OOS Investing in Which Markets?

Question

Hello there! I'm 
based in San Jose, CA (and may be moving to NYC in the next ~1.5 yrs) and have been trying to decide which market to invest in 
out of state. I make a decent six-figure income here but couldn't fathom ever affording a remotely decent place here, which has driven me to look at markets out of state where I could actually come up with $40k for a down payment. In particular, good price-to-rent ratios, low median home values, and high rental demand have led me to consider the areas around Milwaukee, WI and Detroit, MI -- but honestly I've only just started researching. Open to other market suggestions too.

I did also consider Denver, CO since I'm originally from there and am familiar with the area, but the Denver metro area has gotten quite expensive itself... maybe a smaller town like Greeley?

I'm interested to know if anyone has any 
experience (benefits or risks) in OOS investing in a similar situation and what type of property 
you've invested in.

I'm also open to any advice you might have for someone
 who is buying for the first time and doing it out of state no less. Thanks!

Travis Hill · Answer

@Garet Gavito like you I also live in CA (unfortunately) and invest out of state. I have properties in Milwaukee and enjoy the architecture, price point, and rent price. I have a solid team with great communication. Make sure to connect with @Marcus Auerbach or Kevin Gregg. Both are solid guys doing good things there.

Patrick Drury · Answer

@Garet GavitoIf you are looking to invest out of state I would definitely recommend checking out Columbus OH and Cleveland OH. Columbus is a solid hybrid market of cash flow and appreciation. Cleveland is a great cashflow market if that's mainly what you're looking for.

Nathan Gesner · Answer

Use the magnifying glass search feature in the upper-right corner and track down Dave Meyers of BiggerPockets. You can also find him on the BiggerPockets Youtube channel. He analyses markets and tells you the ones that are performing best based on current data/trends.

Marcus Auerbach · Answer

@Garet Gavito the choice of city is not as important as how you operate, how well you understand the city and how good your team is. Milwaukee has a reputation of a cash flow market, but that is  changing. 40k down (160k PP) does not go as far as it used to here and puts you well below the median.  We have seen good appreciation over the last years. Prices have almost doubled since 2015. Currently Milwaukee is outperforming most markets in the US - in March we have seen the median home price go up 15% and a list to sold ratio  of 100.7%, details here in YouTube.

Thanks for the mention @Travis Hill!

Ben Einspahr · Answer

@Garet Gavito Denver is an excellent place to invest but $40k downpayment will not go too far with the minimum downpayment for investment property. I would recommend checking out Norther CO (North of the E-470 loop) and Pueblo. Yes pueblo :) As Colorado Springs prices increase, investors are moving further south.

With this being your first investment plus being OOS, I would highly recommend KISS avoiding heavy renovations.

Next would be building your team. Find yourself a good RE agent that is familiar with investment properties and have a couple of their own, they will bring you the rest of the team.

Here is my rule of thumb for Team:

Tier 1: Investment Friendly RE Agent and Lender

Tier 2: PM, Handyman, Title, Insurance, Legal, etc.

Best of luck

Nader Shariff · Answer

Hey there we have had a lot of success in Detroit Mi and Cleveland Oh

I would strong suggest you continue to explore Detroit MI and add cleveland to the mix

Understand there are pros , cons , and risks associated with both marketplaces and as long as you understand what you are investing in and are comfortable with it - there is potential to grow a solid portfolio in those cities.

I am more than happy to connect with you to share my experiences in both cities !

Sam McCormack · Answer

@Garet Gavito

Hi Garet, I would recommend starting in OH. Cleveland, Columbus, and Cincinnati. Each have their own specialty. Cleveland is cash flow, Columbus is more appreciation based, and Cincinnati is both, depending on where you invest in can be both, or sway one way or another

Vicki X. · Answer

@Garet Gavito If you are moving to NYC, you may want to give more weight to places near there.  I don't have specific recommendations for you, but hope the general rules below will be helpful.

• - Your budget: are you looking to buy under $200K, $200-300K, $300-500K or higher? It can help you create a short list
• - Population and business growth, including the type of businesses, are the most important factors in the health of the market. There are many analysis, charts out there. Specifically. places where the millennials are attracted to are interesting as they are becoming the biggest renter and homebuyer group
(Note: Be careful with 'historical' data. The top growing markets in the last 2 years are unlikely the most sound choices. Good examples are Austin and Phoenix. Try to add the futuristic lenses into your analysis whenever you can. In the ideal case, there be a "new California" emerging somewhere in the next 10 years. But to be frank, CA's trajectory is impossible to replicate as working remote has become more prevalent, companies more “decentralized”, and more people think about not just professions, but also lifestyles these days).
• - Are you able to find trustworthy realtors, PMs and service providers? Do not get into a market before you know whom to work with. Many investors interview many to find the best one.  In my case, I started in the Houston area as my friend had very good recommendations for me. So use your network to get more ideas!
• - Cost, with the effective property tax rates being one of the biggest one. It typically range from 0.5%-2%+
• - Rental regulations as some States are more friendly to renters while some more friendly to investors
• - Distance to you. If you find a good area 2-5 hours drive from you, it’ll be easier to meet your team and check out the properties in person
• - Certain hazards or costs that you want to avoid.  Drought, flooding, tornados, just to name a few

- Your budget: are you looking to buy under $200K, $200-300K, $300-500K or higher? It can help you create a short list

- Population and business growth, including the type of businesses, are the most important factors in the health of the market. There are many analysis, charts out there. Specifically. places where the millennials are attracted to are interesting as they are becoming the biggest renter and homebuyer group

(Note: Be careful with 'historical' data. The top growing markets in the last 2 years are unlikely the most sound choices. Good examples are Austin and Phoenix. Try to add the futuristic lenses into your analysis whenever you can. In the ideal case, there be a "new California" emerging somewhere in the next 10 years. But to be frank, CA's trajectory is impossible to replicate as working remote has become more prevalent, companies more “decentralized”, and more people think about not just professions, but also lifestyles these days).

- Are you able to find trustworthy realtors, PMs and service providers? Do not get into a market before you know whom to work with. Many investors interview many to find the best one.  In my case, I started in the Houston area as my friend had very good recommendations for me. So use your network to get more ideas!

- Cost, with the effective property tax rates being one of the biggest one. It typically range from 0.5%-2%+

- Rental regulations as some States are more friendly to renters while some more friendly to investors

- Distance to you. If you find a good area 2-5 hours drive from you, it’ll be easier to meet your team and check out the properties in person

- Certain hazards or costs that you want to avoid.  Drought, flooding, tornados, just to name a few

Jimmy Lieu · Answer

Hey Garet, I really like Columbus Ohio and work with a lot of California investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. Just a few weeks ago, I helped a client close on a deal getting them 20% cash on cash return. As a local investor and agent here, let me know if you have any questions or want to connect!

Travis Hill · Answer

See what I mean! @Marcus Auerbach is on point!

OOS Investing in Which Markets?

Most Popular Reply