New Out-of-State Investor, What Markets Should I Research?
Los Angeles, CA · Member since 2026 · 3 posts · 15 votes
New Out-of-State Investor, What Markets Should I Research?
Most Popular Reply
Josh HandlerPro Member
Contractor · Memphis, TN · Member since 2026 · 53 posts · 56 votesHarold, notice what's happened in this thread in 24 hours. You asked which market to research and you got Kansas City twice, Ohio, Oklahoma City, Memphis, and South Florida tax deeds. Every one of those answers came from somebody who earns a living in that market. None of them are lying to you. It's just that the question "which market" mostly gets answered by people who are already in one.
I'm a contractor rather than an agent, so I don't have a market to sell you. I'd rather give you the thing that actually decided the outcome for most of the out-of-state owners I've met.
It usually isn't the market. It's the house.
I've walked houses two blocks apart, same city, same rent, bought within a few thousand dollars of each other, where one owner is fine and the other is deep underwater on repairs that were sitting there at closing. Same market, same team, different result. The variable was the age and condition of the structure and the mechanicals, and neither buyer had priced it before they were committed.
So here's what I'd add rather than replace.
Learn to read a house before you learn to read a market. Year built tells you more about your first three years of ownership than the zip code does. Pre-1965 usually means cast iron drain lines and galvanized supply near the end of their life plus an undersized panel. Late 1970s means checking for aluminum branch wiring. 1980s means polybutylene supply. 1990s and newer means the structure is fine and the systems are the story, so HVAC, water heater, and a roof on its second life. None of that is a reason to avoid anything, it's a reason to know what you're buying.
Size your capital against the work, not the purchase price. New investors budget to the down payment and keep almost nothing back. The ones who get hurt usually didn't buy in a bad market, they had no reserve when the sewer line failed in month four.
And two checks before you close anywhere, in any market: a sewer scope on anything pre-1970, and somebody pulling the cover off the electrical panel. A few hundred dollars, and it's where the five-figure surprises live. Most general home inspectors do neither.
Full disclosure so you can weigh it: I run a construction company and own rentals myself, so I see this from the repair side and that colors my view. But you're going to be handed a lot of market opinions over the next few months and almost nobody is going to tell you to underwrite the building itself.
One practical suggestion. Whatever two or three markets you land on, find a contractor in each and ask them to walk a house you're seriously considering during your inspection period. Plenty will do it for free or close to it, because that's how we meet clients. You'll learn more in an hour with someone who has to actually fix the thing than in a month of spreadsheets.
44 Replies
- 2wWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
With $150K to spend, I wouldn’t pick a market based on what’s being written about in the media and first choose some markets in which the ratios of rents to prices, employment growth, taxes, insurance costs and landlord regulations work well. If my first out-of-state project is going to be successful, I need to first establish the right people in the area.
Good luck!
NETWORTH BUILDERS5236 Reviews - 2wMilton ChamberlainPro MemberReal Estate Agent · Kansas City, MO · Member since 2019 · 235 posts · 107 votes
Hi Harold, I work with out-of-state investors looking on both the Kansas and Missouri sides of the KC metro. I’d be happy to chat about your specific investment goals and where the Kansas City market might fit into your strategy.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes2w
Quote from @Harold Yam:
Hi everyone! I’m new to real estate investing and looking to learn as much as I can before putting my capital to work.
I currently live in California and am interested in becoming an out-of-state investor. I have approximately $150K in capital available to invest, but I want to take the time to educate myself, understand different markets, and learn from experienced investors before making my first investment.
I’d especially love to connect with other out-of-state investors who have gone through the process of investing remotely and can share what they’ve learned, both what worked and what they wish they knew before getting started.
I’m also curious to hear everyone’s thoughts on markets that may be worth researching for a first-time out-of-state investor with around $150K to invest.
If you’ve invested out of state, what markets would you recommend looking into, and why?
Looking forward to learning from the community and connecting with other investors!
We have invested in the MidWest, SouthEast & Soutwest portions of the US. While we have tried we could never make a deal work on the West or NorthEast coasts.
Our process of investing remotely. Once we decide which market we are going to pull the trigger in we establish relationships with realtors, attorneys, investors, contractors, handimen..... in that market. Before Covid we would establish a budget to travel into the market and meet people. During and after COVID, like everyone else we started using virtual meeting tools like Zoom to meet people. Part of the process was to find partners to invest with in the market. Primary reason- a local partner with skin in the game became our boots on the ground person to check on the progress of projects. With that said we did pull the trigger on deals even when there wasn't a local person with skin in the game.
Which markets- We like large metropolitan markets with lots of submarkets & it must have a major airport that we can get to with a direct flight. And the most important stat- Can we make our hurdle rate in that market. Our other criteria for a market is does it have a major university or up & coming tech hub. Areas that I think may be worth exploring, Chicago, Columbus, DFW, Atlanta, Raliegh.
Good luck
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2w
I recommend doing some research. resiclub is where i get a ton of my data. they publish free info (i have the subscription) and the free info can give you great insights into markets.
7e investments53 Reviews - 2wAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Harold, with about $150K available, I’d resist the temptation to start by asking “which market should I buy in?” and instead build a filter for what kind of market actually fits your strategy.
For a first out-of-state deal, I’d want a market where the numbers work conservatively, but also where the operations are manageable from a distance. That usually means looking at rent-to-price relationship, property taxes, insurance, landlord laws, vacancy, age of housing stock, property-management depth, and whether there are enough contractors and vendors to support you when something goes wrong.
I’d also narrow the strategy before narrowing the geography. A market that works well for turnkey LTRs may not be the same market I’d choose for BRRRRs or heavy value-add. Since you’re new and investing remotely, I’d lean toward something operationally simple for the first deal rather than trying to maximize upside.
From the tax side, I’d also think about state filing exposure, entity registration, depreciation, and whether cost segregation is actually useful in your situation before buying across state lines. The cheapest property isn’t always the simplest investment once state compliance and management are added.
With $150K, preserving liquidity matters too. I’d rather see you buy one property with solid reserves and a dependable local team than stretch into multiple out-of-state deals too quickly.
Feel free to DM me, I’d be happy to send over a few resources that might help you build a market-selection and underwriting framework.
INVESTOR FRIENDLY CPA®5241 Reviews - 1wRudy TaghiPro MemberRealtor · Los Angeles California · Member since 2018 · 11 posts · 3 votes
Hi Harold, I saw your post about researching your first out-of-state investment. I’m also in LA County and work in both real estate and lending. I liked that you’re taking the time to understand the numbers before jumping in. What kind of property are you leaning toward right now—single family, small multifamily, or something else? I have been actively investing out of CA since started in 2018.
- Realtor · Oklahoma City · Member since 2020 · 258 posts · 139 votes1w
@Harold Yam I think you have a ton of options across the states to choose from that are a lot more affordable than California. Most of the central markets are really good for certain cities.
Its great that you are wanting to converse more with other out of state investors & people in those local markets to better refine your investment criteria and market.
You can additionally look into possible private money lending if you are looking more for cashflow, but if you want the benefits of owning property then it's always best to purchase. Being out of state comes with its own set of extra tasks you have to stay on top of that having someone that is well rounded in their own investments, has experience helping others, as well as property management &/or construction experience is a plus!
good luck! - Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes1w
This thread be poppin yo
- 1wDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
How much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
A 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 building a knowledgeable & trustworthy local team.
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/Market”.
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?
What do you think will happen if you rehab a Class D rental to Class A standards?
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/Market.”
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:
Logical Property Management4.9450 Reviews - Property Manager · St. Louis, MO · Member since 2026 · 6 posts · 2 votes1w
Harold, there is a lot of people commenting about the Mid-West, which as a great place to start, very affordable. I work property management in St. Louis and would be happy to connect.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes11h
Quote from @Harold Yam:
Hi everyone! I’m new to real estate investing and looking to learn as much as I can before putting my capital to work.
I currently live in California and am interested in becoming an out-of-state investor. I have approximately $150K in capital available to invest, but I want to take the time to educate myself, understand different markets, and learn from experienced investors before making my first investment.
I’d especially love to connect with other out-of-state investors who have gone through the process of investing remotely and can share what they’ve learned, both what worked and what they wish they knew before getting started.
I’m also curious to hear everyone’s thoughts on markets that may be worth researching for a first-time out-of-state investor with around $150K to invest.
If you’ve invested out of state, what markets would you recommend looking into, and why?
Looking forward to learning from the community and connecting with other investors!
Investing out of state is not ideal, but my students in California choose either Nevada or Arizona to place their money because both states are far more landlord friendly, less expensive and easily accessible. There are times when you need to urgently visit the property or county the property is in. I wouldn't want you to forfeit your rights because you couldn't be somewhere you you were needed. Properties are an expensive asset, don't use cheap tactics to get it started only to lose it later.
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