas City KS
    5. Columbia

    I thought Tuscaloosa was the best on the matrix. I can provide a link to the Google Sheet for anyone that wants it. Keep in mind I eliminated many markets and did not pull all the data for all of them.

    In the end, after all that work, I decided to invest in Columbus with my girlfriend as she has a sister there and my best friend's three sisters know the city. LOL. But if we move on from Columbus I'll be running this again. 

  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Jon Catterson:

    I like to do basic "research" (not real bona fide research), so I went through all the markets that are listed on BiggerPockets as having sub-forums. I chose to look up: 

    1. the median home value from Zillow
    2. the Rentometer average rent
    3. the resulting price to rent ratio
    4. the property tax
    5. population growth since 2010
    6. change in income since 2000
    7. change in home value since 2000
    8. unemployment change since 2010 to 1st Quarter 2020 (which was not helpful due to rebound from the Great Recession)
    9. crime percentile for the country (also not helpful since most metros generally have relatively high crime)

    I started out going through all the markets, but quickly saw that I could not afford some. So I started to eliminate any market higher than $180,000 in median home price. Then I eliminated

    1. any market with a price to rent ratio above 12
    2. property tax above 2%
    3. population growth lower than -3%
    4. change in income lower than 20%
    5. change in home value lower than 4

    That cut out a bunch of markets and reduced my workload. The markets that made it through were:

    1. Tuscaloosa
    2. South Bend
    3. Des Moines
    4. Kansas City KS
    5. Columbia

    I thought Tuscaloosa was the best on the matrix. I can provide a link to the Google Sheet for anyone that wants it. Keep in mind I eliminated many markets and did not pull all the data for all of them.

    In the end, after all that work, I decided to invest in Columbus with my girlfriend as she has a sister there and my best friend's three sisters know the city. LOL. But if we move on from Columbus I'll be running this again. 

     What areas are you looking at in Columbus, Ohio?

  • Flipper/Rehabber · Sacramento, CA · Member since 2020 · 72 posts · 49 votes
    5y

    Our search is open to a lot of areas but most of the properties we're looking at are in North Linden, Franklinton, Southern Orchards, and Driving Park for single family and Hilltop for multi-family. I don't know if multi-families are just not common besides in Hilltop or if they're common elsewhere but out of our price range. 

  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Jon Catterson:

    Our search is open to a lot of areas but most of the properties we're looking at are in North Linden, Franklinton, Southern Orchards, and Driving Park for single family and Hilltop for multi-family. I don't know if multi-families are just not common besides in Hilltop or if they're common elsewhere but out of our price range. 


    What is your price range?

  • Flipper/Rehabber · Sacramento, CA · Member since 2020 · 72 posts · 49 votes
    5y

    Our search caps at $200,000.  

  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y

    @Kenny Manchester Most people turn to out of state because like you, are looking for cash flow which they can't get in their own market. There are a lot of popular cash flow markets but if you are asking why we chose the markets we have, it's for the following reasons in addition to just cash flow.
    1. Strong population growth
    2. Strong job growth
    3. High labor force participation rate
    4. Public and private economic development
    5. Modern, diverse economy and industry
    6. Low to moderate property taxes and insurance rates
    7. Favorable landlord/tenant laws

  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Jon Catterson:

    Our search caps at $200,000.  

    They are pretty common in locations other than Hilltop. Below is a map of 2-4 units that solid in Columbus, Ohio under $200,000

  • Vacaville, CA · Member since 2018 · 36 posts · 22 votes
    5y
    Originally posted by @Mike D'Arrigo:

    @Kenny Manchester Most people turn to out of state because like you, are looking for cash flow which they can't get in their own market. There are a lot of popular cash flow markets but if you are asking why we chose the markets we have, it's for the following reasons in addition to just cash flow.
    1. Strong population growth
    2. Strong job growth
    3. High labor force participation rate
    4. Public and private economic development
    5. Modern, diverse economy and industry
    6. Low to moderate property taxes and insurance rates
    7. Favorable landlord/tenant laws

     Great info Mike. Appreciate the input. The help in this post has been tremendous!

  • Rental Property Investor · San Jose · Member since 2020 · 44 posts · 22 votes
    5y

    @Kenny Manchester

    I'm glad you asked that. This is helpful!

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