Choosing where to invest out-of-state (OOS)

Rental Property Investor · Honolulu, HI · Member since 2020 · 8 posts · 3 votes

As a beginner investor looking to use BRRRR strategy , how do you search or choose where to invest/purchase out-of-state (OOS) properties?

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Brenden MitchumBusiness Member

Rental Property Investor · Atlanta, GA · Member since 2019 · 1k+ posts · 872 votes

Hey @Voltaire G., welcome to the BP community!

Regardless of strategy, there are several factors most investors look at when researching markets. Here are the 6 big ones that I see again and again:

1. Population over 100k

2. .5% or more year-over-year (YOY) population growth

3. 1% or more YOY median household income

4. 2% or more YOY job growth

5. 2.5% or more YOY median home value

6. Decreasing crime index

Essentially, it does not really matter what your strategy is if the market is depressed or in a down cycle. They will all be fairly risky in these markets. So you want somewhere with strong growth and job diversity that will be able to handle the coming national downturn. This is especially true for BRRRR deals because they hinge on that refinance.

I actually recently moved from Honolulu to Atlanta to start investing here because I really like and believe in this market. I even recently heard somewhere that job growth actually outpaced population growth in 2019, which is pretty sweet.

Anyways, hope that helped a bit! If you have any other questions or just wanna chat, please feel free to message me anytime!

[email protected]404-737-0018

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Brenden MitchumBusiness Member
Rental Property Investor · Atlanta, GA · Member since 2019 · 1k+ posts · 872 votes
6y
Hey @Voltaire G., welcome to the BP community!
Regardless of strategy, there are several factors most investors look at when researching markets. Here are the 6 big ones that I see again and again:
1. Population over 100k

2. .5% or more year-over-year (YOY) population growth

3. 1% or more YOY median household income

4. 2% or more YOY job growth

5. 2.5% or more YOY median home value

6. Decreasing crime index
Essentially, it does not really matter what your strategy is if the market is depressed or in a down cycle. They will all be fairly risky in these markets. So you want somewhere with strong growth and job diversity that will be able to handle the coming national downturn. This is especially true for BRRRR deals because they hinge on that refinance.
I actually recently moved from Honolulu to Atlanta to start investing here because I really like and believe in this market. I even recently heard somewhere that job growth actually outpaced population growth in 2019, which is pretty sweet.
Anyways, hope that helped a bit! If you have any other questions or just wanna chat, please feel free to message me anytime!
[email protected]404-737-0018
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Duc Ong
Real Estate Agent · Honolulu, HI · Member since 2015 · 450 posts · 196 votes
6y
@Brenden Mitchum Awesome that you made the move! Atlanta should be a great market to invest in.
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Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Voltaire G. remember that BRRRR requires rehab. I personally would not be taking this risk on from afar. My wife and I have done over 20 rehabs betweeen personal residence, rentals (BRRRR), flips, and a STR. Not one went smoothly enough that I felt I could have not been present for. Maybe this is my contractors, but there is a reason flipping is a full time job.
For out of state investment, I would be looking for turnkey operators, or find a partner in the market, where you both will have skin in the game to do it correctly.
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
The BRRRR method is not designed for out-of-state investing and/or is not your best option. The first question is why are you investing out-of-state? What have you done locally to find deals? What teams do you have on the ground in any market to assure you that you can renovate and flip in an area you've never been to? Do you plan to travel to these areas and be on-site at all? These are some questions you'll need to flesh out some more before embarking.
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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
6y
I disagree with stating OOS investing isn't possible using BRRR. As long as you have boots on the ground and a clear game plan you are fine. BRRR in most Midwest markets works, there is competition since everyone likes to "BRRR".
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Randall Weatherall
Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
6y
BRRRR is tough for OoS investors; there are a lot of moving parts in the actual process and then even more intangibles that a lot of OoS investors don't worry too much about on the front-end that can add up to make what started as a solid deal into a mess that costs a lot and can put you in turnkey territory without the guarantees. It can work, though; it just takes a lot of experience and hand-holding while you figure out who's being held accountable for what.
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Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
6y
Agree with someone's post that BRRRR is not suited to out of state investors. You live in a good market, albeit very expensive. Can you pull off an investment locally? Be careful with "turn key" properties that are being sold. Often they are poor investment choices in the long run.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y
Originally posted by @Voltaire G.:
As a beginner investor looking to use BRRRR strategy , how do you search or choose where to invest/purchase out-of-state (OOS) properties?

Welcome aboard. Many markets available. Cleveland is the one I am most familar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
- Cincinnati, Ohio
- Dayton, Ohio
- Toledo, Ohio
- Youngstown, Ohio
- Cincinnati, Ohio
- Memphis, Tennessee
- Saint Louis, Missouri
- Indianapolis, Indiana
- Detroit, Michigan
- Erie, Pennsylvania
- Louisville, Kentucky
- Milwaukee, Wisconsin
- Jackson, Mississippi
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 lose 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.
- Google Clayton Morris Scam and/or Morris Invest Fraud for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
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Whitney HuttenPro Member
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Voltaire G. Good for you for entertaining options to live where you want and invest where it makes sense. I do disagree with the sentiment that BRRRR can't be done OOS. It can (I've done over 25 projects like that). You DO have to have very strong TEAM and systems to make that happen. I talk about it here.
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