Investing out of California
Rental Property Investor · Long Beach · Member since 2014 · 24 posts · 7 votes
Investing out of California
Most Popular Reply
I read BiggerPockets everyday and it's the first thing I check. I make my own notes based on comments here. I am also in socal and have been pondering investing out of state. Here are my latest notes:
Boise, ID - For buy and hold SFH.
Colorado Springs, Denver, CO - Prices will increase along with interest rates and inventories. The market is strong for triplex and fourplex.
The other areas I would look into for MF and commercial property investing are: Kansas city, MO
Tampa, FL; Charlotte, NC; Circleville and Chillicothe, OH; Indianapolis, IN
31 Replies
- Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes7y
I would step back and look at why Southern California does well. There is a shortage of housing stock compared to the demand. Income properties rarely cash flow well. I don't think they ever did.
Still, it is hard to invest in this market, especially when smaller properties produce a negative cash flow.
Pick a couple of out of state markets and get to know them very well. Travel there a few times, look at lots of product. Be careful with people who sell 'turn key' rentals. You'll have to find some good service providers locally to make all of this work.
I read BiggerPockets everyday and it's the first thing I check. I make my own notes based on comments here. I am also in socal and have been pondering investing out of state. Here are my latest notes:
Boise, ID - For buy and hold SFH.
Colorado Springs, Denver, CO - Prices will increase along with interest rates and inventories. The market is strong for triplex and fourplex.
The other areas I would look into for MF and commercial property investing are: Kansas city, MO
Tampa, FL; Charlotte, NC; Circleville and Chillicothe, OH; Indianapolis, IN
- Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes7y
Hi Brian and Ruel, Colorado is a great place. Like you said Ruel it can be challenging to cashflow in Denver unless it is multi-family. Colorado springs has some cash flowing options for both single family and multi-family.
If you have any questions about Colorado, let me know and I'd be happy to assist.
- 7yKerry Noble JrPro MemberInvestor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
@Account Closed we would love to have you here in Central indiana......feel free to connect
- Kansas City, MO · Member since 2017 · 144 posts · 148 votes7y
Most of the Denver CO investors that I know are following CA investors into secondary markets for better returns. I am partial to KC since I have been making great returns here. I would say Oklahoma City is doing real well, Dayton OH, Columbus OH are some other markets that I am interested in as well. I have also talked to some investor's that line Indianapolis IN all though that name comes up a lot less than the others. If you look in the KC market I could help with that search in the multifamily sector at or above $1M in price.
- Investor · Indianapolis, IN · Member since 2016 · 232 posts · 133 votes7y
@Account Closed connect with investors in your backyard and see what's working or not working for them. There are a lot of folks who invest in all the markets mentioned above. They've done research and built teams. You can network with them and see if they'd be open to guide you in the right path and help share their network with you. That would prevent you from having to do all the work yourself.
- Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes7y
@Account Closed - I would suggest being deliberate and objective with your market analysis. I'm certain you can find on BP or the web a good checklist for choosing a market. If you have some markets in mind, see how they stack up against the checklist. With a little luck, you may have friends or family in these markets that may be able to act as boots on the ground for you.
I would also suggest going on market tours. It will improve your credibility with brokers and help bridge the gap between internet knowledge and true market knowledge. Best of luck to you, I live in Alaska and all my investments are out of state, specifically in Tennessee...it can be done. - Investor · Nipomo, CA · Member since 2014 · 366 posts · 401 votes7y
Start with David Greene's book "Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties." That will give you a good sense of what it takes to setup a long-distance portfolio.
As others have said, take some time to research markets before jumping in. There is some "conventional wisdom" as to what to look for in a market, but honestly, it comes down to preference. I currently invest in Milwaukee and Rock County Wisconsin because the rent to cost ratio is pretty hard to beat. I've found PM and contractors in each location to allow me to invest while rarely visiting the markets. There are other markets (primarily in the Midwest) that will show similar numbers to these.
I consider the team even more important than the market. You could pick the best market, but have a horrible team, and find yourself losing money. Conversely, you can have a horrible market (by conventional standards) but an amazing team that knows how to rock that market. The team is what is going to make you either uneasy or comforted.
- Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes7y
@Brian Lee
Ironic. I just decided I’m keeping my money in Ca. I was about ready to invest out of state. Had offers on multiple properties but I think CA is the long play. Eyes on the prize.
- Rental Property Investor · Long Beach · Member since 2014 · 24 posts · 7 votes7y
Thank you very much for all your input and information! That’s why this community is so GREAT! I’ll def do some hw around the forum on some of the areas you guys mentioned. Maybe it’s time to consolidate and take all my equity and stay in Cali and purchase one Big unit. Again gotta do my hw like everyone says.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes7y
Amen to what Jack said! Questions like: what city has the best cash flow? are somewhat irrelevant. Besides the team you have, the next set of questions might be: how easy is it to get there? Are there cheap direct flights? Do I know the city, have I lived there at some point? Do I have freinds and or family there? Your backyard will always be best, but if that does not work, find a place that is as acessible as possible for you and spend time seeking out great people to work with!
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes7y
Here is an article that I wrote on markets to invest in for Multi-family
https://www.biggerpockets.com/blogs/10145/68178-to...
Here is the research method behind the markets
- 7yJason B.Pro MemberRental Property Investor · Boise, ID · Member since 2017 · 228 posts · 180 votes
Originally posted by @Ruel K.:
I read BiggerPockets everyday and it's the first thing I check. I make my own notes based on comments here. I am also in socal and have been pondering investing out of state. Here are my latest notes:
Boise, ID - For buy and hold SFH.
Colorado Springs, Denver, CO - Prices will increase along with interest rates and inventories. The market is strong for triplex and fourplex.
The other areas I would look into for MF and commercial property investing are: Kansas city, MO
Tampa, FL; Charlotte, NC; Circleville and Chillicothe, OH; Indianapolis, IN
I live in the Boise, Idaho market, and while I'm brand new to REI, I pay lots of attention to the housing market, go to open houses, etc. The market here is going through a squeezing situation. We have an extreme housing shortage in the Treasure Valley aka the Boise Metro area. We currently have less than 1 month inventory of SFH and prices have skyrocketed and still climbing. We're having a MASSIVE influx of people from California, Washington, Colorado and New Jersey/New York. The Boise Metro is about 750,000 people and is projected to grow to 900,000 in 2025. There was already a shortage for the people that lived here and the influx has driven prices way up and priced many out of buying even their personal homes, let alone investments/rentals. Rents have also skyrocketed to a level that many native Idahoans can't afford. On the news a few minutes ago they were talking about this very issue, and how the average home price since 2012 has doubled from around $150k to $300k.
For example, I talked to an agent recently and he said what he’s seeing as of now is about 7 out of 10 buyers are from out of state and 5 of those are all cash.
Now residence properties are different animals than potential rentals, but it's not easy finding any SFH with the goal of adding value now. A buddy of mine in NorCal who buys in Caldwell (a town about 40 minutes from Boise) said he and his partners have stopped buying here for now.
This isn’t to say there’s nothing, there definitely is, it’s just going to take some work and a rock solid team on the ground. If you do find something it can work out pretty well. I have no idea how multi family is. I hope this helps and if you or anybody needs anything by all means please let me know.
@Jason B. Thanks for your feedback. It's always good to hear from someone who actually lives in Boise and knows what's going on locally. I totally agree that it is more competitive now and will require hard work to find those deals. Is there in any city that you would recommend for anyone to research the possibly invest in SFH or MF?
- 7yJason B.Pro MemberRental Property Investor · Boise, ID · Member since 2017 · 228 posts · 180 votes
Originally posted by @Ruel K.:
@Jason B. Thanks for your feedback. It's always good to hear from someone who actually lives in Boise and knows what's going on locally. I totally agree that it is more competitive now and will require hard work to find those deals. Is there in any city that you would recommend for anyone to research the possibly invest in SFH or MF?
I don’t know anything about MF, but for SF one that I keep hearing mentioned a lot is Kuna, Idaho. It’s a rural but growing suburb about 20-30 minutes outside of Boise in Ada County, so your property taxes won’t be quite as high as Canyon County (not that they’re too high in Canyon County, it’s just Ada is lower). There’s roughly 18,000 people, lower prices than Boise, and growing. One of the things that makes it attractive is that some of the large/larger devolopers are looking to build multiple developments there and leaders there are projecting the population to double in the next 10-15 years. Meridian and Eagle are the suburbs of choice, especially Eagle, but with Kuna it’s on the other side of the freeway from Meridian so similarish commute times into Boise. It has good schools (my nephew and niece graduated out of there and my sister-in-law was pleased with their education), and an x-factor that you’ll find in a good amount of Idaho towns is a strong sense of community. If you can get into Eagle, go for it. Eagle is a highly desirable town, great schools (I’m in Eagle and both my kids just graduated/graduating out of there), strong appreciation. Another to look into is Star, Idaho. It’s by Eagle, about 5 minutes, but lower priced, and like everywhere here, booming.
This place is ripe for large developments because there’s a lot of farm land. Many farmers are reaching retirement age and there’s just not much of the younger generation who want to continue it so a lot of farmers are willing to sell to fund their retirement. Plus a lot aren’t profitable so they are open to sell so they don’t lose it. I mention this because The developers know this, city planners know this, so if you’re looking for long-term buy and hold, many small towns aren’t going to stay small towns so getting in now while it builds up around you could definitely go in your favor depending on what your timeframe is.
Boise is an interesting locale. You can be downtown in some amazing restaurants that will rival and hold their own with ones from L.A., drive 30 minutes and you can be camping in peace and quiet, run into your neighbors while out shopping, and then walk by the Capitol to find yourself talking to Bruce Willis on the Capitol steps about protecting Idaho’s lands-not kidding.
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes7y
@Account Closed
You are in a Primary market where the Rent-to-Value Ratios are not going to work. You need a RV ratio of more than 1% is needed to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%.
- Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes7y
Originally posted by @Jason B.:
Originally posted by @Ruel K.:
@Jason B. Thanks for your feedback. It's always good to hear from someone who actually lives in Boise and knows what's going on locally. I totally agree that it is more competitive now and will require hard work to find those deals. Is there in any city that you would recommend for anyone to research the possibly invest in SFH or MF?
I don’t know anything about MF, but for SF one that I keep hearing mentioned a lot is Kuna, Idaho. It’s a rural but growing suburb about 20-30 minutes outside of Boise in Ada County, so your property taxes won’t be quite as high as Canyon County (not that they’re too high in Canyon County, it’s just Ada is lower). There’s roughly 18,000 people, lower prices than Boise, and growing. One of the things that makes it attractive is that some of the large/larger devolopers are looking to build multiple developments there and leaders there are projecting the population to double in the next 10-15 years. Meridian and Eagle are the suburbs of choice, especially Eagle, but with Kuna it’s on the other side of the freeway from Meridian so similarish commute times into Boise. It has good schools (my nephew and niece graduated out of there and my sister-in-law was pleased with their education), and an x-factor that you’ll find in a good amount of Idaho towns is a strong sense of community. If you can get into Eagle, go for it. Eagle is a highly desirable town, great schools (I’m in Eagle and both my kids just graduated/graduating out of there), strong appreciation. Another to look into is Star, Idaho. It’s by Eagle, about 5 minutes, but lower priced, and like everywhere here, booming.
This place is ripe for large developments because there’s a lot of farm land. Many farmers are reaching retirement age and there’s just not much of the younger generation who want to continue it so a lot of farmers are willing to sell to fund their retirement. Plus a lot aren’t profitable so they are open to sell so they don’t lose it. I mention this because The developers know this, city planners know this, so if you’re looking for long-term buy and hold, many small towns aren’t going to stay small towns so getting in now while it builds up around you could definitely go in your favor depending on what your timeframe is.
Boise is an interesting locale. You can be downtown in some amazing restaurants that will rival and hold their own with ones from L.A., drive 30 minutes and you can be camping in peace and quiet, run into your neighbors while out shopping, and then walk by the Capitol to find yourself talking to Bruce Willis on the Capitol steps about protecting Idaho’s lands-not kidding.
Jason, I’ve been buying SFHs in Meridian for the past 10+ years. As an out of state investor I keep my finger on the pulse of that entire market (Boise/Meridian/Kuna/Star/Nampa/Middleton) with the help of an amazing team whom I’ve worked with since I started investing there in 2008.
Your two posts above are spot on and you’ve laid out a fairly accurate picture. The only comment I’d add is that I’m being advised to look at Middleton as the next place to buy. It’s a toss up for me between there a Kuna. And then of course there’s Caldwell and Nampa which agents are pointing their investors to. Canyon Co. taxes are higher that Meridian, but the numbers can still work on the spreadsheet.
Also, if you’ve not read the Nampa City Master Plan, I’d recommend it. I’m impressed with their comprehensive perspective with a concerted focus on the Corridor between Eagle-Star and Caldwell as the future growth area.
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes7y
Originally posted by @Account Closed:
Hi,
I am currently at a stage where I can’t invest in Southern California anymore. It’s just to expensive and I wanted to expand my real estate profile.
I was considering refinancing because I have significant equity in all my buildings in so cal and start investing out of state. Since I have no experience out of state what would be the proper steps to locate an area worth investing in?
Any recommendations?
Many investors in CA find success with the Midwest. Housing is still cheap and rents are going up. It is a great time to move forward on something in Cleveland, Pittsburgh, Cincinnati, etc.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes7y
Originally posted by @Account Closed:
Hi,
I am currently at a stage where I can’t invest in Southern California anymore. It’s just to expensive and I wanted to expand my real estate profile.
I was considering refinancing because I have significant equity in all my buildings in so cal and start investing out of state. Since I have no experience out of state what would be the proper steps to locate an area worth investing in?
Any recommendations?
Brian there are tons of turnkey markets out there for you to invest in. The most popular markets are
- Cleveland
- Toledo
- Memphis
- Birmingham
- KC
- Indy
- Detroit
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
- Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
- Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
- Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
- Make sure your property manager is a licensed real estate brokerage.
- Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
- Boise, ID · Member since 2019 · 7 posts · 10 votes7y
I’m a real estate agent located in Boise who’s been watching the market for many years. It is indeed what you say... most investors last year were seasoned people who were moving their money out of a different market into this one to make their money work a little better for them. Those who already have real estate capital are able to invest here as a place to hold their $.
The housing supply is actually about 6 weeks now and the inventory is very slightly up. What investors need to focus on is finding a way to provide affordable housing here. I am very concerned the entire “life is good for everyone” feel of Boise is shifting as the Gap between renters and buyers is widening. Two years ago, a two income family that totaled $50k a year could find a decent house to rent for $1000/mo or buy for $150k. Now those same families are struggling to find even a 2 bed apartment to rent as there are thousands of “luxury” apartments being built all over the area.
I helped a family last year buy a $180k home in Caldwell, and they have their parents and adult sister with husband living with them because their family members could not find an affordable place to rent. This reminds me very much of what happened in the Sacramento market about 20 years ago.
One town I have my eye on for investing is Emmett. They haven’t completed the highway yet, but when they complete highway 16, it will provide direct access from 84 to Emmett.
Also, think about possible AirBnB opportunities in places like Star, Middleton, etc...as there are no hotels. With all these people moving here, their families need a place to stay when visiting, and they all complain about having to drive 20 min to get to a hotel.
The take home I’m seeing is: Emmett-a town to keep your eye on, Airbnb’s in the smaller towns, and rentals that allow for multigenerational/multi family living.
- Rental Property Investor · Long Beach · Member since 2014 · 24 posts · 7 votes7y
Probably first active then as time goes by and I learned the area and get stabilize maybe invest in some passive real estate?
- 7yBrandon SturgillBusiness MemberReal Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
@Account Closed The out-of-state guys I see do the best actually spent time in another market building their team...there is no replacing time on the ground where you want to be. I would encourage you to look closely at your internal goals, resources, needs, and capacity. You can find a good deal anywhere in the country...but it has to work for your needs. And stick to fundamentals...appreciation is speculation....and just because everyone is saying a market is on fire doesn't mean it's a good spot to invest.
- 7yMike D'ArrigoPro MemberTurn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
@Account Closed start by clearly defining your goals and objectives. If you're goal is cash flow and cash on cash return, the Midwest will be best, but you won't have the high appreciation rate as CA. Look for markets with a good combination of cash flow and strong economic/demographic fundamentals.There are several cash flow markets in the Midwest but I like Kansas City and Indianapolis. Both not only cash flow well but they have growing populations and jobs and are landlord friendly. The table below might be helpful. Click on it to enlarge it.
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