Where to buy first Multi-family home out of state?

[Richard Lam]

Hi All,

I am newbie on BP. I have been reading a lot of different posts, listening to the podcasts and I am currently reading long-distance real estate investing by David Greene. I can't help but, want to start analyzing deals. At the same time, I feel very uncertain where to invest. I wonder if anyone has any tips for cities with low prices and high rent for the best ROI that is landlord friendly. Any thoughts or suggestion would be very much appreciated. Thank you!

[Frank Wong]

Hi Richard,

There is no magic city and magic state which will have the perfect ROI. For the most part, everything is very similar as in returns. I think what you need to do first is work backward. This is what I mean.

1. How much money do you have to invest?  Does that amount allow you to buy a property with 30% have closing costs paid and have money for reserves and repair costs?  

2. Now you have an idea on what you can afford, now you can start looking at different cities and the avg prices.  If you can't afford it. Cross off your list. Easy.

3. Out of the remaining areas. Which fits you best? Would you mind traveling there? Can you see yourself traveling there maybe 1x a year?  This is important because you are going to go to that area.  Make it a working fun trip. 

4. Are you planning to scale?  Pick a city and state where you plan to buy multiple properties. That should be your mindset. If you are just planning to buy 1 don't do its not worth your time. Now I am all for buy 1 test the market have a proof of concept first.  If it works great scale.  If it doesn't cut you loses and get out. 

The most important thing about investing is not the city and state.  You can honestly make money anywhere in real estate.  What you need is to have a process and a system so you know what you are doing.  If you don't know you can be in the best location and still lose money.  I see it all the time.