Best states to buy rental property

San Diego, CA · Member since 2016 · 10 posts · 3 votes

I live in San Diego and would like to buy property outside of California due to it being so expensive and tentant friendly. Does anyone have any advice on what city and state to look into? Looking to buy multifamily or single family homes Thank you

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Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

10y

my recommendation is you house hack in San Diego. If you do not know the term house hack look it up on BP.

Traditionally San Diego is one of best REI returns in the nation over any reasonable duration. 10, 20, 30 years if does not matter San Diego is near the top.

House hack, build equity,learn about property management then think bigger.

Good luck.

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Katrina Razavi
Rental Property Investor · San Francisco, CA · Member since 2016 · 118 posts · 90 votes
10y
A family friend of mine is buying up property in the state of Alabama. They have a new Kia factory I believe, still low prices so not too expensive to get in. Of course, do your own research but worth looking into!
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David Dye
Real Estate Investor · Torrance, CA · Member since 2015 · 186 posts · 45 votes
10y
@Matthew Cain
Is this your first property?
-David
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
10y
my recommendation is you house hack in San Diego. If you do not know the term house hack look it up on BP.
Traditionally San Diego is one of best REI returns in the nation over any reasonable duration. 10, 20, 30 years if does not matter San Diego is near the top.
House hack, build equity,learn about property management then think bigger.
Good luck.
2 Reply
Matt Burr
Poway, CA · Member since 2016 · 15 posts · 7 votes
10y
Hey Matt, I too am interested in knowing what cities provide good cash flow (2% rule or better), safe, stable employment, low vacancy rate, low cost/ high rent, etc. I also live in San Diego and am interested in investing in buy and hold multifamily properties out of state for good passive income. I was thinking of finding a property in a good college town with the assumption that those areas would be safe and always need renters. I would love to be one flight away from the property too.
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Ryan Zomorodi
Flipper/Rehabber · San Diego, CA · Member since 2015 · 133 posts · 63 votes
10y
Hey Matt, here are some leads to few cities/states outside CA that I'm invested in, know people who have invested in, or am planning to look further into... Memphis, TN; Las Vegas; Texas, Cleveland, Florida, Atlanta. Pretty sure you can find direct flights to all of these Cities out of SAN, or at most have one connection. Cheers and good luck.
RZ
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
10y
@Matthew Cain - Welcome to BP! I'm sure you are already figuring out that this is an awesome place to learn about investing in real estate with plenty of great people and great connections.
I will second what @Dan H. said and tell you to make sure you really investigate southern cal before completely writing it off as too expensive or too tenant friendly. Don't just jump at out of state investing without at least investigating southern cal.
If you do decide to look at other areas, this is a link to an e-book that can help get you started in your research safely. Best thing you can do is know how to research and complete solid due diligence ~
Best to you as you get started!
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REI Nation4.577 Reviews
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y
Originally posted by @Matthew Cain:
I live in San Diego and would like to buy property outside of California due to it being so expensive and tentant friendly. Does anyone have any advice on what city and state to look into? Looking to buy multifamily or single family homes Thank you
There are several turnkey markets that are well represented here on Bp.
Cleveland, Toledo, Indy & Memphis seem to have the biggest presence here on the site. I only have 1st hand knowledge of Cleveland as I operate a large portfolio in the city but the other markets seem to have similar numbers to what we see here in Cleveland. If you do land on Cleveland as the market you want to take the plunge in I suggest reading The Ultimate Guide to Grading Cleveland Neighborhoods.
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Cecil Mason
Investor · Memphis, TN · Member since 2015 · 21 posts · 9 votes
10y
Hey @Matthew Cain,
I also reside in San Diego, and have for the past two years. I'm originally from Memphis,Tn and have decided to invest in my hometown market instead of here locally in San Diego. Personally with the budget that I have allocated for investment projects, the Memphis market has proven to produce continuously favorable returns. However, I honestly think it depends on your financial goals and what you're aiming for as it relates to what markets to invest in. For example, I'm strategically purchasing/seeking cash flow rental properties that contribute to my monthly income, and assist with my current lifestyle. So with my situation, cash flow is viable to my success. Hence the reason I opt for the Memphis market, being I can buy at a much lower price point and still have positive cash flow every month after expenses. Meanwhile, if it was appreciation that I was seeking, then San Diego has historically shown to have one of the best markets for that strategy. So again it boils down to, what are your financial goals, and what's important to you. Good luck and feel free to reach out if you would like to catch up or grab a coffee. Happy Investing!
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
Hey Matthew! It completely depends on a few things. What's your budget, do you have a particular type of property you want (like urban rowhouse vs. suburban with a little more space, etc.), some markets are better for MFRs vs SFRs, and then no matter what your preferences are you want to be sure you are dealing with a growth market, not a declining one.
For example- right now (because the markets are always changing), Chicago and Philly have great market fundamentals and do have SFRs but they also have really good MFRs that make sense. Philly's price range is much lower than Chicago and you get smaller properties, so that kind of thing speaks to budget. Indy and KC are solid and have been around a few years as good investment markets, but you'll only get SFRs there and not so much MFRs. All are growth markets.
If you have any preferences you know of, or budget range, if you want to shoot it over happy to make some more specific recommendations!

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Alexander A.
Investor · Indianapolis, IN · Member since 2015 · 143 posts · 82 votes
10y
When I lived in TX, I bought 4 out of state rental properties (3 in indy and 1 in KC) All my research led me to those two cities being the best for out of state investing. Since then, I have moved to Indianapolis so I can have a lower cost of living as well as grow my rental portfolio here.
You will need to research as much as you can but I would start with these two cities. Both cities have growing populations, economy and very affordable real estate.
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Larry Fried
Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
10y
@Matthew Cain I am an out of state investor and what is best states for you can vary. Out of state investing certainly has its advantages for those of us who live in markets where cash flow is hard to come by. It can also have a lot of risks that are hard to manage from a distance. One investment strategy I currently favor is investing with a midwest company that sells co-owned interests in 10 prop portfolios that they also manage. This has low entry points and provides instant diversification for lowered risks. I wrote about it earlier this year in this article:
Have I Found the Holy Grail of Passive Real Estate Investing?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Larry Fried did not think you could advertise securities offerings like this...
Podcast Guest on Show #222
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Account Closed
Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
10y
The profitable ones....
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Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
10y
Originally posted by @Matthew Cain:

Does anyone have any advice on what city and state to look into?
Here's the answer according to Forbes Magazine. Top 20 Cities for Investing In Real Estate Rentals
312-681-7487
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Janet Lancaster
Investor · Alexander NC · Member since 2016 · 19 posts · 1 vote
9y
I have lived in San Diego since 1982 and bought my first condo in 1984, followed by my first rental shortly after that. I've have a rule about any rental property I buy: I don't want to have to carry a gun to the property if I need to go there to collect rent. Generally speaking, in San Diego, the only areas with single family homes that fit that 1 requirement are over $300,000. When you see SFRs for sale in other areas of the country for $50,000 that makes San Diego pretty unpalatable unless you have deep pockets IMO. Of course, the distance thing brings a unique set of logistical challenges.
Two years I sold a SFR rental I owned here that was netting $75/month after mortgage, taxes and insurance. With the proceeds form that sale, I bought TWO turnkey SFR in Birmingham AL that together net $1388/month after the same expenses AND a property management fee.
I am now looking to purchase a property in Gainesville FL to flip. My sister lives there and will check out properties and manage the renovation. That's how I chose that location and am just getting started on the hunt for undervalued aka distressed properties.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
9y
@janet Lancaster
If I use $0 for cap expense, vacancy, and maintenance then you have made $1388 * 24 = $33,312 in the two years. Definitely not a poor profit. In reality the cap expense likely is $200 to $250/month per unit. Subtract a small amount for maintenance and vacancies and it still is not a bad profit.
The last 2 years San Diego RE has appreciated 8% annually. The $300k SFR without compounding would be worth $348k for profit of $48k (compounding likely would have it closer to $50k). Note in reality the rents have gone up proportionally so your rent likely would have gone up $100 to $200/month.
Last year I refinanced my REI assets and took out significant equity without tax consequences. I am in the works of doing it again on select properties.
My point is that I do not distinguish one source of profit from another (except for taking into account the tax man). If I make $50k on appreciation or $50k in cash flow it is still $50k.
Historically the return on financed San Diego buy n hold via appreciation (rent and price appreciation) has far out performed better cash flow locales.
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Rosston Smith
Investor · Warner Robins, GA · Member since 2015 · 1k+ posts · 490 votes
9y
Macon Georgia is pretty great
1 Reply
Jesse Sasomsup
Property Manager · Los Angeles, CA · Member since 2013 · 58 posts · 9 votes
9y
Look to the Midwest!
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Jailen Holt
Real Estate Salesperson Licensed · Atlanta, GA · Member since 2016 · 114 posts · 22 votes
9y
Certain areas in Nevada and Arizona have produced exponential returns
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Grant Greene
Lender · Tucson, AZ · Member since 2015 · 279 posts · 91 votes
9y
I'll second what @Jailen Holt says about Arizona! :)
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