First Property Out of State

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First Property Out of State

Zak Beard
San Clemente, CA · Member since 2017 · 4 posts · 10 votes

Hey all! I live in Southern California and want to purchase my first property out of state since the market here is so high (over my budget). How realistic is it to find a cash flow positive property when investing from out of state? Any recommendation on markets?

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Min ZhangBusiness Member
Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
2y

Hey Zak! I personally love the Cleveland market for its cash flow. I invest heavily in this area as an agent. I grew up on the east side of the town with a well versed knowledge of the neighborhood. I have a neighborhood grade guide my team has been working on in Ohio. We regularly update it. A lot of investors prefer to stay in the C and D neighborhoods because that is where you get the best cash flow. There are also some great tax benefits to investing in opportunity zones which are commonly located in C and D areas. Let me know how I can help!

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    2y

    Hi Zak,

    What is your specific cash flow goal? Are you satisfied with a positive number or are you looking for 5%, 7%, 9%+? It's not hard to find deals that are are 5%+ but if you are aggressive (ex. 15%), it starts to get difficult in this market. Personally, I prioritize land lord friendly states because this significantly reduces risks.

    310-848-9776
    1Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    2y

    @Zak Beard, you can cash flow here in Atlanta if you're interested in pursuing rent-by-the-room properties. I'm happy to connect and chat further if you aren't familiar with this investment strategy. 

    0Reply
  • Jake AndronicoBusiness Member
    Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
    2y

    @Zak Beard

    Totally depends how much you have to put down. What's your budget and capital you're looking to deploy? 

    415-233-1796
    1Reply
  • Joseph Bui
    Lender · Nationwide · Member since 2023 · 362 posts · 237 votes
    2y

    Hi Zak, I’m a newer investor myself but I do have 9 doors in a couple Midwest markets (Memphis and Detroit). In terms of cash flow, it’s definitely possible in the Midwest. In fact, every property I buy in the Midwest has a rent to price ratio of 1% or better and cash flows day 1, assuming a 20% down payment. Happy to connect and knowledge share if you are interested. 

    2Reply
  • Michael MilesPro Member
    Rental Property Investor · Carlsbad, CA · Member since 2023 · 3 posts · 2 votes
    2y

    What's up Zak! Just down the 5 from you. Bought my first this last October in North Carolina. I'm a big time rookie myself but always trying to learn. 

    Basically, in my opinion: it depends. This decision on where to invest in real estate depends on your strategy which depends on your goals. "Cash Flow" nowadays seems to be a lot tougher than the years past with rates and home prices (and HOAs) the way they are. You can google rent-to-price ratios and other things and that will tell you places you've never heard of in places you probably never considered living in. Alternatively, if you're able to put a good chunk down payment on a property and the rent(s) cover your mortgage + expenses + a touch more, in an area that you like and know will appreciate, that's pretty nice as well. 

    I'd say if your goal is immediate passive income to replace your job, then do some research on markets, and hustle to get that cash flow no matter where it is. If your goal is something longer term or diversification based, maybe treat the down payment like a CD with a big potential bonus that'll pay out when you refi when rates drop, or 1031 exchange into something bigger in 10 years. 

    My rookie 2 cents.

    2Reply
  • Zak Beard
    OP
    San Clemente, CA · Member since 2017 · 4 posts · 10 votes
    2y

    Thanks for the reply! Obviously I want the largest return possible but I think the priority for my first one is something maybe more on the safer or stable end of the spectrum. I was looking at Kansas because the numbers look pretty good and it’s doesn’t have a ton of crime. Do you have a preference on market?

    0Reply
  • Zak Beard
    OP
    San Clemente, CA · Member since 2017 · 4 posts · 10 votes
    2y
    Quote from @Jake Andronico:

    @Zak Beard

    Totally depends how much you have to put down. What's your budget and capital you're looking to deploy? 

    Thanks for the reply! Ideally 30k but could go up to 60k for the right opportunity.
    1Reply
  • Zak Beard
    OP
    San Clemente, CA · Member since 2017 · 4 posts · 10 votes
    2y
    Quote from @Joseph Bui:

    Hi Zak, I’m a newer investor myself but I do have 9 doors in a couple Midwest markets (Memphis and Detroit). In terms of cash flow, it’s definitely possible in the Midwest. In fact, every property I buy in the Midwest has a rent to price ratio of 1% or better and cash flows day 1, assuming a 20% down payment. Happy to connect and knowledge share if you are interested. 

    Sounds a risky but I’m open to hear more if you have a good strategy for managing the risks👍🏼
    0Reply
  • Bradley BuxtonBusiness Member
    Real Estate Agent · NV · Member since 2023 · 1k+ posts · 715 votes
    2y

    @Zak Beard

    There will be multiple markets you can invest.  Take the long view and the big picture. Do you have the time and energy to invest in Kansas? Do you have enough capital in reserves if something goes wrong? There ae plenty of success stories pre-2022, the strategies need to be different now.  Start with why you're investing. Everyone wants cash flow of course. There are some really big gains to be made with appreciation. It might make more sense in CA or someplace closer like AZ or Nevada.  There are other advantages to investing in real estate and benefits besides cashflow. 

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Zak Beard

    Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

    If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

    So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

    Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

    Class A Properties:
    Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% the more recent norm.
    Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

    Class B Properties:
    Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
    Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

    Class C Properties:
    Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
    Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
    Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

    Class D Properties:
    Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
    Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
    Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

    Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

    PM us if you’d like to discuss this logical approach in greater detail!

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  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Hey Zak! I personally love the Cleveland market for its cash flow. I invest heavily in this area as an agent. I grew up on the east side of the town with a well versed knowledge of the neighborhood. I have a neighborhood grade guide my team has been working on in Ohio. We regularly update it. A lot of investors prefer to stay in the C and D neighborhoods because that is where you get the best cash flow. There are also some great tax benefits to investing in opportunity zones which are commonly located in C and D areas. Let me know how I can help!

    [email protected]614-412-2912
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  • Samuel DioufBusiness Member
    Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
    2y

    There are some great opportunities in the Ohio markets. Many investors from California are choosing to invest in the Midwest because of the low barrier to entry and yearly cash returns making more sense in these lower priced markets. Ohio markets show up 3 times in Zillow’s 2024 hottest markets, with Columbus and Cincinnati taking the top 2 and 3 spots. I moved from Florida to start investing in Columbus because of the same reason.

    https://www.zillow.com/learn/hottest-housing-markets-2024/

    [email protected]614-662-1652
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  • Evan HoppleBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
    2y

    @Zak Beard

    Dayton, OH would be a good fit. Buy turnkey on your first purchase to take away some of the risk of dealing with contractors from out of state. 

    [email protected]614-924-8151
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  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    2y

    @Zak Beard

    A lot of investors from California are investing in Columbus, OH. I would recommend looking in the Midwest. Columbus OH is a great place to start looking in the Midwest. It's a nice balance of cash flow and appreciation. Also, it has lots of job opportunities and population growth. I also live and invest locally here in Columbus.



    [email protected]614-412-4565
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  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    2y
    Quote from @Zak Beard:

    Hey all! I live in Southern California and want to purchase my first property out of state since the market here is so high (over my budget). How realistic is it to find a cash flow positive property when investing from out of state? Any recommendation on markets?


     It is realistic. I recommend you check out the Ohio markets. I have been investing in Columbus for a while now. When I started in 2017 there was a bunch of cash flowing properties. Over the years it has gotten more competitive but I have expanded to other Ohio markets and have gotten into strategies that produce more revenue, like Airbnb

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  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    2y

    It's absolutely is possible to find a cash flow positive property out of state, even in the current market. Cleveland OH for one is a good option that has this potential.

    0Reply
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    2y
    Quote from @Zak Beard:

    Thanks for the reply! Obviously I want the largest return possible but I think the priority for my first one is something maybe more on the safer or stable end of the spectrum. I was looking at Kansas because the numbers look pretty good and it’s doesn’t have a ton of crime. Do you have a preference on market?


     Lower the class (class D area as an example) will get you better returns.. Or STRs, or MTRs will get you better returns with more work. 

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  • David Hilaire
    Rental Property Investor · NJ · Member since 2022 · 5 posts · 1 vote
    2y

    Hey Zak

    Sure it's definitely realistic to find a cash flowing property when investing out of state. You have to have your own plan and pace to move forward. Make sure to analyze any deals with a magnifying glass and have as much accurate numbers as possible with any renos etc. We're in the Dayton OH market and so far it's been good for us. I am a general contractor as well as a commercial loan broker and so far this market have been well for us. Feel free to reach out with any help needed on having renos done affordably if you ever decide to invest in the Dayton OH and surrounding areas or any DSCR loans etc. Wishing you the best on your real estate investing journey.

    0Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Zak, fellow Californian here up on the Central Coast.

    My main market is Detroit. I've been investing there since 2019 and have 12-doors currently but closing on a duplex next month while I'm there for a few days.

    There are still cash flow deals to be had, but you really need to know the market and understand how to run your numbers. A lot of folks get tripped up with properly understanding their true, future property taxes, for example. 

    You also can't rely on the "1% rule" anymore because most 1% rule deals don't actually cash flow with today's rates.

    If it's a market you're interested in checking out I'm happy to connect and share some resources or just talk more about my experience there.

    0Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @Zak Beard welcome to the forums! I work with a couple hundred investors from CA and they prefer the middle/southern part of the country because the price points are much easier and the landlord laws are friendly. Memphis, Little Rock or TX would be great options. 

    Feel free to reach out if I can be of any assistance. Best of luck! 

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  • Samantha Fedor
    Property Manager · Cincinnati, OH · Member since 2024 · 64 posts · 69 votes
    2y

    Hey Zak, I will also add that if you have the opportunity to visit a few markets you think you are interested in, do it! 

    1Reply
  • Kevin Coco-Senyszyn
    Real Estate Agent · Keller, TX · Member since 2022 · 62 posts · 37 votes
    2y

    North Texas has a lot of opportunities for finding cash flow-positive deals. Many of the issues that eat away at cash flow come from not having reliable boots on the ground. You don't want to have to fly back and forth all the time when problems arise. 

    0Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    2y
    Quote from @Zak Beard:

    Hey all! I live in Southern California and want to purchase my first property out of state since the market here is so high (over my budget). How realistic is it to find a cash flow positive property when investing from out of state? Any recommendation on markets?


    G'Day Zach,

    There will always be great deals in any market as long as you look/work hard enough.

    For example, we buy various lists like evictions, probate and tax delinquent just to name a few.

    We offer low, negotiate hard, close with cash and close quickly.

    This enables us to buy 1 out of let's say 100 for 30 cents on the dollar.

    As the saying goes "The more mud you throw on the wall, eventually some will stick"

    Lot's of cold calls and chasing but it's my full time gig and that's what I do 🤷‍♂️

    I have always believed that "Cash is King" and you don't have it.

    Wait till you do.

    Just my 2 cents.

    As you will see mentioned many times in the forum, Ohio has great cashflow.

    So does, Michigan and Indiana IMO.

    You will probably find the most cashflow in these markets and if you look even further within these markets you can snag great deals in tertiary cities of those states.

    Wishing you much success

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  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    2y

    @Zak Beard hey the key to investing for out of state is not only the property (of course) but most importantly the property manager - finding an honest and good one is not always as easy as you would think.  If you ever want to invest in MI let me know - I get nothing for it but I do run the Michigan Real Estate Investors group and connect with you with legit people and areas - I tend to hear the dirt and good stuff on investors, areas, Pms, contractors, etc..... feel free to reach out if you end up wanting to know more about Detroit or Pontiac/ etc investing 

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  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    2y
    Quote from @Zak Beard:

    Hey all! I live in Southern California and want to purchase my first property out of state since the market here is so high (over my budget). How realistic is it to find a cash flow positive property when investing from out of state? Any recommendation on markets?

    Hey Zak, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

    [email protected]614-300-7535
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