Would you ever invest out of state without someone you trust on the ground?

Question

How many markets did you research before pulling the trigger on your first out-of-state deal?

For me, the biggest factor is having someone on the ground I trust who can be my point of contact. The numbers have to work, but having a reliable local connection matters more than anything else. That’s why I limit my out-of-state investing to markets where I have those relationships.

James Jones · Answer

Answering from the other side of this, because I am the guy on the ground. Memphis, 454 doors, single family, majority Section 8, own crews and own management since 2003. People fly in to look at me before they buy here.

I agree with your conclusion and I want to push on the word trust, because I think it is doing too much work and it is where people get hurt.

Trust is not the variable. Alignment is. I have watched out of state buyers get wrecked by people who were completely honest and completely useless to them at the same time, because nobody in the chain was paid on the thing the buyer cared about.

Run through who is actually around the deal. The agent is paid when a transaction happens. The property manager is paid when the unit is occupied, and under a lot of fee structures is not hurt at all by maintenance volume. The contractor is paid on scope. Every one of those people can be straight with you, do their job properly, and still have no economic exposure whatsoever to whether your return shows up in year three. They are not adversaries. They are just pointed at a different target.

So the version of your rule I would actually use is not do I trust this person. It is does this person hold the same asset I am about to hold, on the same streets.

The test is one question and it is uncomfortable enough that it works. Ask your ground contact what they personally own in the submarket they are pointing you at. Not whether they invest, which everybody says yes to. What, where, and for how long. Somebody recommending a street they own houses on is giving you advice that has already been tested against their own money. Somebody who can only talk about it in general terms is giving you an opinion.

The other half of this, and it is the part I would gently push back on in your own framing. Limiting yourself to markets where you already have relationships is a defensible constraint, but it is a constraint, not a thesis. The failure mode is that relationship availability quietly becomes your market selection criteria, and you end up somewhere because you know a guy rather than because the market deserved the capital.

I think the honest resolution is that the right weighting changes with scale. Execution risk is what kills the first few deals, and execution risk is almost entirely a people problem, so early on you weight the relationship heavily and accept a worse market. Market selection is what compounds over ten years, so past some door count you should be willing to go build a relationship in the better market rather than restrict yourself to the one where you already have one. Where the crossover sits depends on how much pain you can absorb.

And to answer the question directly. No, I would not, but my constraint is stronger than yours. I do not buy anything I cannot stand inside the same day something goes wrong, which is why every one of mine is within driving distance of my office. That costs me every market in the country except one. I accept that trade knowingly, and I would not hand it to anybody else as advice.

Marcus Auerbach · Answer

Very, very carefully. And only if there is a big enough economic delta between where I make money and where I invest. Working in San Francisco and investing in Milwaukee makes sense. Working in Dallas and investing in Milwaukee does not - not enough difference, invest in your backyard.

And if you do: narrow the gap, spend time in that market, be there often. Invest in properties that require a limited number of interactions: paint & carpet in a good school district is enough of a challenge remote. Don't go full blown BRRRR in the hood just because your xls looks nice

Inder Singh · Answer

I wouldn't — and I've watched people learn that the hard way. The spreadsheet is the easy part. What you can't underwrite from out of state is the contractor who actually shows up, the PM who actually answers, and the street-level stuff — which blocks are fine and which ones just look fine on Zillow. Before I put money in a market I don't live in, I need one person on the ground I trust more than the numbers: usually a PM or an investor-friendly agent who's actually walked the property. Worcester's a good market — I've done deals there — but the team comes before the deal, not after. Happy to talk through what to look for in that person.

Don Konipol · Answer

I think I’ve invested in something like 31 or 32 of the states at one time or another. With the technology that has evolved since 2012 it’s become viable even for a solo investor.

Ryan Spath · Answer

We invest in two markets, the treasure valley here in Idaho, this is where we live. And a small market in Florida. The small market in Florida is where is went to HS, and we lived there for a couple years briefly. In my opinion this gives us a distinct advantage, we know the market extremely well, and the right people to help with maintenance, turning etc. Without having boots on the ground or personally knowing someone this would be a tough one for me personally……

Divin Kanyama · Answer

That makes sense, @Andrew Freed . I would rather study a few markets deeply than compare dozens at a surface level. The numbers can identify candidates, but execution depends on the local team—especially the property manager, agent, inspector, and contractors.

A trusted point person is valuable, although I would still build redundancy so the deal does not depend on one individual. Before buying, I would verify rents and expenses independently, speak with multiple local professionals, visit the area if possible, and understand the neighborhood block by block. The best market is often not the one with the highest projected return, but the one where you can operate reliably when something goes wrong.

Mike Paolucci · Answer

I researched a few different markets before narrowing it down but ultimately it came down to the ecomnomics and local development going on with the market. I'm originally from San Francisco, CA and have been pretty happy with my decision so far.

As for the local boots on ground, yes that's important but you'll still have to take the leap of faith regardless in order to get into the OOS investing game. You'll still need to work on the portfolio, even with the local boots on the ground.

Samuel Diouf · Answer

I'd say about 90% of my clients are OOS and with the right network and core 4 it seems like they don't have anymore difficulty as compared to someone who's investing locally to our market. It's just crucial you're working with the right people who have an eco system that allows you to be efficient across all boards.

Even on my own personal investments I operate them like I would if I was OOS , because location freedom is super important for me. I've made sure I have a system that works from anywhere.

Andrew Postell · Answer

@Andrew Freed thanks for the post! I do appreciate the post above. It is a perspective with a lot of experience. I have been investing for 25+ years...could I invest in just about anywhere successfully? Maybe. But if you are coming at this from a newer place I would highly guide you against doing any type of "buy-and-hold" or "flipping" without help. Could you wholesale out of state? Sure...but to me, that's not really investing. It's a necessary part of what we do as real estate investors...but not holding an asset doesn't require the same protection as someone who is holding the asset - whethere it's shorter term (like a flip) or longer term (like a hold). My recommendation is to ALWAYS choose whatever city you have the most trustworthy contacts in. Keep in mind that you may never see your asset. That's an ENOURMOUS amount of trust/money to put into a stranger's hands. What I mean here is that if you know someone in a different city...but that city may not have as good as numbers as this "other" city...then stick with the city where you know people. One wrong move, one wrong contractor, one wrong vendor…will erase any "benefit" one city has over another. Your network is the most important piece for any potential returns when you invest out of state.

Hope all of that makes sense.

Would you ever invest out of state without someone you trust on the ground?

Would you ever invest out of state without someone you trust on the ground?

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