Newbie way to find out what out-of-state market to invest in

11 Replies

Hi all, just joined Bigger Pockets and I'm excited to connect with all of you! I'm working in the tech industry in Seattle and I'm trying to start doing out-of-state BRRRR, as Seattle is too expensive to start with.

Then I'm facing my first challenge: which market should invest in? I've heard couple good options from podcasts and other investors but I decided to do some homework. From my perspective, I want to invest in places where I can imagine myself living in and having a good life, so I started googling best places to live in the USA, and found https://realestate.usnews.com/places/rankings/best-places-to-live.

US news has done some extensive research for 125 metro areas across the country. Then they came up with multiple indices for ranking (you can find out how they come up with their indices here) Some of the ranking criteria includes home prices, rent, job market, cost of living, net migration, etc. PERFECT! Sounds like some criteria I would look at as an investor. Then I did some web scrapping to pull the valuable data and stick them in a spreadsheet. For those who are interested in the data and play it around yourself, click here to download it from my Google drive. 

For those who don't wanna deal with spreadsheet, this is what it roughly looks like:

After playing around the data a bit,  we picked 4 markets for further investigation and analysis. I also stick some of my emotional thoughts on these markets:

1. Fayetteville, AR

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k.

Cons: fairly small metro area (500K population). Small metro size means less opportunities (generally compared to bigger metro areas).

2. Des Moines, IA

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k. I have family in Minnesota so I may be able to get some support there too. 

Cons: fairly small metro area (600K population). Small metro size means less opportunities (generally compared to bigger metro areas).

3. Boise, ID

Pros: High appreciation, and I've personally been there so I have a rough idea of what it feels like. Closer to Seattle area so it's easier to fly there for anything. 

Cons: To start off my investment career I'd rather start in market with more steady growth. Rapid appreciation sounds attractive but also scared me a bit for market downturn. 

4. Houston, TX 

Pros: I have friends down there so I can get more local knowledge. Big metro area seems to have more opportunities in general.

Cons: Bigger metro area also means more competition (especially larger players).  

By no means I'm trusting this dataset 100% but it helps me narrow down for further actions. My next steps:

1. Further research on these 4 markets and get down to a winner I will focus on.

2. Using a similar approach to lock down what neighborhoods to invest.

3. Start connecting with local investors, agents, property managers, contractors to build a team. 

4. Fly down there to connect with people. Live in local Airbnb to get a feeling. 

5. Find deals 

Love to hear all your feedback on my approach! Please share what you will look for when considering an out-of-state market. Will also appreciate tips & tricks on neighborhood research. 

Hello @Kin Meng Sio ! Interesting data and it appears you've really started a good analysis of each location. I can speak to the Des Moines market because I live here and understand that this is a good place to BRRRR for the locals. I have a full-time job and don't have the time to manage a BRRRR so I have chosen to purchase turnkey properties in Indianapolis. The taxes in Iowa are WAY too high to be able to successfully invest in Des Moines with a buy/hold strategy.

If you'd like to talk more about why I have gone the TK route as an OOS investor and have done well, DM me! Also, I can give you more insight into the DSM market and how you might be able to BRRRR here.

@Nicole Hoss - strongly disagree with the property tax piece ruling out DSM as a suitable buy and hold location. While taxes are higher this year than last, there are a number of POSITIVE factors (rent rate, vacancy rate, and turn over rate) that offset that very predictable annual expense.

That said, I endorse DSM for investing overall but it comes down to your individual investing strategy.

you said you want a place to actually live.. this really depends on where your coming from

everything being equal what kind of weather you want to live in.. there is a reason 50 million people live in CA. LOL

and also what is your interest for getting out and about for a day or so for free time..  there is a reason Denver is hot as a fire cracker..  

of the list personally to live somewhere I would only consider Boise.. real estate is real estate.. but again personal choice.. I want mountains rivers lakes trout fishing  snow skiing all within a few hours.  And NO massive cold winter and no massive humidity and out of the thunderstorm belts.

@Kin Meng Sio great analysis! Love how you've been able to identify four potential markets using data from various sources. 

I think I can help with deciding on a particular neighborhood to invest in. Below I have included maps for each of the areas you have identified and their corresponding location grades. 

Depending on your risk tolerance and return criteria, you will be able to determine what sub-market to focus your search on.

Originally posted by @Kin Meng Sio :

Hi all, just joined Bigger Pockets and I'm excited to connect with all of you! I'm working in the tech industry in Seattle and I'm trying to start doing out-of-state BRRRR, as Seattle is too expensive to start with.

Then I'm facing my first challenge: which market should invest in? I've heard couple good options from podcasts and other investors but I decided to do some homework. From my perspective, I want to invest in places where I can imagine myself living in and having a good life, so I started googling best places to live in the USA, and found https://realestate.usnews.com/places/rankings/best-places-to-live.

US news has done some extensive research for 125 metro areas across the country. Then they came up with multiple indices for ranking (you can find out how they come up with their indices here) Some of the ranking criteria includes home prices, rent, job market, cost of living, net migration, etc. PERFECT! Sounds like some criteria I would look at as an investor. Then I did some web scrapping to pull the valuable data and stick them in a spreadsheet. For those who are interested in the data and play it around yourself, click here to download it from my Google drive. 

For those who don't wanna deal with spreadsheet, this is what it roughly looks like:

After playing around the data a bit,  we picked 4 markets for further investigation and analysis. I also stick some of my emotional thoughts on these markets:

1. Fayetteville, AR

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k.

Cons: fairly small metro area (500K population). Small metro size means less opportunities (generally compared to bigger metro areas).

2. Des Moines, IA

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k. I have family in Minnesota so I may be able to get some support there too. 

Cons: fairly small metro area (600K population). Small metro size means less opportunities (generally compared to bigger metro areas).

3. Boise, ID

Pros: High appreciation, and I've personally been there so I have a rough idea of what it feels like. Closer to Seattle area so it's easier to fly there for anything. 

Cons: To start off my investment career I'd rather start in market with more steady growth. Rapid appreciation sounds attractive but also scared me a bit for market downturn. 

4. Houston, TX 

Pros: I have friends down there so I can get more local knowledge. Big metro area seems to have more opportunities in general.

Cons: Bigger metro area also means more competition (especially larger players).  

By no means I'm trusting this dataset 100% but it helps me narrow down for further actions. My next steps:

1. Further research on these 4 markets and get down to a winner I will focus on.

2. Using a similar approach to lock down what neighborhoods to invest.

3. Start connecting with local investors, agents, property managers, contractors to build a team. 

4. Fly down there to connect with people. Live in local Airbnb to get a feeling. 

5. Find deals 

Love to hear all your feedback on my approach! Please share what you will look for when considering an out-of-state market. Will also appreciate tips & tricks on neighborhood research. 

 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.
Originally posted by @Kin Meng Sio :

Hi all, just joined Bigger Pockets and I'm excited to connect with all of you! I'm working in the tech industry in Seattle and I'm trying to start doing out-of-state BRRRR, as Seattle is too expensive to start with.

Then I'm facing my first challenge: which market should invest in? I've heard couple good options from podcasts and other investors but I decided to do some homework. From my perspective, I want to invest in places where I can imagine myself living in and having a good life, so I started googling best places to live in the USA, and found https://realestate.usnews.com/places/rankings/best-places-to-live.

US news has done some extensive research for 125 metro areas across the country. Then they came up with multiple indices for ranking (you can find out how they come up with their indices here) Some of the ranking criteria includes home prices, rent, job market, cost of living, net migration, etc. PERFECT! Sounds like some criteria I would look at as an investor. Then I did some web scrapping to pull the valuable data and stick them in a spreadsheet. For those who are interested in the data and play it around yourself, click here to download it from my Google drive. 

For those who don't wanna deal with spreadsheet, this is what it roughly looks like:

After playing around the data a bit,  we picked 4 markets for further investigation and analysis. I also stick some of my emotional thoughts on these markets:

1. Fayetteville, AR

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k.

Cons: fairly small metro area (500K population). Small metro size means less opportunities (generally compared to bigger metro areas).

2. Des Moines, IA

Pros: pretty well-rounded in terms of cost of living, quality of life, job market, net migration. Housing price fits my price range of < $200k. I have family in Minnesota so I may be able to get some support there too. 

Cons: fairly small metro area (600K population). Small metro size means less opportunities (generally compared to bigger metro areas).

3. Boise, ID

Pros: High appreciation, and I've personally been there so I have a rough idea of what it feels like. Closer to Seattle area so it's easier to fly there for anything. 

Cons: To start off my investment career I'd rather start in market with more steady growth. Rapid appreciation sounds attractive but also scared me a bit for market downturn. 

4. Houston, TX 

Pros: I have friends down there so I can get more local knowledge. Big metro area seems to have more opportunities in general.

Cons: Bigger metro area also means more competition (especially larger players).  

By no means I'm trusting this dataset 100% but it helps me narrow down for further actions. My next steps:

1. Further research on these 4 markets and get down to a winner I will focus on.

2. Using a similar approach to lock down what neighborhoods to invest.

3. Start connecting with local investors, agents, property managers, contractors to build a team. 

4. Fly down there to connect with people. Live in local Airbnb to get a feeling. 

5. Find deals 

Love to hear all your feedback on my approach! Please share what you will look for when considering an out-of-state market. Will also appreciate tips & tricks on neighborhood research. 

 Awesome spreadsheet, thanks for putting that together!

Thanks all for the awesome reply!

@Jay Hinrichs you are spot on! End of the day there IS opportunity in every market; it really comes down to my personal preference and whether I feel comfortable committing to a market. Houston is now my top pick as I can see myself living there (no cold weather, more city-like). Another advantage I have in Houston is the significant Asian community there. Lots of brokers/investors/contractors I can tap into more easily. However flooding is my top concern in Houston and I don't know how much I can avoid/mitigate even by not buying properties in known flood zones.

@Art Perkitny Awesome PRODUCT that you built! How much do you charge after the 14-day trial? And what data sources do you pull in for determination (if it's not confidential ;) ). I'll try it out once I get back from an international trip. I like using https://www.niche.com/ but their rating seems too overrated, while yours is more conservative (which is a good thing for me)

@James Wise GREAT advice, thank you! I agree that you can make or lose money in any market. My market research isn't perfect but it forced me to find ways to face my fear and find ways to mitigate it. From the exercise I'm also building a habit to do due diligence coz it's the BIGGEST mistake a newbie can make in my opinion. to get better understanding and give me confidence for out-of-state investment so I don't regret it.

More thoughts on your suggestions:

  • 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.

Agreed. My criteria is a B-class area and homes built after 1970, mainly because I have low confidence dealing with electrical/structural issues that can pop up in older homes. How do you normally determine class of a neighborhood? I use various online resources to determine based on crime rate, owner vs renter ratio, income, school districts. I'm also reading a lot in the Houston local forum to get a better feeling, and will make a trip down there soon to talk to brokers/investors. Do you have other suggestions? 

  • 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.

Yes inspector is a MUST for me (as part of the inspection contingency I will definitely put on every offer). Any tips on vetting great inspectors? 

  • 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.

Yes I'm planning to do that even I will be buying with cash upfront. I'm not sure how much insights an appraiser can give on ARV before rehab but I like having more unbiased opinion to cross-check each other, even if it adds a bit more cost upfront. 

  • 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.

Can you elaborate more on this? Does clear title here mean being clear in any sorts of legal/financial issues on the property? I can't imagine myself being one of those craigslist maniacs ;)

  • Make sure your property manager is a licensed real estate brokerage.

Can you elaborate more? Why does a property manager needs to be a broker? Are you suggesting using the same person who serves as property manager AND broker? Or just making sure the proper manager has a broker license?

  • 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.

Totally agreed. I chose the BRRRR route over turnkey coz I'm willing to embrace the risk to get better in the game. And of course the key part is to be willing to do what it takes to mitigate the risk. 

Originally posted by @Kin Meng Sio :

@James Wise GREAT advice, thank you! I agree that you can make or lose money in any market. My market research isn't perfect but it forced me to find ways to face my fear and find ways to mitigate it. From the exercise I'm also building a habit to do due diligence coz it's the BIGGEST mistake a newbie can make in my opinion. to get better understanding and give me confidence for out-of-state investment so I don't regret it.

More thoughts on your suggestions:

  • 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.

Agreed. My criteria is a B-class area and homes built after 1970, mainly because I have low confidence dealing with electrical/structural issues that can pop up in older homes. How do you normally determine class of a neighborhood? I use various online resources to determine based on crime rate, owner vs renter ratio, income, school districts. I'm also reading a lot in the Houston local forum to get a better feeling, and will make a trip down there soon to talk to brokers/investors. Do you have other suggestions? 

  • 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.

Yes inspector is a MUST for me (as part of the inspection contingency I will definitely put on every offer). Any tips on vetting great inspectors? 

  • 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.

Yes I'm planning to do that even I will be buying with cash upfront. I'm not sure how much insights an appraiser can give on ARV before rehab but I like having more unbiased opinion to cross-check each other, even if it adds a bit more cost upfront. 

  • 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.

Can you elaborate more on this? Does clear title here mean being clear in any sorts of legal/financial issues on the property? I can't imagine myself being one of those craigslist maniacs ;)

  • Make sure your property manager is a licensed real estate brokerage.

Can you elaborate more? Why does a property manager needs to be a broker? Are you suggesting using the same person who serves as property manager AND broker? Or just making sure the proper manager has a broker license?

  • 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.

Totally agreed. I chose the BRRRR route over turnkey coz I'm willing to embrace the risk to get better in the game. And of course the key part is to be willing to do what it takes to mitigate the risk. 

 Clear title is a must. Don't wanna buy a property via quit claim & later realize there are leins all over the place.

Originally posted by @Kin Meng Sio :

Thanks all for the awesome reply!

@Jay Hinrichs you are spot on! End of the day there IS opportunity in every market; it really comes down to my personal preference and whether I feel comfortable committing to a market. Houston is now my top pick as I can see myself living there (no cold weather, more city-like). Another advantage I have in Houston is the significant Asian community there. Lots of brokers/investors/contractors I can tap into more easily. However flooding is my top concern in Houston and I don't know how much I can avoid/mitigate even by not buying properties in known flood zones.

@Art Perkitny Awesome PRODUCT that you built! How much do you charge after the 14-day trial? And what data sources do you pull in for determination (if it's not confidential ;) ). I'll try it out once I get back from an international trip. I like using https://www.niche.com/ but their rating seems too overrated, while yours is more conservative (which is a good thing for me)

 I travel through Houston a few times a year and the heat and humidity for a west coaster is just so oppressive no way I  could live there personally.  plus I cant live anywhere that is basically flat land. I need mountains if for nothing else situational awareness IE were am I  exactly. this is why I could never do Florida either the only place that I personally would consider that is flat and somewhat humid is Charleston SC.. now that is a place to check out .. and really great place to live.. I have been building there for 6 years now and if I was 30 years younger I would be based there its super cool.  but I get the Asian community aspect.. that's huge of course.

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