How does one choose where to start rei

Question

Hi all!

I'm a newbie investor, young 20s, saving up for my first house hack and hoping to purchase in a year. I'm based out of CO currently, but my family lives back in IA. While I am planning on buying in CO at least for now, I'm not sure if CO is where I want to be long term and wonder if I need to consider being closer to family. I've considered Chicago and IL area, but have heard about the negative impacts the governance has on rei there. My W2 is flexible and I could work remotely if needed or find another job. What overall advice would you have for someone navigating where in the states to start investing? How did you experienced investors decide where and when to "settle" down? What feedback do you have on your location that you are investing in and how it has worked for you? Ultimately, how much does location matter and is it more of a personal decision than a business decision?

An ethnically diverse, urban area with a decent population of young professionals and career opportunity is important to me, which is why I initially considered Chicago. It is also within driving distance to my family. Are there any areas within the midwest that you know of that has those qualities?

Jaron Walling · Answer

@Jessica Tse Luckily for me I grew up in and choose to "settle down" in a prospering economy and stable market. The mid west has benefited post covid but it's always hummed along and and generally avoided the bigger market swings. We have jobs, growing population, and "affordable" housing compared to other states. We don't have the big appreciation plays and big tech but we do have cash-flow LTR, and opportunities for flips, STR, or MTR.

If you're picking a market you need stability. You need time on your side. Colorado is an amazing state and if you buy real estate there you can't go wrong. It's got a lot going for it that other markets don't have; outdoor recreation (jealous), tech jobs, and great weather. I've been temped to move myself but knew I could create opportunities in my backyard. Investors need to leverage what they have and learn to leverage more. If you don't plan to live in CO for next 2-3 years DON'T BUY real estate. You need time to network, meet people, and learn what's working in that market. If you "buy right", follow a strategy, and have team behind you to handle the PM you'll do great as an OOS. It's always the right time to buy real estate if you're financially, have an emergency fund, and know the numbers (market prices, rental income, ARV, rehab costs). I told myself I was an investor before I bought my first distressed property. I had no clue what I was doing but I did know the ARV and had a terrible rehab estimate. I followed the boring path others had taken in my market. I knew I was buying equity at the closing table. The numbers get bigger and bigger every year. Don't wait on the sidelines forever. Cheers.

Najma Osman · Answer

Hi @Jessica Tse,

While it is always better to start investing in your backyard, you can ultimately invest out of state for a better market and returns. I think this is awesome, it forces you to really be an investor instead of landlord. When considering OOS investing, look for markets with strong economic fundamentals, such as job growth, population growth, and low unemployment rates. This can help ensure that there is a demand for rental properties in the area.

It does not matter where you start as long as you develop your Core 4. The core 4 is David Greene’s long-distance investing strategy and consists of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to invest in any market confidently.

When vetting homes that are out of state, it's important to work with a trusted agent who has experience in the local market. They can provide valuable insights about the property, its condition, and the local rental market.

I invest locally in Columbus, Ohio. I think we have a great hybrid market for appreciation and cashflow.

Account Closed · Answer

Hi Jessica, if you don't want to stay in CO, and have the flexibility to move anywhere, align your REI goals with your personal goals. Find some cities that meet your criteria for REI (cashflow, appreciation, affordability- whatever it may be) and choose one that offers you a good career and that you'd like to live in. Columbus fits a lot of your criteria (midwest, diverse, urban, booming job market with young professionals), might be worth looking into.

James Wise · Answer

Columbus is really gonna be the only major metro city in Ohio that's going to see a net population increase. If folks are looking at some of the other popular cash flow cities like Cleveland, Cincinnati, Toledo and Akron they should absolutely take that into account.........And this is coming from a dude who's sold $200M+ in Cleveland/Akron/Toledo.

Anthony L Amos Jr · Answer

Invest in the wonderful town of Columbus, OH. Home to The Ohio State University with nearly 60,000 students, 5 Fortune 500 companies, over +25% population change since 2000, 2016 smart city challenge award winner gaining 50 million dollars in funding from the government (https://www.columbus.gov/smartcity/), Intel is spending 20 Billion dollars to build two semiconductor plants, and many more great things presently and coming in the future. Needless to say, Columbus will remain a strong real estate market for the foreseeable future.

Abbey Humphreys · Answer

Hey Jessica! I think the advice here in this thread is great. Something that I've found that works if you're investing out-of-state is to invest somewhere where you have some sort of connection- history, family, friends, etc. The market will be more familiar to you and you will have some sort of boots on the ground (other than property management) if it's an area where you have people nearby. If that's not feasible, the markets mentioned here are great and of course, I have to throw Austin, TX into the mix. The real estate market here continues to appreciate as the city grows and I am very partial to the city itself.

Jonathan Klemm · Answer

Hi @Jessica Tse - I am biased, but am a huge fan of Chicago real estate.  For several reasons:

1.  Chicago has unlimited old inventory that needs to be rehabbed

2.  Tons of small multifamily properties

3.  Price points across the board from $50 to $5M

Not to mention, there is a ton of helpful people in the BP community that will help you build an amazing team!

Jimmy Lieu · Answer

Hi Jessica, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. 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!

Jeff White · Answer

@Jessica Tse

I would put it in perspective, what are you goals?  What do you want with to accomplish with real estate investing? Can investing in Colorado accomplish it?  Indiana?  Illinois?

It is a very personal decision, and whatever you decide is the right decision.

For me, it is pretty simple, invest where you live and don't try to time the market by waiting for the perfect deal. The perfect deal doesn't exist on your first few deals anyway since you are just starting out and learning how to analyze deals, deal with tenants, contractors, etc.

Also, like Ben mentioned above, you can always purchase a house hack here, and then still move back to the midwest later on and get a property manager to manage it out of state. Or, you could 1031 exchange it into something in the future city that you live in. Lots of options, but the biggest power of house hacking is eliminating or reducing your housing cost. The second best part of house hacking is how it compounds your savings rate by eliminating that housing cost, and getting hands on education on self-managing a property.

When I first started out, I thought of something similar because I was going to do my MBA out of state and I held off purchasing a property because of that mindset, and eventually, I didn't need to get an MBA, so it was a waste all of those years renting.

No matter how you look at it, buying now has its benefits, and you can still refinance later on if rates do come down. If you ask any experienced investor, none of them say, I'm so happy that I waited so long to buy real estate. They usually say the opposite, I wish I bought more when I was younger.

Ben Rhodin · Answer

Hey @Jessica Tse! Starting so early, you are already well ahead of the curve, and personally, I wouldn't over think it. Since you are located in Denver currently, invest and purchase your first house hack here ASAP and start building that equity and lowering your living cost. The great thing about house hacking and REI in general is that it's fluid (mostly) and if something changes and something brings you back to Chicago you can keep your Colorado rental, and pick up a new one when you move to Chicago. That way you don't pigeon hole yourself into trying to decide the next couple years of your life before getting your first property, you always have the possibility to move if need be, and as long as you are able to self-manage from a far, or afford a property manager, and you ran your numbers correctly, you'll have left a cash flowing property behind.

How does one choose where to start rei

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