How to find areas to invest in

Question

Hi everybody,

I am starting out my investing career and could use some advice. I am looking to invest out of state and am not sure where to start. How do i find a good area to invest in? What metrics and trends do you look for to find good locations and cities to invest in? How do i find those trends?

I am not looking for answers like "Columbus OH is hot", I want to understand on a fundamental and then practical level how to find good investments in the entire USA.

Account Closed · Answer

If you're looking for cashflow, the answers are in the numbers. You'll want an area with strong rental demand and lower price points. A good metric for cashflow is the "1% rule," where buyers look for rents that can equal or exceed 1% of the purchase price. This is a good baseline metric to determine if the rental income will cover mortgage, insurance, etc. Solely looking at cashflow, the midwest a good region with affordable price points.

For a more long-term, appreciation based approach, look for economic drivers. Job growth, population growth, heavy investment. To go beyond "Columbus OH is hot," Intel is investing $20bil into Columbus, while Honda is coming in with a roughly $4bil plant. Both will provide thousands of full time jobs for years to come- these are the kind of indicators to look for.

However, it goes beyond just "Columbus is appreciating," much of this is broken down by specific areas and neighborhoods, as is the case anywhere. Once you pick a market you are interested in, specify an area based on your buying criteria and your long-term goals. Hope this helps.

Anthony L Amos Jr · Answer

What are your goals? What is your timeline? What is your risk tolerance?

Just some of the questions to answer first. Then based off your budget find areas that you can afford. What is your exit strategy? Do you need the money now, later, etc. If your looking for cashflow only and have a lower budget check out places like Toledo, OH. A city full of renters and affordable housing. Do you want to place your money somewhere to grow? Then yes Columbus, OH would be great for a potential appreciation play. There is population growth, job growth, construction is booming, one of the largest universties in the country is here, and more affordable than most markets similar in size. You have to go deeper than Whats a good area to invest.

Good luck

Cassi Justiz · Answer

Look for areas with population and job growth, new industries, decent price/rent ratios and affordable starter homes. You'll also want to explore what the landlord/tenants laws look like. Find out what the average property taxes are and look at how much they've increased over the last 3-5 years. There are tons of "best places to invest" lists that can at least give you an idea of where to start your searches.

I'd also try to define a few factors that you specifically care about. These are things that I've heard from different people.

-Proximity to a 4 year university

-Public transportation availability

-Direct flight availability from home airport

-Proximity to military base

If I were starting from a blank slate, I'd look up the top 20ish metros that are gaining population. Find out average home prices and average rent prices in each metro and start filtering through that way. As you see some areas have better ratios than than others, you can dig into those metro areas a little further.

Jimmy Lieu · Answer

Hi Yosef, to find a good real estate market, you want to look for job growth, population growth, and a city where the rent to price ratios make sense and there is still positive cash flow where you can still BRRRR and flip properties easily. I personally love Columbus Ohio and as someone who works with a lot of out of state 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 this month, I’ve gotten under contract for my clients for multiple 20%+ cash on cash rental properties so there’s definitely tons of opportunity here. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!

Scott Allen · Answer

@Yosef Sod

You need to do your own research. I'd recommend looking into and researching 3-5 different markets before picking one that you want to get started in. If you investing out of state - work on building your core four that will consist of a realtor, lender, property manager, and contractor.

Columbus, OH - steady appreciation, cashflow, and growing population. Look at the job diversity in Columbus as well.

Cleveland, OH - pretty heavy cashflow / less appreciation

Other tertiary markets in Ohio to look into with a lower price range - Newark, Dayton, Lancaster

Research and network in other markets in the midwest as well before picking one you want to get started in.

Michael Porche · Answer

Hey @Yosef Sod!

The metrics you want to pay attention to will vary depending on what type of asset class you are going into. Short term rentals vary differently from long term rentals. Flipping varies from holding properties, multifamily varies a bit from holding long term SFH and so on.I believe a great place to start is to ask yourself what is your goal? How much time do you have to execute such goal and can you realistically make it happen. Then you can choose a market based on the vehicle you are going to use to accomplish such goal.