Purchasing Investment Property Out of State

General Real Estate Investing
3yFollow

Purchasing Investment Property Out of State

Nathaniel K.
Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes

Hello everyone, 

I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

Your replies and insight is greatly appreciated! 

Best, Nathan

8Reply
54 views

Most Popular Reply

Joe HammelBusiness Member
Real Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
3y

Metro Detroit has what 99% of REI want. Couple hundred bucks a door cash flow, double digit ROI, and yes the prices appreciate and you build equity.

Anyone who disagrees, is missing out. I cash flow $100k a year off 20 doors and have created a ton of equity. Happy to send a screen shot of the portfolio to anyone who wants to see, it just won’t allow me to attach pics to a reply.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $250-$350/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-15% (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets in the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

The bad reputation of “Detroit” comes from OOS investors wanting $20,000, D class properties. We don’t buy those lol.

[email protected]248-422-1685
FIRE Realty Team - Keller Williams5377 Reviews
WebsiteView Page
6Reply
See this reply in the discussion

40 Replies

Jump to latestLatest
  • Jeff Nash
    Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
    3y

    I would just identify potential agents to work with in the markets you are considering.  If you understand the other risks, you just need to find the right property. Insurance, property taxes, property management, legal/liability, etc are other main factors off the top of my head. 

    2Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    3y
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, Nathan


     Hi Nathaniel, when you say southeast midwest I immediately think about where I am. While Cincy is a bit farther north, Northern Ky may be something you like, maybe even Cincinnati because it is directly across the bridge. For the most part the purchase prices compared to everywhere else is lower, but cash flow more. Let me know if NKY/Cincinnati may be something you would look into, thank you!

    [email protected]859-443-4952
    Sam McCormack Realtor
    View Page
    3Reply
  • Nathaniel K.
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes
    3y

    @Sam McCormack Hi Sam, thanks for commenting. Ohio is certainly a state I am looking into. I have been looking into Akron, but am certainly open to other cities nearby. Would love to connect!

    0Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    3y

    Hey Nathaniel!

    Lots of folks here recommend the larger cities in Ohio like Cleveland, Cincinnati, Columbus, Dayton and Toledo...I personally have found success in Canton, which is about an hour south of Cleveland. I  focus small multifamily that will cash flow and work with Section 8 as well. Happy to talk more if you have questions. Happy 4th! 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
    View Page
    1Reply
  • Anthony L Amos Jr
    Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes
    3y
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, Nathan


     Build a team first. Since your focus is section 8 you'll want a realtor who understands what properties would be good for your goals, a property manager who has experience with section 8 properties, a good lender, and a great contractor. I would also speak with a legal team in the area to familiarize myself with the local landlord/tenant rights and responsibilities. 

    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    3y
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, Nathan


     Seeing as most out of state investors like to go to the cheapest markets like Cleveland, Akron or Toledo, Section 8 is the way to go. It can be very difficult to consistently collect rent in a lot of these low income areas. Section 8 alleviates a lot of the issues with consistent rent collection.

    2Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    3y
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, Nathan


     I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager.

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

    I invest locally in Columbus, Ohio

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    2Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    @Nathaniel K., read "Long-Distance Real Estate Investing" by David Greene. 90% of your questions and concerns will be answered. Long story short, your success will depend on the reliability and resourcefulness of your team. If you're interested in section 8 investing in Atlanta, Id be more than happy to discuss. Feel free to shoot me an email or text to connect (contact info is listed in my bio). 

    3Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    @Nathaniel K. we find very few investors actually know the risks involved when they are starting out.

    Suggest you speak with an expert and focus on what can go wrong.

    Logical Property Management4.9446 Reviews
    WebsiteView Page
    0Reply
  • Cassi Justiz
    Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
    3y

    If the property is already tenant occupied with Section 8 tenants, make sure you do a full home inspection. Sometimes people skip inspections if there are tenants in place. Don't do this. 

    Section 8 offices all operate differently. In my market, we have 2 different offices that cover different areas. Once is MUCH easier to work with than the other. However, they are both operating on a huge backlog and can take weeks to get the property inspected from the time you approve a tenant. As you start narrowing down a market, I would definitely ask around for the Section 8 experiences of investors in that market. I would also want to find a few property managers that are comfortable managing Section 8 properties and going through those inspections. The operations of the individual Section 8 offices can definitely make an impact on your experience with Section 8 investing. 

    2Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    Nathan, we should chat.

    I live in the Central Coast here in CA. But I have 12-doors in Detroit. It's been a fantastic market for me. Of those 12, 3 are currently occupied by section 8 tenants.

    Investing out of state can be as easy or as difficult as you want it to be. Building your own team from scratch is tough and time consuming. Plugging into someone else's is far easier, but finding the right folks to work with takes time too.

    I built my own team while on the ground in Detroit for 5 years. Then I moved back to CA. I have everything in place from deal acquisition to contractors and an internal PM. Happy to help if it makes sense, but also happy to just chat and give some advice.

    Shoot me a DM if you'd like.

    2Reply
  • Nathaniel K.
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes
    3y
    Quote from @Remington Lyman:
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, Nathan


     I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager.

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

    I invest locally in Columbus, Ohio


     Thanks for sharing this article, going to take a read right now! 

    1Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
    3y

    Metro Detroit has what 99% of REI want. Couple hundred bucks a door cash flow, double digit ROI, and yes the prices appreciate and you build equity.

    Anyone who disagrees, is missing out. I cash flow $100k a year off 20 doors and have created a ton of equity. Happy to send a screen shot of the portfolio to anyone who wants to see, it just won’t allow me to attach pics to a reply.

    Purchase: $80k-$130k

    Rent: $1100-$1500 (no rent control in MI)

    1% rule: 1%-1.4% rule deals

    ROI: 10-14%

    Cash flow: $250-$350/door (after all expenses and budgeting for maint, capex, vacancy)

    Appreciation: 3-15% (has been double digit for a decade)

    Location: C+, B-

    These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets in the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

    The bad reputation of “Detroit” comes from OOS investors wanting $20,000, D class properties. We don’t buy those lol.

    [email protected]248-422-1685
    FIRE Realty Team - Keller Williams5377 Reviews
    WebsiteView Page
    6Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Nathaniel K.

    do you have substantial funds saved up for a down payment and closing costs?

    i haven't looked at your profile or other posts but can you house hack instead?

    0Reply
  • Nathaniel K.
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes
    3y

    @Nicholas L. Sure do! House Hacking is the ideal situation, but in Los Angeles, CA (where I’m at) finding a property (whether a duplex or triplex) that will break even at most or have a minimum negative cashflow is very difficult. Unless I move about an hour or two away from where I’m currently at, it’s just not ideal.

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Nathaniel K.

    OK.

    I hear you on wanting to buy something in the midwest because of the high prices in southern California.  I just don't think it's a panacea anymore with interest rates up and prices still high.  Unless you have a plan to be hands-on or be creative, you will quickly run out of cash putting 25% down + closing costs on a nice area, even in the midwest.

    0Reply
  • Sherri Stokes
    Real Estate Agent · Los Angeles, Palm Springs CA · Member since 2016 · 190 posts · 65 votes
    3y

    Hi Nathaniel. Looks like you have a lot of knowledgeable Agents responding, but if you're still doing your homework, reach out and I can refer you to some investor-friendly agents in the Midwest-beyond. Good luck to you!

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, NathI 

    I know dozens of investors from out of state and Ca that have been buying rentals in the Cleveland markets for years. I live in Fl and do all my business out there. I just picked up 9 more doors over the last month, 

     All you need is a team in place

    All the best 

    1Reply
  • Nathaniel K.
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes
    3y
    Quote from @Bob S.:
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, NathI 

    I know dozens of investors from out of state and Ca that have been buying rentals in the Cleveland markets for years. I live in Fl and do all my business out there. I just picked up 9 more doors over the last month, 

     All you need is a team in place

    All the best 


     That's awesome! Very impressive. I have been analyzing numbers on properties in Cleveland, Akron and Toledo for a couple of hours each night. First thing on my list is to find an investor-friendly like minded agent and second will be to find a partner-minded property manager. Would love to connect and hear if if you have any referrals from your experience! Congrats again and cheers! 

    0Reply
  • Nathaniel K.
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 32 posts · 28 votes
    3y
    Quote from @Nicholas L.:

    @Nathaniel K.

    OK.

    I hear you on wanting to buy something in the midwest because of the high prices in southern California.  I just don't think it's a panacea anymore with interest rates up and prices still high.  Unless you have a plan to be hands-on or be creative, you will quickly run out of cash putting 25% down + closing costs on a nice area, even in the midwest.


     I 1000% agree with you on that. It certainly will be a slow growth, I would like to ensure scalability. Not saying going slow is a bad things, but getting 1 property at a time at 20k+ down each time will take decades to build a nice portfolio. Creative financing will be my best bet, just finding those deals will take some work I am willing to take on. 

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Nathaniel K.:
    Quote from @Bob S.:
    Quote from @Nathaniel K.:

    Hello everyone, 

    I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

    Your replies and insight is greatly appreciated! 

    Best, NathI 

    I know dozens of investors from out of state and Ca that have been buying rentals in the Cleveland markets for years. I live in Fl and do all my business out there. I just picked up 9 more doors over the last month, 

     All you need is a team in place

    All the best 


     That's awesome! Very impressive. I have been analyzing numbers on properties in Cleveland, Akron and Toledo for a couple of hours each night. First thing on my list is to find an investor-friendly like minded agent and second will be to find a partner-minded property manager. Would love to connect and hear if if you have any referrals from your experience! Congrats again and cheers! 


     Well if you are cash or have a large DP you do not need an agent. I have done 100s of deals out there never using an agent. My last 9 doors were purchased all off market, no agent involved.

    Good luck  

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    3y

    Buying out of state or more than 30 minutes from your house adds an element of risk. It also adds a layer of moving pieces that you don't need to bring into the mix if you live near the property.

    0Reply
  • Account Closed
    Columbus, OH · Member since 2023 · 427 posts · 254 votes
    3y
    Quote from @Ian Walsh:

    Buying out of state or more than 30 minutes from your house adds an element of risk. It also adds a layer of moving pieces that you don't need to bring into the mix if you live near the property.

    This is definitely true, but that risk can be mitigated with a good team on the ground. Networking will greatly increase your probability of a successful investor, and a good network of agents, lenders, PM's, and contractors in your target market will greatly influence your success as an investor. Having said that, don't blindly follow those on the ground, run your own numbers and do your own due diligence.
    0Reply
  • Dan Portka
    Real Estate Agent · San Pedro, CA · Member since 2019 · 253 posts · 128 votes
    3y

    @Nathaniel K. Its quite an easy process to purchase out of state, work with a good agent and they'll do most of the leg work for you. But its difficult to do it well and at scale. In my opinion most new investors underestimate their expenses and overestimate projected rents, hence returns might not be as good as you might initially think. Creative financing (seller financed) is not easy to find and if it is those properties will either sell quicker or for a premium. And I like section 8, but the rules and housing authority are different in every market, so make sure to talk to PMs and investors wherever you're looking for specific things to be aware of.

    0Reply
  • Dan Portka
    Real Estate Agent · San Pedro, CA · Member since 2019 · 253 posts · 128 votes
    3y
    Quote from @Account Closed:
    Quote from @Ian Walsh:

    Buying out of state or more than 30 minutes from your house adds an element of risk. It also adds a layer of moving pieces that you don't need to bring into the mix if you live near the property.

    This is definitely true, but that risk can be mitigated with a good team on the ground. Networking will greatly increase your probability of a successful investor, and a good network of agents, lenders, PM's, and contractors in your target market will greatly influence your success as an investor. Having said that, don't blindly follow those on the ground, run your own numbers and do your own due diligence.

    I have to agree that there is additional risk in purchasing outside of your local market. Sure some risk is mitigated if you have a great team, but finding a great team is not always easy. It takes awhile to build trust and you dont really know how your team will be until you actually work with them. At least if you're able to drive to the property in person you're not relying on others to do the due diligence for you.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free