Investing out of state
New to Real Estate · NJ · Member since 2026 · 13 posts · 13 votes
Investing out of state
Most Popular Reply
Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesLet's separate out the ideas.
Good ideas
- Investing near where you live, if you've done your homework
- Investing out of state, if you've done your homework
- Buying a SF as an airbnb, assuming you choose wisely
Bad ideas
- Investing somewhere just because you have a friend living there
- Buying a condo as a rental (you don't control many of the expenses)
- Hiring a friend to manage your business
Terrible idea
- Renting to friends or family which almost never works out well
14 Replies
- 6moGreg ScottPro MemberRental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
Let's separate out the ideas.
Good ideas
- Investing near where you live, if you've done your homework
- Investing out of state, if you've done your homework
- Buying a SF as an airbnb, assuming you choose wisely
Bad ideas
- Investing somewhere just because you have a friend living there
- Buying a condo as a rental (you don't control many of the expenses)
- Hiring a friend to manage your business
Terrible idea
- Renting to friends or family which almost never works out well
- 6moDerek BrickleyBusiness MemberLender · Ann Arbor, MI · Member since 2021 · 686 posts · 234 votes
Hey Ryan!
Greg's post is spot on, if the deal makes sense then yes it could absolutely be beneficial. I will say about half of our rentals we rent to those we know, but those are all local to us. Even if you have someone you know renting it out, don't skip any steps. Depending what state it is, that's how you'll get in a tough spot. Fill out a full application, get a lease signed, etc.
Gold Star Mortgage Financial Group547 Reviews - 6moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 3k+ posts · 886 votes
Hi @Ryan Hoehn, here's my thoughts, having a friend there helps, but only if you treat it like a real business relationship with clear expectations, not just a handshake. Mixing friendship and being your tenant can get messy fast if something goes wrong. I’d focus on buying a solid deal than chasing a location or idea. Vacation condos and short term rentals can look great on paper but come with more volatility, rules, and management complexity
If you can find a straightforward long term rental with strong numbers, whether local or out of state with good property management, that is usually the better first step. Keep it boring and predictable, you can always get more creative on deal two or three.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes6mo
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
ThanksThis will sound harsh and I don't mean to be, but that is a terrible idea on several levels. Investing remote is hard and risky, mixing it with a friend makes it only worse. Definitely invest in your own back yard, invest matching your skills and experience level, don't let anyone sell you a turnkey or a seminar reveling the "secrets to getting rich".
- 6moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
ThanksA common issue, so Copy & Paste info below:
You’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9469 Reviews - Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 608 votes6mo
@Ryan Hoehn It can work but don’t confuse having a friend there with having a system. For your first deal, I would strongly recommend staying closer to home so you can learn the process. That is the screening, leasing, maintenance and understanding the numbers without added risk. Out-of-state investing adds complexity quickly. Also, be cautious about renting to a friend. It can blur boundaries and make it harder to enforce lease terms if issues come up.
If you decide to invest out of state, build your boots-on-the-ground team first. That is a solid property manager, clear screening criteria and conservative underwriting. The location matters but the system matters more, especially on your first deal.
- 6moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesHey Ryan, welcome to BP! Investing out-of-state can definitely work, especially if you have someone you trust on the ground to help with management and maintenance, but it also comes with extra challenges like local laws, market nuances, and being able to respond quickly if something goes wrong. Starting with a condo or single-family rental in a vacation-heavy area can be tempting, especially with Airbnb potential, but keep in mind that short-term rentals often have stricter regulations, higher turnover, and more management headaches compared to long-term rentals. Having a friend there helps, but I’d make sure you’re clear on roles, responsibilities, and legal liability before jumping in. Sometimes it’s easier for first investments to be closer to home so you can get your feet wet with management and understanding the cash flow, but if you do your homework, plan carefully, and have strong local support, out-of-state can work too. Happy to connect and answer any questions you have!
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
Thanks
Jimmy Lieu, Red 1 Realty4.9122 Reviews - 6moMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 504 posts · 556 votesIt's always ideal to invest locally. Easier to manage your asset and less risky. You can walk the property virtually whenever you want and assess the things that need to happen in real life vs just assessing things via pictures.
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
Thanks
OOS investing can be a great idea, if it makes sense for you. I had to go the OOS route because the numbers made zero sense to me while living in San Francisco so it kind of forced my hand there. I also wanted a landlord friendly state where I could avoid being penolized just because I was a private landlord renting to tenants.Step 1 - evaluate the market for tenants other than just your friend and Airbnb. Condo's are a good play but don't appreciate the same as a single family property. You'll also have the monthly HOA due's and need to make sure those associations allow for rentals / airbnb in the communities. Not all will allow it per their bylaws.
Step 2 - evaluate the single families and other properties in the area to see if they make financial sense. Just because it sounds like a good idea, doesn't mean it's a good market for your rentals.
Step 3 - figure out how you'd be managing the property from out of state. When I got started as an OOS investor in 2021, I had a property manager take care of the day to day operations and I leveraged their contractors and other resources but the numbers had to make sense for me.
Step 4 - Take a few trips there and check out the market for yourself. You'll figure out pretty quickly what the market is like, and what areas you'll want to investing / avoid.
Reafco - Mike Paolucci 512 Reviews - 6moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
ThanksThis is common question that a lot of newer investors have @Ryan Hoehn. But i'm glad you want to get started. OOS investing is very easy and many people especially the Cali and NY investors do this a ton.
I recommend finding a good market in the midwest where your investments would make sense from both cashflow vs. appreciation.
You want a market that is tech driven, landlord friendly, and affordable. That will mean more jobs, more income, higher property prices, and better opportunity for your rental to perform better.
Any state in the midwest works. Find a major city and only invest there. Connect with a good investor-focused agent who is also an investor themselves. Have him connect you with his team of contractors, lenders, property managers. Go visit the market.
Your agent will send you good investment opportunities off-market and on-market. Ask for rent comps, sales comps, info on mechanicals, and have agent find out how far on the price you guys can go to make it make sense.
Get inspection/contractor walkthrough, speak to PM on rents, and that is all. Let me know if you have any questions.
ReafCo | Ahmed Group 533 Reviews - Member since 2026 · 1 post · 0 votes6mo
I am a foreign investing out of US so it possible
obviously it easier to invest in your niegberhood but you deferentially can invest OOS
Just do full research start from choosing location that for your goals, choose friendly agent talk to lenders property managers and plan exit points of something go wrong
Of you have a friend there it a bonus he can help you but don't count on him only
- 6moTodd AndersonPro MemberReal Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
When talking with new investors trying to make a good decision to start their REI journey I always recommend to go with a boring investment. You need to make a base hit on your first deal. this helps you figure out the process and gets you confidence.
Going with a SFR or Duplex for LTR is what i find to be the best way to start. When I am making suggestions, I would also have the investor look at new construction right now. There are alot of them out there and with this you take many of the maintenance questions out
Investing OOS can and does work well for a lot of investors but i find the best moves are the most boring with good numbers.
best of luck and let me know if I can help more.
- 5moRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Quote from @Ryan Hoehn:
Whats up guys, i've always thought about investing in another state.
Currently have no investments but looking to change that as soon as i can.
Question i have is do you think its a solid move to invest in another state where you dont live but have a friend there that does? Its in a state where alot of people vacation and are moving to.
I was thinking about a condo in a hotel beachfront or even possibly a single family home. My friend currently lives there but rents out from his cousin who has a family so the thought i had if it were single family, buy it so he has a place of his own and pays me each month or find renters elsewhere or airbnb the beachfront condo?
Would that be a good step to take or would you suggest making my first investment a place closer to home?
ThanksOne thing I'd think about is choosing the market first and the property second.
A lot of new investors start with "my friend lives there" or "people are moving there," but I've found the better question is whether the rent, acquisition price, landlord laws, and long-term demand actually support the investment.
Have you narrowed down which state or market you're considering yet?
Section 8 Launch52 Reviews The friend angle is the part I'd be most careful about. Renting to someone you have a personal relationship with sounds convenient until it isn't, and it can get awkward fast if they're ever late or you need to raise rent. Keep the friendship separate from the investment decision.
On the market itself, if it's a legit vacation and migration destination, that's worth paying attention to, but you still need the numbers to work. Beachfront condos can look sexy and perform terribly once you factor in HOA fees, special assessments, and the restrictions some of those hotel-style properties have on rentals. I actually use an AI tool to help me screen markets and run initial deal analysis before I spend real time digging in, which has saved me from going down a lot of rabbit holes on deals that looked good on the surface.
For a first investment, the honest answer is: location matters less than buying a deal that actually cashflows and that you understand. Out of state can work, but you need a solid property manager lined up before you close, not after.
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