Picking the right out of state market
Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes
Picking the right out of state market
Most Popular Reply
Josh HandlerPro Member
Contractor · Memphis, TN · Member since 2026 · 61 posts · 65 votesGood answers above on the team and the underwriting, so I'll take the part nobody has: the building itself. I build and renovate for a living, so this is the construction view rather than the market view.
The jump you're actually making isn't Florida to Indiana. It's newer single family to old small multifamily, and that's the bigger change of the two.
Two to four units in most Midwest markets means 1900 to 1940 stock, and those buildings have a failure mode your South Florida rentals don't: shared systems. One boiler, one main stack, one electrical service, one roof over everybody. In a single family, a system failure is one tenant and one unit's income. In a 1920s triplex on a single boiler, it's every tenant and all of the income at once, in February. That's the risk that doesn't show up anywhere in a cap rate.
So the things I'd want answered before your inspection period closes, in the order they'd cost you money:
How the building is heated and how it's metered. A boiler with steam radiators on one gas meter means you own the heating bill permanently, and in a cold market that's usually the largest operating line in the building. Owner-paid heat moves a deal more than fifty dollars of rent does, and it's the number people from warm states have never had to think about.
The main stack and the lateral out to the street. Somebody already said sewer scope and they're right, but here's why it matters more in this asset class than in a house: every unit drains into one pipe. When it fails, it doesn't fail for one tenant. It's also the cheapest five-figure risk on the list to rule out.
How the electrical is divided. A lot of these were single family homes carved into units decades ago, and the panel arrangement is frequently something a home inspector calls functional and an electrician calls a project. Ask when units were added and whether it was permitted, because an unpermitted fourth unit is a legal problem that becomes a lender problem.
Basements and grade. You've never had to own a basement. Water down there is usually gutters and grading, which is cheap, right up until it's the foundation, which is not.
On the team, the one change I'd make to the standard advice: the first person I'd hire isn't the agent, it's whoever will tell you what the building actually needs. Pay a contractor to walk one or two properties with you before you write any offer, and pay him enough that he takes it seriously and tells you the truth rather than the version that wins him the job. That cost is trivial next to learning the same information in month four.
And one honest warning. Duplex through fourplex is harder than single family, not easier. More systems, more tenants, more turnover, more municipal compliance. The math looks better on paper and the operational load is real. Better to go in knowing that than to find out.
21 Replies
- Real Estate Agent · Member since 2026 · 2 posts · 2 votes1d
Hi Michelle,
I hope you’re doing well! I saw that you mentioned you’re considering exploring markets outside of South Florida due to the high cost of entry, and I wanted to share a couple of ideas that may be worth considering.
Have you thought about converting or utilizing any of your existing South Florida properties as short-term rentals (STRs), assuming the property, zoning, and local regulations allow for it? Depending on the location and property, STRs can potentially create another avenue for increasing income and overall investment returns.
Also, if you’re looking to remain in Florida, have you explored Northwest Florida? I currently have clients investing in duplexes and triplexes in that area for both long-term and short-term rental strategies. There are some interesting opportunities to evaluate, particularly for investors looking at a combination of cash flow and long-term appreciation.
I also work closely with@Jason Wray who has extensive experience in real estate finance and investor lending. He is a tremendous resource for investors, whether you decide to stay concentrated in one market or build a portfolio across multiple markets. His knowledge of financing strategies and different investment loan programs can be extremely valuable when structuring acquisitions and planning how to scale a portfolio.
If you’re open to it, I’d be happy to have a conversation about what you’re currently holding, what your goals are, and whether expanding into another Florida market—or potentially repositioning an existing property—could make sense for your investment strategy.
Best,
Christian
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
@Christian Welch hi Christian, thank you for taking time to comment on my post. I actually have thought about investing in other parts of FL. I would love to connect and discuss further some possibilities in the N FL market.
- 1dDivin KanyamaBusiness MemberAccountant · Seattle, WA · Member since 2025 · 188 posts · 57 votes
@Michelle Dong Indiana can offer more affordable entry points, but I would choose the specific market before choosing the property. Study employment, population trends, rents, taxes, insurance, vacancy, and neighborhood-level demand because conditions can vary significantly by city and even by block.
Build your team slowly: interview several investor-friendly agents, property managers, lenders, inspectors, contractors, insurance brokers, and local attorneys. Check references from other out-of-state owners, confirm licenses and insurance where applicable, and test the team with a small project before relying on anyone fully. A strong property manager is especially important—ask about leasing standards, tenant screening, maintenance markups, inspection routines, eviction experience, reporting, and their current unit count per manager. I would also speak with at least two managers before making an offer and compare their rent estimates, repair expectations, and opinions of the exact block.
Underwrite conservatively using verified rents, realistic taxes and insurance, vacancy, management fees, capital expenditures, and a larger repair reserve than you might use locally. For a duplex through fourplex, confirm utility responsibility, unit legality, zoning, local rental-registration requirements, and whether the lender will treat the property as residential or commercial. Get a thorough inspection, sewer scope when appropriate, and contractor estimates before the contingency period ends rather than depending only on the seller’s numbers.
For remote oversight, require monthly statements, invoices and before-and-after photos for repairs, regular property inspections, and written approval limits for nonemergency work. Maintain backup vendors, visit the market periodically, and have more than one exit strategy if rents, financing, or neighborhood conditions change. The right structure will depend on the specific Indiana market and your financing, so local tax, legal, insurance, and property-management input is worth getting before you commit. You already have LTR experience, which gives you a solid foundation; if you stay disciplined about the team and the numbers, expanding out of state can be a very workable next step.
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
Hi Divin,
Thank you for taking the time to reply to my post. You made several great points. Do you have any resources or links that would be insightful in studying a specific market like Indiana or other markets?
- 1dAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Michelle, I’d start by choosing the team before choosing the property when you’re going out of state.
I’m from Florida as well, so I understand why investors start looking toward lower-cost Midwest markets once South Florida pricing makes the numbers harder to justify. But I wouldn’t move into Indiana just because the purchase prices are lower. I’d first decide what kind of duplex, triplex, or fourplex you want, what minimum cash flow and reserves you need, and how much management complexity you’re willing to accept.
For an out-of-state team, I’d want an investor-friendly agent, property manager, inspector, lender, and a reliable contractor or handyman who are independent enough to give you different perspectives on the same deal. I’d interview the property manager before making offers because they can tell you a lot about realistic rents, tenant demand, turnover, maintenance, and which areas are harder to manage than they look on a spreadsheet.
I’d also make sure the property still works after professional management, even if you plan to be involved yourself. A remote deal that only works because you’re assuming free management is usually too thin.
From the tax side, buying in another state can also create additional state filing and bookkeeping considerations, so I’d keep every property tracked separately from day one and decide the ownership structure before closing rather than trying to clean it up later.
The biggest thing I’d avoid is picking a “hot market” first and then trying to make a property fit. Define the numbers and operating model first, then let that narrow the market.
Feel free to DM me, I’d be happy to send over a few resources that might help with out-of-state rental underwriting, entity structure, and building the right team.
INVESTOR FRIENDLY CPA®5241 Reviews- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
HI Ashish,
Thank you for replying. I have sent you a message.
- 1dJosh HandlerPro MemberContractor · Memphis, TN · Member since 2026 · 61 posts · 65 votes
Good answers above on the team and the underwriting, so I'll take the part nobody has: the building itself. I build and renovate for a living, so this is the construction view rather than the market view.
The jump you're actually making isn't Florida to Indiana. It's newer single family to old small multifamily, and that's the bigger change of the two.
Two to four units in most Midwest markets means 1900 to 1940 stock, and those buildings have a failure mode your South Florida rentals don't: shared systems. One boiler, one main stack, one electrical service, one roof over everybody. In a single family, a system failure is one tenant and one unit's income. In a 1920s triplex on a single boiler, it's every tenant and all of the income at once, in February. That's the risk that doesn't show up anywhere in a cap rate.
So the things I'd want answered before your inspection period closes, in the order they'd cost you money:
How the building is heated and how it's metered. A boiler with steam radiators on one gas meter means you own the heating bill permanently, and in a cold market that's usually the largest operating line in the building. Owner-paid heat moves a deal more than fifty dollars of rent does, and it's the number people from warm states have never had to think about.
The main stack and the lateral out to the street. Somebody already said sewer scope and they're right, but here's why it matters more in this asset class than in a house: every unit drains into one pipe. When it fails, it doesn't fail for one tenant. It's also the cheapest five-figure risk on the list to rule out.
How the electrical is divided. A lot of these were single family homes carved into units decades ago, and the panel arrangement is frequently something a home inspector calls functional and an electrician calls a project. Ask when units were added and whether it was permitted, because an unpermitted fourth unit is a legal problem that becomes a lender problem.
Basements and grade. You've never had to own a basement. Water down there is usually gutters and grading, which is cheap, right up until it's the foundation, which is not.
On the team, the one change I'd make to the standard advice: the first person I'd hire isn't the agent, it's whoever will tell you what the building actually needs. Pay a contractor to walk one or two properties with you before you write any offer, and pay him enough that he takes it seriously and tells you the truth rather than the version that wins him the job. That cost is trivial next to learning the same information in month four.
And one honest warning. Duplex through fourplex is harder than single family, not easier. More systems, more tenants, more turnover, more municipal compliance. The math looks better on paper and the operational load is real. Better to go in knowing that than to find out.
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
Hey Josh,
Thanks for taking the time to leave these insights. You are right, many of these factors I have not considered since I live in a state that is warm all year round.
With older units their maintenance of the property is much higher unlike many FL properties which are on the "newer" side. When I do decide to pick a market and a property, I will keep all of these aspects in my mind.
Thank you once again,
- 1dStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
Most out of state buyers buy based on purchase price and not fundamentals. The question to ask yourself does the property value support hiring the type of licensed, insured and professional service providers you trust to oversee a property you are responsible for from a distance?
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
Hi Stuart, thank you for this question. I will ask this to myself when analyzing the deals.
- 1dNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
if you're successful in Florida I'd stay there. it's not clear to me that investors are actually getting the so-called 'cash flow' that is so often touted as a feature of midwest properties. usually the cash does flow - but from the investor's wallet into the property?
my top tip - go to the market in person every month and build your team in person and look at dozens of properties in person. and if you can't do that, reconsider.
if you're interested in Pittsburgh come on up and we'll show you some old properties and try to talk to you out of it. =)
hope this helps
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
HI NIck,
Thank you from this prospective. After this prospective I can select a different part of FL instead of South FLorida.
- Investor · Pacific Northwest · Member since 2026 · 536 posts · 298 votes1d
Michelle — I wouldn’t try to build a team you trust.
I’d build one you can verify.
That sounds colder than it is, but out-of-state investing gets dangerous when the same little circle of people is creating the story and confirming it.
Agent says the rents are $1,600.
Property manager agrees.
Inspector came from the agent.
Contractor came from the property manager.
Everybody says the building looks great.
Congratulations, you have five people and one source of information.
That’s the part I’d fix.
If the PM gives me the rent number, I want to see what actually leased nearby.
If the contractor says the stack needs replacing, I want photos, scope and enough evidence that somebody else could price the same problem.
If the agent says a block is improving, I want to see what has actually sold, sat, cut price, rented and failed around it.
And with Midwest 2–4 units, I’d get obsessive about the boring stuff: who pays heat, shared boilers, sewer laterals, old electrical, legal unit count, basements, water intrusion. Those buildings can look fantastic on a cap-rate sheet while one shared system is quietly carrying five figures of risk. That point came up elsewhere in this thread for good reason.
The goal isn’t to remotely manage people you hope are honest.
It’s to make sure no important decision depends on one person being right.
That’s how we tend to structure remote property work now. The farther away the owner is, the more important it becomes that every important claim leaves evidence behind.
Distance itself isn’t the problem.
Unverifiable information is.
- Investor · Boca Raton, FL · Member since 2020 · 103 posts · 43 votes1d
Hi MIcheal,
Thank you. I agree from this thread its more than what the property shows from the outside. What must be analyzed is the "boring stuff" that will make or break the property.
- 1dAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
@Michelle Dong I have seen a ton of investors from south FL or MIA will invest a good bit of money in markets like columbus or other midwestern cities. I'm personally working with a ton of FL investors that are buying here since property values are more affordable, cheaper property taxes and insurance, higher margins, and tech growth.
I've got 30 units in Columbus myself and there is a ton of west coast investors buying here as well which is why the market has also seen a ton of money.
ReafCo | Ahmed Group 55 Reviews - 1dArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 911 votes
Quote from @Michelle Dong:
Hi All,
I currently have a couple LTR properties in South Florida. Due to the high cost here I am looking to start investing in the midwest, specifically the Indiana area.
Ideally I am looking for a duplex, triplex, or quad plex to invest in.
What are some helpful tips on establishing a trustworthy team in the out of state market ?
What is some good advice to be a successful out of state investor?
Any additional tips would be appreciated as well.
Thanks in advance.
The biggest thing with out-of-state investing is having a reliable team before you buy. I’d build relationships with a PM, lender, and contractor first, then compare a few Midwest markets instead of locking yourself into Indiana right away.
- 1dDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
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 Management4.9451 Reviews - 1dGregory AcsPro MemberLender · MD · Member since 2025 · 149 posts · 54 votes
Michelle, building the right local team is probably the biggest factor in succeeding with out-of-state investing. I’d start by finding an investor-friendly agent, a reliable property manager, a lender who regularly works with out-of-state investors, and a few local contractors before you ever make an offer. Having trusted people on the ground can help you avoid a lot of costly mistakes.
I’d also recommend visiting the market if you can, analyzing plenty of deals, and making sure the numbers work with conservative assumptions for vacancy, maintenance, and repairs. If you’re looking at duplexes through fourplexes in Indiana and want to compare financing options or discuss how to structure your purchase as an out-of-state investor, I’d be happy to help.
- 5hMarc RiceBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
Since you are starting to look in the midwest states, you might want to check a couple of other hot markets. Happy to connect.
Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews - 3hMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 492 posts · 549 votes
Quote from @Michelle Dong:
Hi All,
I currently have a couple LTR properties in South Florida. Due to the high cost here I am looking to start investing in the midwest, specifically the Indiana area.
Ideally I am looking for a duplex, triplex, or quad plex to invest in.
What are some helpful tips on establishing a trustworthy team in the out of state market ?
What is some good advice to be a successful out of state investor?
Any additional tips would be appreciated as well.
Thanks in advance.
Hey Michelle.
Trustworthy team:
- I'd recommend doing some research on the local property managers and investor focused agents who also own property themselves. They'll both have good contacts they can refer you to and the property managers will also have their own maintenance & unit turn crews to be able to tackle a lot of the issues you'll run into.
- Wouln't be a bad idea to travel there and check it out for yourself and see what you'll be buying.
Successful OOS investor:
- Get to know the market. Understand what works, what doesn't work in that market specifically vs what works in your local market. They are VERY different and you can get really turned around by bringing in an out of town bias / philosophy. Things work in the market for a reason.
- Take your time on ^^^
- Trust but verify the work being done. For GC's, if you have an independent inspector who can walk the properties and spot check, that will help you keep everyone honest while you build the relationships with people.
- Remember, you hire the team for a purpose. Use them accordinly while you develop the relationship. Take care of them, and they'll take care of you.
Additional tips:
- get comfortable being uncomfortable
- make sure you're confident in your numbers
- theres conservative and then there's OVERLY conservative
Reafco - Mike Paolucci 512 Reviews - Specialist · Long Beach, CA · Member since 2011 · 874 posts · 393 votes3h
It comes down to what your strategy is
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