Out of state investing

Member since 2025 · 1 post · 16 votes

I have just recently discovered the possibility of real estate investing and I'm concerned whether I should invest out of state or not. I currently live in San Diego but seem to find the area too expensive for my liking. I am active duty military so I move around every few years for work, so I'm trying to decide if buying a property here and house hacking for the next couple of years until I move or making my first investment in a cheaper area is the better option.

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John Clark

Member since 2018 · 1k+ posts · 1k+ votes

Quote from @Cody Miracle:

"I have just recently discovered the possibility of real estate investing and I'm concerned whether I should invest out of state or not."
--------------------------------------------------

As a former military man myself, and knowing the demands of investing out-of-state in general (check Bigger Pockets in general for the perils of investing non-local), I will give you some advice in military parlance so that you will absolutely understand when it comes to non-local investing:

"Not 'NO,' but "F*** NO!!!!!!'"

You will note that everyone telling you to buy out-of-state is either a real estate agent or an investor who has something to sell. That means that they get paid on commission or for a sale. They don't care if you make money. They only get paid if you buy. Once they have their paycheck, they are gone.

Where are you in your military career?

If you are less than an E-6 or O-3, you should be concentrating on learning the the ropes. If you are ready to take the plunge, buy local, house hack, and have a management company lined up for when you get transferred. Run your numbers conservatively.

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Bethany Carlson
Real Estate Agent · San Diego, CA · Member since 2017 · 20 posts · 6 votes
1y
If its your first home purchase, I would start with where you live. House hacking is a great idea to help off-set your mortgage. Once you understand how the buying process works, have experience with maintaining a home and dealing with tenants, you'll be able to make a more informed decision for the next time around.
The VA loan is a great opportunity to buy real estate without having to put any money down that civilians don't have access to. If you do have cash to put down, there are currently tons of homes for sale right now that are advertising a VA loan assumption, meaning you can take over the seller's 2.75% (or whatever low interest rate they have!) and their low monthly payments if you have cash for the equity. I'm happy to send you some of these if of interest - just shoot me a message.
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Kate Sanchez
Member since 2025 · 248 posts · 101 votes
1y
@Cody Miracle Out of tate is doable with strong teams, but house hacking near you could be a smart start. Build equity now, scale later. Good luck!
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
1y
500% agree with @Caleb Brown. That VA benefit is like a magic trick to get in to investing. Out of state is high risk and it will absolutely take more capital. If you are being reassigned every couple years, you can continue to house hack over and over, leaving a trail of performing investments behind you with little to no capital down. Most investors would love to have that opportunity.
Even better if you can do it in a small multifamily.
Best of luck!
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Dean HarrisBusiness Member
Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
1y
@Cody Miracle
Welcome to BP! I have personally used the BRRRR strategy in Memphis, TN over 50 times and Im happy to show you how I did it and the vendor partners I used to work along side my business.
I also host a weekly podcast on how to use this strategy in Memphis. You can listen wherever you listen to podcast by searching Investors Guide to Memphis Real Estate
Best of Luck!
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Anthony L Amos Jr
Real Estate Agent · Columbus | Toledo · Member since 2019 · 608 posts · 768 votes
1y
Quote from @Cody Miracle:

I have just recently discovered the possibility of real estate investing and I'm concerned whether I should invest out of state or not. I currently live in San Diego but seem to find the area too expensive for my liking. I am active duty military so I move around every few years for work, so I'm trying to decide if buying a property here and house hacking for the next couple of years until I move or making my first investment in a cheaper area is the better option.
Since you move every few years, house hacking at each new location is a smart play. Buy a place, live in part of it, rent out the rest. Your housing allowance can help cover the mortgage, and you build equity while keeping costs low. As you relocate, build a network of local property managers and contractors, or use tools like RentRedi or TenantCloud to manage remotely. If San Diego feels too expensive, consider buying at your next duty station in a more affordable market. You’re in a great spot to build wealth with each move.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1y
@Cody Miracle Your decision between house hacking in San Diego or investing out of state really comes down to how you want your income, deductions, and eventual exit to play out. Each option has different implications:
- Buying in San Diego and house hacking allows you to use Section 121 Home Sale Gain Exclusion when you eventually sell. If you live in the property for at least 2 of the last 5 years, you can exclude up to $250K of gain ($500K if married) from federal taxes. That’s a powerful benefit, especially in a high-appreciation market like San Diego.
- Rental property expenses are deductible regardless of where you invest. Mortgage interest, property taxes, insurance, repairs, and depreciation can offset rental income whether the property is local or out of state.
- Active-duty military have special flexibility on the 2-out-of-5 year rule for the home sale exclusion. You can “pause the clock” for up to 10 years while on qualified extended duty, giving you more leeway to convert a primary residence into a rental and still qualify for tax-free gains later.
- Out-of-state investing adds complexity at tax time. You’ll often need to file a nonresident return in the state where the property is located, on top of your federal return. That’s not necessarily a dealbreaker but should be factored into your planning.
- In higher-cost areas like San Diego, property taxes and depreciation deductions are larger in dollar terms, which can help shelter income. In lower-cost states, the cash flow may be stronger, but the absolute deductions are smaller.
Ultimately, the choice depends on whether you value long-term tax-free appreciation through Section 121 or prefer immediate cash flow and lower entry costs with out-of-state investing. Both paths can be tax-efficient, but the strategies you’ll use to capture those benefits differ.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
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James WachobBusiness Member
Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 890 votes
1y
@Cody Miracle,
Welcome to BiggerPockets, and thank you for sharing your story. I have worked with many investors in your exact position, wanting to get into real estate but finding their local market too expensive to make the numbers work.

That is exactly why a lot of investors choose to look at out of state markets like Memphis. With a much lower barrier to entry, you will find opportunities that can cash flow without requiring the high upfront costs of places like San Diego. Memphis is very much a “street by street” city, but it holds a lot of hidden gems once you know where to look.

If you would like, I would be happy to walk you through what those opportunities look like and help you weigh the pros and cons of house hacking locally versus building your portfolio in a more affordable market.

Feel free to ask any questions, I would love to help you get started.
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Joseph TadresPro Member
Real Estate Agent · Columbus, OH · Member since 2025 · 184 posts · 179 votes
1y
If you want long-term growth and easy management, house hack in San Diego, but cash flow will be tight. If you care more about cash flow, look at out-of-state Midwest spots, which can work if you have a good local team. Run the numbers on both and go with what feels right for your goals.
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- Dan H.Pro Member
  Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
  1y
  Quote from @Joseph Tadres:
  
  If you want long-term growth and easy management, house hack in San Diego, but cash flow will be tight. If you care more about cash flow, look at out-of-state Midwest spots, which can work if you have a good local team. Run the numbers on both and go with what feels right for your goals.
  Can you find a single reputable source that shows any Midwest market has better cash flow than San Diego for a hold as long as 10 years or longer?
  
  the reality is historically San Diego has had better cash flow for long holds than every Midwest city as its rent growth is near top in the nation for this century.
  1 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
1y
The great thing about living in a High Cost of Living area is that you(hopefully) make a great salary.

The high salary that you make can go a long way in other markets where you might be able to put a down payment on an investment property at a much faster rate.

The other great thing about living in a high cost of living area is that you might have friends / colleagues who are high net worth individuals. You have easier access to capital from these friends / colleagues if you decide to partner in the future.

Best of luck!
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Jeb Williams
Property Manager · Clarksville, TN · Member since 2025 · 14 posts · 5 votes
1y
Hey, Cody!
My family and I are originally from El Cajon, CA, so I understand the trepidation in starting there as an investment spot. I work with Rent My Home based in Clarksville, TN which sees a lot of traffic from the military base here, Ft. Campbell.
Comparatively, Tennessee is on the expensive side compared to other areas in the country. But, that is driven by the high demand to live here. Nashville and its surrounding cities, including Clarksville, have seen an explosion in population growth since Covid.
So, while it's not the cheapest place to start, I think the high demand makes it easier to find tenants on the rental side if that's what you're looking to do. Feel free to connect and message me on the side if you're looking to have a deeper discussion about Clarksville as a potential investment spot.
1 Reply
Kiernan LaFaver
Real Estate Agent · Central New York · Member since 2023 · 207 posts · 96 votes
10mo
Hey @Cody Miracle! It entirely depends on what your main goals are. If cash flow and appreciation are main objectives, it sounds like maybe out of state investing is the way to go. If lifestyle, and wanting to use VA funding are main, then staying put,house hacking, and investing locally makes more sense. I'm in the Syracuse NY market and am very familiar with how the out of state investing process works. I've helped clients from MA,FL,NJ, and CA. Syracuse market is appreciating anywhere from 9-13% YoY depending on neighborhood. On top of that, there is expected to be a huge influx of people due to the incoming Micron semiconductor fab plants over the next 10-15 years. Housing is relatively affordable now, but I can't exactly say that will be the case in 2 or 3 years time. Rent consistently increasing through both city and suburbs annually. If you're curious about my market and what it has to offer, I would be more than happy to discuss the opportunities!
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Adam MaddoxBusiness Member
Chino Hills, CA · Member since 2020 · 7 posts · 1 vote
9mo
Hey Cody,
I am a realtor here in SoCal and both an in state and out of state investor. Any time you want to talk I would be glad to share my experience or grab some lunch to discuss your goals more! All are good options with proper structure and a good team behind you!
[email protected]909-377-0770
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