Out-of-state real estate investing for beginner

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Out-of-state real estate investing for beginner

Sonya C.
Member since 2023 · 2 posts · 6 votes

Hi All,

I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

2). Low property tax/lower costs to maintain, etc.

3). Landlord friendly (eviction, rent increase, etc.)

4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

5). Good job or population growth

6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!

5Reply
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Joe HammelBusiness Member
Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
2y

I've seen quite a few investors achieve FIRE through REI. REI is by far the best vehicle to do so.

Personally, my portfolio here is to that point..making over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity. It statistically has the best price/rent ratios in the country...so it's arguably the "easiest" place to execute FIRE.

Some people don't like Detroit.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s statistically the best market in the country for cash flow.

$100k a year and also built a lot of equity which opens up a lot of doors as well.

Here is the primary target...

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.


Detroit has the the highest rent to price ratio in the country…and we focus on the best balance of price/location within the area.

You may have noticed our name is literally FIRE lol.

Questions:

1) Best price/rent in the county. Easily beats the 1% rule and cash flows

2) Taxes pencil out fine and deals cash flow

3) Michigan is considered a swing state..Detroit isn't notably hard on landlords. No rent control, you can evict as needed. It's likely not an easy thing to do anywhere, but can be done.

4) No notable natural Disasters

5) A dozen fortune 500 companies. See notes above

6) We target $80k-$130k (for SFH)

Here is a picture of my portfolio...

[email protected]248-422-1685
FIRE Realty Team - Keller Williams5379 Reviews
WebsiteView Page
5Reply
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  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Hello Sonya, I invest in Columbus, Ohio, and I can provide you with a list of contacts in Ohio to help you assemble your team, especially a property manager. I believe the Midwest is an excellent place to start due to its lower entry point and strong cash flow potential. Columbus has been booming lately, thanks to big tech companies like Intel, Meta, Amazon, and Google setting up shop here with warehouses and data centers. That's made property prices go up, and there are more job opportunities too. By the way, I also invest in Cleveland and Dayton. Let me know how I can help.

    [email protected]614-412-2912
    Reafco.512 Reviews
    View Page
    4Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Sonya C. I think once you analyze every market you will see that nothing cashflows currently. This might change in the future...but cashflow isn't possible. Anytime someone says "Oh, but in my city we cash flow"...by the time we anlyze the numbers it turns out that those people aren't doing their math correct. Now, could you cashflow an STR renting out each room every 2 days of the week...or just put 50% down...I guess that's possible to cashflow doing something like that...but in all other cases, you aren't cashflowing. I know, I know...all the articles and all the videos say otherwise...I see and read those same articles. Once you start analyzing the numbers, you'll see.

    Now, I'm not saying this to discourage you from investing - I still believe in real estate and the majority of my wealth is in it.  But the expectation needs to be in the proper place.  Also, you WILL eventually cashflow...but just not in year 1 and probably not in year 2.  If you want to read more on this topic I would suggest reading this post HERE.  It's pretty descriptive.

    Also, as a 15 year, out-of-state investor 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.

    2Reply
  • Mike PaolucciBusiness Member
    Realtor · Columbus Cleveland Dayton, OH · Member since 2022 · 499 posts · 553 votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!


     Hi Sonya, I started off as an out of state investor living in San Francisco in 2021 and chose the Ohio  markets (mostly Columbus for now) to start off with because of the low entry points as well as the tech sector getting a big boost as previously mentioned by Min. 

    Finding properties that will cashflow from day one are a little hard to come by when sourcing deals on the MLS. Most of the time, those kind of deals are receiving multiple offers at the same time. I would suggest connecting with local agents in the markets that you are looking to buy in. They often have access to off-market deals that will make more sense numbers wise for you.

    Happy to connect with you offline and answer any questions. 

    [email protected]614-892-9184
    Reafco - Mike Paolucci 512 Reviews
    WebsiteView Page
    1Reply
  • Peter Dorinsky
    Real Estate Agent · Columbus, OH · Member since 2020 · 149 posts · 193 votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!

    Hi Sonya, with that criteria I'd recommend checking out markets in the Midwest. A lot of the Midwest markets offer a lower cost of-entry with cheaper taxes. Also as mentioned, Ohio is seeing a lot of growth from big-tech companies making large investments to expand and grow their business in the Ohio markets, creating some great opportunity for investors. If you plan to invest out of state for you first deal it will also be essential to build your core 4: https://www.biggerpockets.com/blog/core-four-real-estate-tea...

    Happy to connect if you have more questions!
    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!


     Just do what many others from around the world do, buy rentals with PM in place and 10% or so net caps based on cash purchase, about 100kish. I live in FL and do all my biz out of state. 

    All the best 

    0Reply
  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    2y

    Hey Sonya, welcome to BiggerPockets! When investing out of state, it's highly recommended that you have a system in place, your Core 4 will be an essential part of the journey: https://www.biggerpockets.com/blog/core-four-real-estate-team

    As for which markets to look into, take a closer look at Cleveland and Columbus for excellent investment opportunities. In these cities, your financial resources will go a long way enabling you to assemble a diverse multifamily portfolio and initiate a steady stream of income. If you wish to know more, feel free to connect. I'd love to share ideas.

    2Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y
    Quote from @Andrew Postell:

    @Sonya C. I think once you analyze every market you will see that nothing cashflows currently. This might change in the future...but cashflow isn't possible. Anytime someone says "Oh, but in my city we cash flow"...by the time we anlyze the numbers it turns out that those people aren't doing their math correct. Now, could you cashflow an STR renting out each room every 2 days of the week...or just put 50% down...I guess that's possible to cashflow doing something like that...but in all other cases, you aren't cashflowing. I know, I know...all the articles and all the videos say otherwise...I see and read those same articles. Once you start analyzing the numbers, you'll see.

    Now, I'm not saying this to discourage you from investing - I still believe in real estate and the majority of my wealth is in it.  But the expectation needs to be in the proper place.  Also, you WILL eventually cashflow...but just not in year 1 and probably not in year 2.  If you want to read more on this topic I would suggest reading this post HERE.  It's pretty descriptive.

    Also, as a 15 year, out-of-state investor 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.


     Strange. I'm doing plenty of deals in Detroit that cash flow. 

    And I'm pretty darn conservative with my numbers...

    1Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
    2y

    I've seen quite a few investors achieve FIRE through REI. REI is by far the best vehicle to do so.

    Personally, my portfolio here is to that point..making over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

    Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity. It statistically has the best price/rent ratios in the country...so it's arguably the "easiest" place to execute FIRE.

    Some people don't like Detroit.

    There are 2 types of people who dog on Detroit..

    1. People who don't actually own property in Detroit

    2. People who did it wrong and weren't able to execute.

    If you do it right, it’s statistically the best market in the country for cash flow.

    $100k a year and also built a lot of equity which opens up a lot of doors as well.

    Here is the primary target...

    Purchase: $80k-$130k

    Rent: $1100-$1500 (no rent control in MI)

    1% rule: 1%-1.4% rule deals

    ROI: 10-14%

    Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

    Appreciation: 3-10%+ (has been double digit for a decade)

    Location: C+, B-

    These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

    We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

    The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.


    Detroit has the the highest rent to price ratio in the country…and we focus on the best balance of price/location within the area.

    You may have noticed our name is literally FIRE lol.

    Questions:

    1) Best price/rent in the county. Easily beats the 1% rule and cash flows

    2) Taxes pencil out fine and deals cash flow

    3) Michigan is considered a swing state..Detroit isn't notably hard on landlords. No rent control, you can evict as needed. It's likely not an easy thing to do anywhere, but can be done.

    4) No notable natural Disasters

    5) A dozen fortune 500 companies. See notes above

    6) We target $80k-$130k (for SFH)

    Here is a picture of my portfolio...

    [email protected]248-422-1685
    FIRE Realty Team - Keller Williams5379 Reviews
    WebsiteView Page
    5Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!

     Saw some of the more popular markets in Ohio mentioned as a good destination. While I myself operate all over Ohio and dig a lot of the markets like Cleveland, Toledo, Cincinnati, and Akron. I'd say the only market in Ohio that fits your criteria would be Columbus. The other Ohio markets mentioned aren't going to have the population trends you are looking for. 

    0Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!

    Hey Sonya, totally can relate with you being from an expensive real estate market - 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. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!



    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
    WebsiteView Page
    0Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    2y
    Quote from @Sonya C.:

    Hi All,

    I've read some posts about achieving FIRE via real estate investing and I'm hoping to start doing that 2024. I don't really have much experience in this area and would love some advise. I'm currently in Phoenix AZ where housing prices are still high and does not seem to make sense in terms of cash flowing perspective, so I'm looking for out-of-state investing opportunities with the following criteria (and please kindly list more if you can think anything else):

    1). Positive cashing flowing since Month 1-2, ideally more than the 1% rule?

    2). Low property tax/lower costs to maintain, etc.

    3). Landlord friendly (eviction, rent increase, etc.)

    4). Few natural disasters (flooding, thunderstorms, snowstorms, etc.)

    5). Good job or population growth

    6). Cheaper price (ideally less than $250k so the mortgage would not be too much)

    Any advice either regarding the above or real estate investing in general is very much appreciated. Thank you very much!


     Greater Cincinnati, easy. I would confidently say Greater Cincinnati has all of these and more to offer. Shoot me a message or let me know and we can talk about it

    [email protected]859-443-4952
    Sam McCormack Realtor
    View Page
    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    Talk to @Joe Hammel with the FIRE Team and invest for success in Detroit!

    Logical Property Management4.9455 Reviews
    WebsiteView Page
    0Reply
  • Ryan Tongue
    Investor · Grand Rapids, MI · Member since 2021 · 49 posts · 21 votes
    2y
    Quote from @Joe Hammel:

    I've seen quite a few investors achieve FIRE through REI. REI is by far the best vehicle to do so.

    Personally, my portfolio here is to that point..making over $100k/yr cash flow from 16 properties here. All of which, I’ve purchased only within the last 4 years.

    Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, double digit ROI, and yes the prices appreciate and you build equity. It statistically has the best price/rent ratios in the country...so it's arguably the "easiest" place to execute FIRE.

    Some people don't like Detroit.

    There are 2 types of people who dog on Detroit..

    1. People who don't actually own property in Detroit

    2. People who did it wrong and weren't able to execute.

    If you do it right, it’s statistically the best market in the country for cash flow.

    $100k a year and also built a lot of equity which opens up a lot of doors as well.

    Here is the primary target...

    Purchase: $80k-$130k

    Rent: $1100-$1500 (no rent control in MI)

    1% rule: 1%-1.4% rule deals

    ROI: 10-14%

    Cash flow: $150-$300/door (after all expenses and budgeting for maint, capex, vacancy)

    Appreciation: 3-10%+ (has been double digit for a decade)

    Location: C+, B-

    These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

    We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

    The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.


    Detroit has the the highest rent to price ratio in the country…and we focus on the best balance of price/location within the area.

    You may have noticed our name is literally FIRE lol.

    Questions:

    1) Best price/rent in the county. Easily beats the 1% rule and cash flows

    2) Taxes pencil out fine and deals cash flow

    3) Michigan is considered a swing state..Detroit isn't notably hard on landlords. No rent control, you can evict as needed. It's likely not an easy thing to do anywhere, but can be done.

    4) No notable natural Disasters

    5) A dozen fortune 500 companies. See notes above

    6) We target $80k-$130k (for SFH)

    Here is a picture of my portfolio...

    Hi Joel, I'm just starting out as well. I live in Utah but have connections in West Michigan, so I'm thinking I'd love buy my first property in Michigan. I hear a lot of hype around metro-Detroit, and I'm wondering if you have an opinion on investing in Grand Rapids and surrounding areas, particularly Muskegon which seems to be on the rise. Would love your input.

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    What other Midwest city has as much investment planned as Detroit, yet offers such affordable real estate investments?

    2023-03-30: 15 New Detroit Developments to Be Excited About

    https://www.metrotimes.com/detroit/15-new-detroit-developments-to-be-excited-about-photos/Slideshow/32734721/32735392

    Logical Property Management4.9455 Reviews
    WebsiteView Page
    0Reply
  • Tam Lapp
    Investor · PA · Member since 2024 · 25 posts · 3 votes
    2y

    Hey Sonya. Feel free to connect if interested in the PA market. I've been a investor here since 2008 and work with many out of state investors. I have many great contacts as I'm a builder and landlord/investor.

    0Reply
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