Out of state investors - what market did you choose and why?

110 Replies

I've been talking to a few people about this recently, but I would love to poll a larger group.

For those of you who have invested out of state - which market did you decide to invest in, and why did you choose that market?

I own some rentals in Las Vegas where I live and my wife still works. 

My out of state property is Lake front property in MN on lake Minnetonka and another up in Big Lake. 

It’s Retirement property while it was affordable. I hear they’re not building any more lake front property within 30 minutes of MPLS/Saint Paul. :-)

Also let’s me expense most of my travel back to MN to see family before or after business part of the trip. And pick up some negative MN state income for tax purposes  if I happen to make any money in the state in the future. 

I’d like to pick up a small multi in Florida on the beach, or MAYBE Hawaii. Something I can rent 3/4ths out all the time and use 1/4th for self and family for vacations. 

I haven't invested in any properties outside of CA but I am looking at states with no income tax such as Texas and nevada.

1. no income tax means I pay tax for only CA state tax and federal tax. Easier tax filing.

2. Affordable Price but then... almost everywhere else seems to be a lot cheaper than CA so a lot of the price looks appealing. But can't compare apples and oranges. 

Potential list/location that I am looking into:

 A. Las Vegas Nevada

 - Very close to CA so I can either drive or fly short distance

- No income tax

- Can be maybe used for vacation rental

- Low Property Taxes

*** Worry is economy is heavily based on casino/hotel so if there is a downturn in the economy potentially have a lot of vacant properties in the area due to laid off/less tourist/etc

*** Slight concern that I have is that I look at number of renters/landlord ratios (is it owner occupied or for investment?). I feel like a lot of the buyers are not looking to buy as primary residence home but as vacation home or rental investment.... meaning vacant home can have squatters and home are not managed close-by and must use managment company that you can trust but could be un-reliable or reliable.

B. Texas  - no income tax and looking into areas near major universities or downtown (Dallas, Houston or Austin areas). Price seems good as well. But I have to keep researching the areas since I am unfamiliar with the area and location is very important.

C. Tennessee - Price and "sort" of income tax free. I am still researching but it seems that there is a flat rate of 6% income tax on investments, interests and dividends such as stock. 

Not as much as interested anymore but possibly:

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D. I was thinking of Chicago, IL but their property tax seems to be constantly increasing a lot and seems pretty expensive. They do have income tax. But I believe Chicago is one of most affordable / cheaper metro areas to live in compared to places like SF or LA in California as an example.

I invest in the Philadelphia MSA, as I had lived and invested there for a long time.

Just behind SF Bay Area in GDP. Strong pharma, healthcare and education economy. Plus Xfinity...lol.

Average Caps 8-12. Good rents. Low property taxes in city.

So many deals, so little time!

Let me know if you want more info. I have a few flips that would make $100k right now. Mostly cosmetics.

And I represent other investors here.

Originally posted by @Susan Truax :

I invest in the Philadelphia MSA, as I had lived and invested there for a long time.

Just behind SF Bay Area in GDP. Strong pharma, healthcare and education economy. Plus Xfinity...lol.

Average Caps 8-12. Good rents. Low property taxes in city.

So many deals, so little time!

Let me know if you want more info. I have a few flips that would make $100k right now. Mostly cosmetics.

And I represent other investors here.

Do you mean " so little time" before next real estate market crush? Or what?

I just moved from San Francisco to Grand Rapids, MI to buy Rental properties. The amount of Health professionals that live and work near the "Medical Mile", number of colleges with hungry student renters, and Amazon just greenlighted their distribution center here a few months ago. 

Simply put - GR is booming.

Happy to send potential deals your way if you're up for it. Perhaps we could hop on a quick call to catch up this weekend? I'd love to learn more about your goals. 

Thanks,

Brett   

Originally posted by @Bill Brandt :

I own some rentals in Las Vegas where I live and my wife still works. 

My out of state property is Lake front property in MN on lake Minnetonka and another up in Big Lake. 

It’s Retirement property while it was affordable. I hear they’re not building any more lake front property within 30 minutes of MPLS/Saint Paul. :-)

Also let’s me expense most of my travel back to MN to see family before or after business part of the trip. And pick up some negative MN state income for tax purposes  if I happen to make any money in the state in the future. 

I’d like to pick up a small multi in Florida on the beach, or MAYBE Hawaii. Something I can rent 3/4ths out all the time and use 1/4th for self and family for vacations. 

 have you thought of picking up some used time shares ?  some in Hawaii can be pretty cheap..  just a thought.. 

@Ho Eun Park   not sure why you are focused on state income tax when you live in CA... you pay tax in CA on all your income regardless of where it is.

and in states with income tax. you get a credit on your CA tax if you pay state income tax in those states I think or maybe salt changed that.. not sure.. 

Originally posted by @Jay Hinrichs :

 have you thought of picking up some used time shares ?  some in Hawaii can be pretty cheap..  just a thought.. 

Are you suggesting this as an investment strategy, or for personal use? I've never heard of a timeshare that cashflowed (or appreciated, for that matter), but I'll admit I haven't spent much time on the question.

Originally posted by @Julie Dike :
Originally posted by @Jay Hinrichs:

 have you thought of picking up some used time shares ?  some in Hawaii can be pretty cheap..  just a thought.. 

 Are you suggesting this as an investment strategy, or for personal use?  I've never heard of a timeshare that cashflowed (or appreciated, for that matter), but I'll admit I haven't spent much time on the question.

 personal use only NOT an investment.. they don't call it Crime share for nothing.. I was responding to the gentlemen that said he would like something to use in Hawaii.. you can buy weeks in Hawaii on the secondary market for as little at 1 to 2k for a week.. then annual fee is like 400 to 600.. so if you score the right ones.. could be a cheap way to have a place there to go to when you want..  without the risk and hassles of owning a rental.

I was considering picking up 8 to 10 weeks in Vegas.. but then just bought a home in Summerlin instead as my wife wanted something more substantial . and so it turned out it will be come our primary.. with Oregon our secondary.. its a good tax strategy for us. 

I chose the best one I could afford, then made sure it "clicked" with me, and then finally it was easy to get to. 

That market is KC. It's affordable (even now), researching it online is easy, the people/culture fits my personality, and travel is a breeze from the bay area.  I mean w/ planning and low cost carrier (spirit/frontier) I can be there in a day for under 200 bucks. With a direct flight (United, Alaska, Southwest) I can be there in under 4 hrs and anywhere from 250-400 bucks.  Plus it's central time so only 2hrs ahead... which is a lifesaver when trying to deal w/ contractors. I know it's only 1 hour, but east coast time is annoying from the west coast.

There's plenty of other markets that work too, but KC just fit the best for me and I've stuck with it.

@Jay Hinrichs

Correct me if I'm wrong but the way I read The Tax Cuts and Job Acts for upcoming 2018 tax is that standards deduction is 12k for single/24k for married, making many people not able to use the reduce SALT deduction.

Even if I'm to claim tax credit on my resident tax form for taxes paid in other state.....the property taxes, state income tax and local tax are only deductible up to $10k. 

For example if I paid over 20k in property taxes and over 20k in income tax...I can only deduct up to 10k due to reduced SALT deduction even if I paid 40+k in combined taxes.

I don't think the property tax, state and local tax will be applied towards the standard deduction for 2018 and forward unless they change it again. I believe they also removed certain things you can deduct as well. 

However I'm not too sure. This is how I interpreted it. 

I have one out-of-state property and it is a condo in South Lake Tahoe. I chose it because I was planning to use it as my vacation/retirement home. Since then, my mother's health has declined and I am spending more and more time in Tahoe. She recently bought her own house and it is more convenient to  live with her, so the condo is now a full-time rental. I own nine properties in my current home state of Mississippi. 

I invest purely based on cash flow (after initial investment, typically positive cash flow every year).  Recent 'hot' investment areas are Cincinnati, Kansas City, Indianapolis.  Some New England cities also has strong cash flow, such as Hartford CT and Providence RI.  I have properties in all above areas, so I know these areas are doing well (some properties in mid west appreciated 25% to 50% within last 12 months alone).  I have properties in Texas, but it might be too late to invest in Texas major cities as too many rentals are on the market, so rents are going downwards.  Some people are starting to invest in Chicago and Cleveland recently, but be very careful of the area.  For example, I found some duplex in Cleveland for less than $20k (rented for both sides) with total monthly rent of $1k (can you believe it? Cost is less than $20k, I did not miss any zeros), but I can not find property management company willing to manage them because location was around warzone and there could be issues obtain proper insurance, so I passed on those deals.  

Your calculation on property tax is NOT correct. Your property tax for rentals are expenses for your investment, so not part of the $10k limit. Easiest way is to put rental properties in LLCs and all rental mortgage, tax, management expenses are part of expense for LLC. Even without LLC, you can still deduct above items. If your business rents your own property (such as office building), there are extra tax deductions depending on your income level in the new law. My wife is a partner in a mid size CPA firm, so we know these tax issues quite well.

Interesting topic! I ended up choosing Fort Wayne, Indiana.  I started from this list and went through each city that had higher rent to price ratio (or rather lower price to rent ratio). I had personal ties to Fort Wayne, and while I was visiting there i really liked the neighborhood so I stuck with it!

@Ho Eun Park , I would be wary of Chicago.  The state of IL is in a dire tax/pension crisis and both Gov candidates acknowledge that property taxes are going to be going up as one of the best ways to try and make up the debt load the state has.  The other avenue is going to be either even more fuel tax or a per-mile driven tax.   There are more people leaving IL each year than move to IL.

That being said, I have a Sec8 Turnkey SFH on the South side of Chicago that's been doing ok for the last 1.75 years but the taxes did go up (PM is filing to get them reduced). You really have to know the areas where you'll be investing.

@Travis Raila Great question..here's my 2 cents:

1. For me...I live in SoCal but started investing in the Southeast because it's where I'm from and know the lay of the land and for the lower price point and the fact that these are municipals that are more landlord friendly (No rent control for one thing)

2. My over 9 years of experience as an REO Asset Manager is an added bonus because I've know how to manage rehabbing properties throughout the country. I know price points when it comes to materials and vetting contractors and professional services

3. Remember…you don’t have to KILL it. Focus on making a solid investment for the long game. I bought a 4 plex in Macon, GA in good area for $72K. I put $40K into it. My total rents are $2400/month. My total monthly expensed are right at $1000/month. Worst case scenario is that I can have 2 vacancies and still not be upside down. Don’t be greedy. The top rents for a similar property in my market is up to $700/month. But I stay around $625/month and I get the same tenants. Don’t let $625/month fool you. When you dealing in Secondary markets in other parts of the country you will get hardworking people who can afford it and want a nice place to live. $50 a month is huge to them. My water bill on the entire building averages out to be $50-$55 a month.

4. Pay your professionals. I have a great agent and a great property manager (and they have great relationships with local contractors) and I gladly pay them their commissions and sometimes even send them a cookie basket or gift card for dinner. Once they see you value them…they will go above and beyond and the next thing you know you're getting the inside track on properties you wouldn't have known about.

5. DUE DILIGENCE! DUE DILIGENCE! DUE DILIGENCE! Not just on the property. Research the population and make sure people are coming in and not leaving. Average income. Local work force. Again…realize that outside of CA, NY and a few other major markets, the rest of the country are middle of the road hardworking people.

6. Don’t be afraid to make AGGRESSIVE offers! Say that 3 times in the mirror. Ask for it all. They will either say no or counter. Remember…you’re the investor building a business. Don’t feel bad about walking away either. 

I own a management company here in north central Connecticut. We have owners/investors from California, Texas, New Jersey, New York, and Washington (to name a few). Is that to say there aren't any deals in those states? Nope. 

I think it's an indication of people willing to invest and purchase property in areas where they find people they can trust. While some people are saying the Indy and Alabama markets are great, I have an investor selling everything she has there to 1031 into some more properties in the CT market.

Purchase price / rent price matters, but having great boots on the ground matters more. Just my .02 cents!

Originally posted by @Xavier Randall :

@Travis Raila Great question..here's my 2 cents:

1. For me...I live in SoCal but started investing in the Southeast because it's where I'm from and know the lay of the land and for the lower price point and the fact that these are municipals that are more landlord friendly (No rent control for one thing)

2. My over 9 years of experience as an REO Asset Manager is an added bonus because I've know how to manage rehabbing properties throughout the country. I know price points when it comes to materials and vetting contractors and professional services

3. Remember…you don’t have to KILL it. Focus on making a solid investment for the long game. I bought a 4 plex in Macon, GA in good area for $72K. I put $40K into it. My total rents are $2400/month. My total monthly expensed are right at $1000/month. Worst case scenario is that I can have 2 vacancies and still not be upside down. Don’t be greedy. The top rents for a similar property in my market is up to $700/month. But I stay around $625/month and I get the same tenants. Don’t let $625/month fool you. When you dealing in Secondary markets in other parts of the country you will get hardworking people who can afford it and want a nice place to live. $50 a month is huge to them. My water bill on the entire building averages out to be $50-$55 a month.

4. Pay your professionals. I have a great agent and a great property manager (and they have great relationships with local contractors) and I gladly pay them their commissions and sometimes even send them a cookie basket or gift card for dinner. Once they see you value them…they will go above and beyond and the next thing you know you're getting the inside track on properties you wouldn't have known about.

5. DUE DILIGENCE! DUE DILIGENCE! DUE DILIGENCE! Not just on the property. Research the population and make sure people are coming in and not leaving. Average income. Local work force. Again…realize that outside of CA, NY and a few other major markets, the rest of the country are middle of the road hardworking people.

6. Don’t be afraid to make AGGRESSIVE offers! Say that 3 times in the mirror. Ask for it all. They will either say no or counter. Remember…you’re the investor building a business. Don’t feel bad about walking away either. 

 Number 5. can't be said enough.... so many "marketing numbers" fluff up values and make things seem like a no brainer, when reality is they're garbage. 

I'll add 2 more things...since getting my feet wet and gaining the experience of rehabbing an income properties...I'm able to see properties differently and pick up properties that others look over because of fear or lack of experience. Sometimes garbage is exactly that...but sometimes you can see that diamond in the rough and be able to polish it up and the returns will be great!! Lastly...me personally...I stay clear of SFR's. I like triplexes and up. They pay for themselves.

@Travis Raila the markets I invest in out of state are Louisville, KY and Austin, Tx. My reason for both is that I know the areas from living there, have connections there and also believe they both have potential for further growth.

@Travis Raila I invest in Las Vegas.  I decided on that market for a few reasons, 

1. I know the market well so I know where to buy and where to avoid based on my criteria

2. I love the demographics and future potential... high growth, lots of development going on, sports teams, etc

3. It's close to California for visits

4. Good rental market

5. The city itself is a brand which I think helps draw people to it.  Not too many cities outside of places like LA, NY, etc have that.  I love that

Of course like most markets in the US right now it has run up quite a bit so the yields have come down and may not be as good as some other "hot" markets around the US right now. But long term I plan to buy more there, I think you get a good balance of both cash flow and appreciation. Many markets seem to be either one or the other, but not necessarily both.

For future investment, I like to wait till Amazon declare HQ2 location. There will be guaranteed spike in house price there...

We can use different research to decide location also... CNBS just released their ranking for HQ2....

https://www.cnbc.com/2018/08/16/as-amazon-narrows-...

Based on this research... investing in any B+ cities will be safe bet... 

  • Dallas
  • Austin
  • Atlanta
  • Denver
  • Miami
  • Nashville