Closed on deal #1 in NJ! Searching for #2 (Local vs. Out-of-State)
New to Real Estate · Pennington, NJ · Member since 2026 · 2 posts · 3 votes
Closed on deal #1 in NJ! Searching for #2 (Local vs. Out-of-State)
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MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
2moQuote from @Victor Patel:
I’d look at it less as “local vs. out-of-state” and more as where can you consistently buy the right deal and manage the risk?
Since you both have W-2s and your goal is a relatively small portfolio, I’d prioritize simplicity and quality over maximizing the number of properties. A local property that barely cash flows just because it’s easier to manage may not be better than an out-of-state property with stronger fundamentals and a proven property manager.
For out-of-state markets, I’d start with the fundamentals—population/employment trends, rent growth, purchase-price-to-rent ratios, taxes, insurance, landlord laws, and supply. Then spend just as much time researching the team. A great property manager, investor-friendly agent, contractor and lender can make a mediocre market workable; the reverse can turn a great market into a headache.
One other thing I’d consider: with only 10 or fewer properties as the goal, you don’t necessarily need to diversify geographically. Finding one market where you understand the numbers and can build a strong team may be more valuable than owning properties in five different states.
You’ve already done the hardest part—getting Deal #1 closed. Now I’d focus on developing a repeatable acquisition process rather than simply trying to find Deal #2. Good luck!
“One other thing I’d consider: with only 10 or fewer properties as the goal, you don’t necessarily need to diversify geographically. Finding one market where you understand the numbers and can build a strong team may be more valuable than owning properties in five different states.”
Agree 100%. Slow and steady often wins the race. Knowing and being able to keep an eye on the areas you are investing in can be invaluable especially as you learn. Be mindful of those encouraging you to chase cash flow in subpar out of state neighborhoods especially when they will gain from your purchase.
OP I’m hoping your current property is in a highly appreciating area because putting down extra money to force cash flow especially on a new build sounds questionable,
18 Replies
- 2moVictor PatelBusiness MemberReal Estate Broker · Cincinnati, OH · Member since 2022 · 133 posts · 89 votes
I’d look at it less as “local vs. out-of-state” and more as where can you consistently buy the right deal and manage the risk?
Since you both have W-2s and your goal is a relatively small portfolio, I’d prioritize simplicity and quality over maximizing the number of properties. A local property that barely cash flows just because it’s easier to manage may not be better than an out-of-state property with stronger fundamentals and a proven property manager.
For out-of-state markets, I’d start with the fundamentals—population/employment trends, rent growth, purchase-price-to-rent ratios, taxes, insurance, landlord laws, and supply. Then spend just as much time researching the team. A great property manager, investor-friendly agent, contractor and lender can make a mediocre market workable; the reverse can turn a great market into a headache.
One other thing I’d consider: with only 10 or fewer properties as the goal, you don’t necessarily need to diversify geographically. Finding one market where you understand the numbers and can build a strong team may be more valuable than owning properties in five different states.
You’ve already done the hardest part—getting Deal #1 closed. Now I’d focus on developing a repeatable acquisition process rather than simply trying to find Deal #2. Good luck!
- MD/DC · Member since 2024 · 1k+ posts · 1k+ votes2mo
Quote from @Victor Patel:
I’d look at it less as “local vs. out-of-state” and more as where can you consistently buy the right deal and manage the risk?
Since you both have W-2s and your goal is a relatively small portfolio, I’d prioritize simplicity and quality over maximizing the number of properties. A local property that barely cash flows just because it’s easier to manage may not be better than an out-of-state property with stronger fundamentals and a proven property manager.
For out-of-state markets, I’d start with the fundamentals—population/employment trends, rent growth, purchase-price-to-rent ratios, taxes, insurance, landlord laws, and supply. Then spend just as much time researching the team. A great property manager, investor-friendly agent, contractor and lender can make a mediocre market workable; the reverse can turn a great market into a headache.
One other thing I’d consider: with only 10 or fewer properties as the goal, you don’t necessarily need to diversify geographically. Finding one market where you understand the numbers and can build a strong team may be more valuable than owning properties in five different states.
You’ve already done the hardest part—getting Deal #1 closed. Now I’d focus on developing a repeatable acquisition process rather than simply trying to find Deal #2. Good luck!
“One other thing I’d consider: with only 10 or fewer properties as the goal, you don’t necessarily need to diversify geographically. Finding one market where you understand the numbers and can build a strong team may be more valuable than owning properties in five different states.”
Agree 100%. Slow and steady often wins the race. Knowing and being able to keep an eye on the areas you are investing in can be invaluable especially as you learn. Be mindful of those encouraging you to chase cash flow in subpar out of state neighborhoods especially when they will gain from your purchase.
OP I’m hoping your current property is in a highly appreciating area because putting down extra money to force cash flow especially on a new build sounds questionable,
- New to Real Estate · Pennington, NJ · Member since 2026 · 2 posts · 3 votes2mo
Thank you @Victor Patel for your detailed insights! Really like your conclusion - developing a repeatable acquisition process will be key for us.
We made the first deal work by putting extra downpayment and securing a favorable interest rate from the lender.
- 2moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesGreat question, Amol! With two full-time W-2s and a goal of fewer than 10 properties, I’d focus more on the quality of each deal than whether it’s local or out of state. If NJ still gives you the returns you want after accounting for taxes, maintenance, vacancy, and management, there’s definitely value in staying somewhere you already understand. But if the numbers consistently feel forced, I’d start comparing a few out-of-state markets instead of lowering your standards. I was actually in a similar position when I moved from Portland to Columbus, Ohio in 2020 to start investing. The lower entry prices and better rent-to-price ratios were a big part of the decision, but the local team ended up being just as important as the market itself. For market research, I’d compare job and population growth, rent-to-price ratios, property taxes, landlord laws, neighborhood-level rents, and long-term economic development. Then talk with local property managers, agents, lenders, inspectors, and contractors before buying anything. A good PM especially can make out-of-state investing much more manageable while working a W-2. Happy to connect and answer any questions you have!
Quote from @Amol Dhamane:
Hi BP Community!
My wife and I (both working full-time W-2s) recently closed on our first long-term rental in New Jersey—a new construction unit where we put 30% down to lock in positive cash flow. Like many here, we spent months running numbers and listening to Dave Meyer and Henry Washington on the BP podcast before taking action.
Our ultimate goal is financial freedom through a small, manageable portfolio (<10 properties).
As we begin searching for Deal #2, we are keeping our options open: continuing to look locally in New Jersey/tri-state area as well as exploring out-of-state markets. Staying local gives us familiar territory and hands-on oversight, while out-of-state offers different price points and cash-flow potential—though long-distance management alongside full-time W-2 jobs is a new challenge.
Would love your insight:
- For investors balancing W-2s, how do you weigh continuing to stack local properties (even with higher entry prices) versus pivoting to out-of-state markets?
- If you do invest out-of-state, what tools helped you pick your market and build a reliable team?
Thanks in advance for the advice!
Jimmy Lieu, Red 1 Realty4.9122 Reviews - 2moSeth McGatheyBusiness MemberReal Estate Agent · Milwaukee WI · Member since 2024 · 321 posts · 255 votesI usually recommend people do their first property local if possible because of the learning you gain from that. But, since you already got that covered, it really comes down to two things. 1. What market gives you the best opportunity. 2. If you are doing out of state, confirm you have a team you can trust. A team should start with an agent and a lender. But being out of state, you likely want to find a property manager early in the process too. If you find the right agent, all those other roles can be referred by the agent and the agent will be an investor that understands what you are looking for in a deal. If you have all of that covered, then it just goes back to #1. Run the numbers and see what market makes most sense for you. If you are considering other markets, I would recommend checking out my local market of Milwaukee. You can find a turnkey duplex in the $300,000-$400,000 range in a C to B class area pretty easily. I assume that is significantly better than what you can get by you. And then you can find cheaper in lower class areas depending on your risk tolerance. If that interests you, let me know and we can discuss it and see if we are a good fit to work together. Regardless of what market you go with, best of luck on your search and feel free to reach out with follow up questions!
Seth McGathey - Shorewest Realtor4.914 Reviews - 2moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 968 votes
Quote from @Amol Dhamane:
Hi BP Community!
My wife and I (both working full-time W-2s) recently closed on our first long-term rental in New Jersey—a new construction unit where we put 30% down to lock in positive cash flow. Like many here, we spent months running numbers and listening to Dave Meyer and Henry Washington on the BP podcast before taking action.
Our ultimate goal is financial freedom through a small, manageable portfolio (<10 properties).
As we begin searching for Deal #2, we are keeping our options open: continuing to look locally in New Jersey/tri-state area as well as exploring out-of-state markets. Staying local gives us familiar territory and hands-on oversight, while out-of-state offers different price points and cash-flow potential—though long-distance management alongside full-time W-2 jobs is a new challenge.
Would love your insight:
- For investors balancing W-2s, how do you weigh continuing to stack local properties (even with higher entry prices) versus pivoting to out-of-state markets?
- If you do invest out-of-state, what tools helped you pick your market and build a reliable team?
Thanks in advance for the advice!
Congrats on deal #1! With both of you working W-2s and wanting to keep the portfolio manageable, I’d seriously consider comparing your next local deal against an out-of-state option before deciding. Midwest markets can offer a much lower entry point and stronger cash-flow potential, but the key is having the right team on the ground. A solid local agent, PM, lender, and contractor can make the difference between remote investing being a headache or pretty hands-off.
- 3wDiana KhanPro MemberAttorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 701 posts · 251 votes
Quote from @Amol Dhamane:
Hi BP Community!
My wife and I (both working full-time W-2s) recently closed on our first long-term rental in New Jersey—a new construction unit where we put 30% down to lock in positive cash flow. Like many here, we spent months running numbers and listening to Dave Meyer and Henry Washington on the BP podcast before taking action.
Our ultimate goal is financial freedom through a small, manageable portfolio (<10 properties).
As we begin searching for Deal #2, we are keeping our options open: continuing to look locally in New Jersey/tri-state area as well as exploring out-of-state markets. Staying local gives us familiar territory and hands-on oversight, while out-of-state offers different price points and cash-flow potential—though long-distance management alongside full-time W-2 jobs is a new challenge.
Would love your insight:
- For investors balancing W-2s, how do you weigh continuing to stack local properties (even with higher entry prices) versus pivoting to out-of-state markets?
- If you do invest out-of-state, what tools helped you pick your market and build a reliable team?
Thanks in advance for the advice!
@Amol Dhamane, congratulations to you and your wife on your first rental! I wouldn't rule out investing out of state, but with both of you working full time and wanting to keep your portfolio under 10 properties, I'd also think about how much time and responsibility you're comfortable taking on. A property with better cash flow isn't always the easier investment if managing it becomes more complicated.
I'm a real estate attorney, broker, and investor based in Maryland, and I've worked with landlords where owning properties in different locations brought up questions they hadn't considered at first. Things like leases, landlord responsibilities, property management agreements, and how issues are handled can vary depending on where the property is located. Those details can make a real difference when you're managing rentals alongside everything else in your life.
I like that you and your wife already have a clear goal for your portfolio, @Amol Dhamane. The landlord and legal side of real estate is a big part of my work, so your question caught my attention. Happy to stay connected!
- 2wDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ 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:
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
https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years
Logical Property Management4.9469 Reviews - Investor · Monroe NY · Member since 2023 · 19 posts · 6 votes2w
Hi @Drew Sygit
I bought a rental in a high Section 8 market in northern St. Louis called Glasgow Village. Purchase price was $67k with $1,100 in repairs, and an occupied Section 8 tenant at $1,450 monthly. So far so good, PITI is $650. What are your thoughts?"
- 2wDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
The median household income in Glasgow Village, Missouri, is approximately $29,530. [1]
Key income and economic details for the area include:
Per Capita Income: Varies between $15,414 and $17,667 depending on recent census data updates.
Poverty Rate: Roughly 46.7% of residents live below the poverty line.
Median Home Value: Between $69,000 and $75,000. [1, 2, 3, 4]
Based on this data your rental appears to be in a very low-income area.
Definitely Class C, maybe Class D.
Logical Property Management4.9469 Reviews
@Amol Dhamane Congrats on your first rental! 🎉 As you explore Deal #2, having the right financing strategy can make a big difference, especially when comparing local and out-of-state markets. If you ever need help exploring lending options for your next investment, feel free to reach out. Happy to help!
West Capital Lending5125 Reviews- Investor · Monroe NY · Member since 2023 · 19 posts · 6 votes2w
Hi @Drew Sygit
Appreciate the breakdown and the reality check on demographics. You're spot on regarding the neighborhood class—it’s definitely a C/D pocket with lower median incomes, higher poverty, and heavy reliance on Section 8.
The rationale for buying there wasn't appreciation (which tracks more with inflation), but rather pure cash-flow yield relative to entry cost. At a $67k purchase price with a $1,450 Section 8 rent and a $650 PITI, the cash-flow margin provides a strong buffer even when factoring in higher turnover and maintenance typical of those classes.
That said, my core question is about scalability: while the numbers work well on paper here, do you actually see comparable purchase-to-rent ratios (or anything remotely close) in better (Class B or stable B-) areas in Detroit, or does upgrading the neighborhood completely crush the cash-flow math? Curious to hear your thoughts on where the sweet spot is if someone wants stronger fundamentals without sacrificing the entire return.
- 2wDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Depends on many factors - block-by-block area, organized PMC, tenant screening, etc.
Many S8 tenants are "animals" destroying a house in a year and then moving to a new "fresh" one, to repeat the cycle - how will you screen for these?
You want the S8 tenants that take decent care of their homes and don't like to move.
Also, you didn't state how much of the rent is paid by S8 vs tenant. Tenant nonpayment can also be an issue.
Lastly, what does the $1450 of rent include?
caseworkers prefer rent includes all utilities
owners should NOT include utilities, otherwise tenant abuse them, killing owner cashflow
If you do this long enough, you'll find that your systems, or those of the PMC you hire, are what REALLY matter when dealing with Class C & D properties/tenants.
Class A & B are what many post about being easy to handle and encourage DIY management.
Logical Property Management4.9469 Reviews - Investor · Monroe NY · Member since 2023 · 19 posts · 6 votes2w
Rent approved by Section 8 is $1,550.
However, because of the tenant's income, Section 8 only pays $1,450, and the tenant is not up to date with their share.
They pay sometimes $30 a month, in better months $80, and are getting late fees.
They pay all utilities, however, they are lately late on paying the sewer bill and the sewer company is keeping the owner responsible. I'm still figuring out what to do because I'd rather keep them than get in a fight with them over $100 per month—vacancy in this area can take three months easily.
- 2wDarius GibsonPro MemberLender · Princeton, NJ · Member since 2026 · 33 posts · 3 votes
Congrats to you and your wife on closing your first property! Getting that first deal done is a big step.
I think it comes down to your goals, the numbers, and how much time you want to spend managing each property. Staying local gives you more control, while out-of-state can open up opportunities in different price ranges, but having a reliable property manager and team is key.
Since you’re looking to build a smaller, manageable portfolio, I’d focus on finding deals that make sense financially rather than limiting yourself to one market.
I work with real estate investors on financing and am always happy to be a resource as you evaluate future opportunities. Best of luck finding Deal #2!
- Member since 2026 · 16 posts · 1 vote2w
Congrats to you and your wife on your first rental! I think starting locally can make those first few deals easier to manage while you're both working full-time. At the same time, out-of-state markets can open up opportunities that may be harder to find nearby. Have you found any markets you're seriously considering for Deal #2 yet?
- 1wMatthew MorrowBusiness MemberInvestor · PA - NY - NJ · Member since 2019 · 924 posts · 331 votes
@Amol Dhamane congrats on getting #1 done. Under 10 good properties is a solid goal, more people should think that way. I don't think there's one right answer on local vs out of state. For me it's always come down to numbers that work and people on the ground who'll actually work with you. NJ taxes make the numbers tough, which is why a lot of NJ investors end up looking across the river in eastern PA. Wherever you land, make sure you can get someone to the property fast when something breaks. Keep us posted on #2.
CORE Team | Realty ONE Group Supreme548 Reviews
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