Out of state investing for Californians

Starting Out
2yFollow

Out of state investing for Californians

Ashni Modi
Member since 2024 · 4 posts · 16 votes

I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 

13Reply
299 views

Most Popular Reply

Mike PaolucciBusiness Member
Realtor · Columbus Cleveland Dayton, OH · Member since 2022 · 504 posts · 556 votes
2y
Quote from @Ashni Modi:

I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 

 Hey @Ashni Modi. 

I'm originally from San Francisco, CA and started investing in 2021. It was pretty hard to find properties where the numbers and landlord laws made sense which is what ultimately led me to investing in Columbus, OH. There's also other markets like Cleveland, Cincinnati, Dayton, Toledo that are also good markets to invest in. 

The numbers and landlord laws out here made sense then, and they still do today. I've been able to get a healthy combination of both cashflow and appreciation from all my properties after a little TLC.

When it comes to investing in CA, be prepared for what is coming on the Nov ballot. It's called the "Justice for Renters Act." It's basically another reason why I choose not to be a landlord in CA. Here's the link --> "Justice for Renters Act"

Happy to share my experiences. Good luck on your REI journey and property search!!

[email protected]614-892-9184
Reafco - Mike Paolucci 512 Reviews
WebsiteView Page
4Reply
See this reply in the discussion

58 Replies

Jump to latestLatest
  • Joel BongcoBusiness Member
    Investor · Honolulu HI & Los Angeles, CA · Member since 2018 · 375 posts · 181 votes
    2y
    Quote from @Ashni Modi:

    I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 

    Aloha Ashni -  I own a Software Development Company in Hawaii as well as a Real Estate Investment and Development Company.  In our world -  its about making Data Driven Decisions.  Logically, its best to look in your own backyard before looking outside.  Hawaii is very similar to Southern California.   The median price of a home in Hawaii $1M+. In a high priced market like ours, off market distress, vacants and tired out of state land lords is the way to go!   You can apply these same principles in California.   We can cash flow rentals as well as have good margins on  Fix/Flips and Buy/Holds.  I'll be in Irvine next month in April and will be hosting a meet-up in Irvine.  I'll post it in the meetup section on BP this weekend.   Please DM me if you have any questions.   Mahalo! 


    [email protected]808-427-2444
    Inspired Life Investments LLC.
    WebsiteView Page
    1Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 670 posts · 536 votes
    2y

    From Wikipedia, Alabama has the second lowest property taxes behind Hawaii.

    2. Alabama

    • Effective Property Tax Rate (2019): 0.37%4
    • Typical Home Value (2022): $189,9766
    • Annual Taxes on Home Priced at State Typical Value: $702.9

    The current metro area population of Montgomery in 2023 is 374,000, a 1.91% increase from 2022. The metro area population of Montgomery in 2022 was 367,000, a 1.94% increase from 2021.
    In a number crunch of 300 cities using 10 metrics ranging from home prices to tax rates to vacancy levels, WalletHub determined that Montgomery, Alabama, was the nation’s most affordable city for homebuyers. Rounding out the top 10 of affordable homeownership cities were Flint, Michigan; Toledo, Ohio; Detroit; Akron, Ohio; Warren, Michigan; Pittsburgh; Yuma, Arizona; Springfield, Illinois; and Palm Bay, Florida.

    [email protected]
    MGM Property Pros LLC
    View Page
    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Ashni Modi here's just a few of the major investments happening in Detroit

    $2.5B New Center by Henry Ford Health, Pistons owner and Michigan State University
    https://www.clickondetroit.com/news/local/2023/02/08/incredible-investment-in-our-city-25b-detroit-neighborhood-redevelopment-to-begin-in-2024/

    $1.5B Investment, 12,000 temp jobs, 6,000 New Jobs: District Detroit Development
    https://www.detroitnews.com/story/business/2022/11/15/district-detroit-1-5b-development-to-include-housing-retail-hotels/69649853007/

    $1.4B Total as Hotel Added to Hudson Site

    https://www.detroitnews.com/story/business/2023/11/02/hudsons-site-hotel-plans-move-ahead-as-city-issues-permit/71426631007/

    $439M Gilbert Foundation investment in Detroit

    https://www.henryfordmsu.org/news/september-2023/gilbert-family-foundation-announces-nick-gilbert-neurofibromatosis-research-institute

    Logical Property Management4.9457 Reviews
    WebsiteView Page
    1Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Ashni Modi:

    I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 


     Hi Ashni, you'll be able to get something in the $400,000-$450,000 range with that size of a downpayment. There are quite a few markets that you can buy in within that range. With that said, Columbus, OH is one of the top growing cities and offers a good mix of cashflow and appreciation. Columbus could be a good market to look into. 

    3Reply
  • Samuel DioufBusiness Member
    Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
    2y

    Hey Ashni,

    with 100k down, you're able to work with some flexibility. How much cash-flow are you looking to get? 

    Columbus, Ohio is a great market to consider if you're leaning towards appreciation. Multiple, billion dollar companies are investing investing heavy in our area, such as Intel, Google, and Amazon. Which in turn will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

    [email protected]614-662-1652
    Reafco - Samuel Diouf528 Reviews
    WebsiteView Page
    2Reply
  • Mike PaolucciBusiness Member
    Realtor · Columbus Cleveland Dayton, OH · Member since 2022 · 504 posts · 556 votes
    2y
    Quote from @Ashni Modi:

    I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 

     Hey @Ashni Modi. 

    I'm originally from San Francisco, CA and started investing in 2021. It was pretty hard to find properties where the numbers and landlord laws made sense which is what ultimately led me to investing in Columbus, OH. There's also other markets like Cleveland, Cincinnati, Dayton, Toledo that are also good markets to invest in. 

    The numbers and landlord laws out here made sense then, and they still do today. I've been able to get a healthy combination of both cashflow and appreciation from all my properties after a little TLC.

    When it comes to investing in CA, be prepared for what is coming on the Nov ballot. It's called the "Justice for Renters Act." It's basically another reason why I choose not to be a landlord in CA. Here's the link --> "Justice for Renters Act"

    Happy to share my experiences. Good luck on your REI journey and property search!!

    [email protected]614-892-9184
    Reafco - Mike Paolucci 512 Reviews
    WebsiteView Page
    4Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    2y

    @Ashni Modi

    In Columbus, OH, you can get good cash flow and solid appreciation at the same time. I recommend areas like Hilltop, Linden, Eastmoor/ Whitehall, and Franklinton. These are areas where you can cash flow because the rent-to-price ratio is favorable. Out of these areas, Franklinton and Linden are seeing some of the most developments. With things like the ONE Linden plan in Linden, which is a 50M plan to improve the neighborhood. Of that 50M, 25M was allocated for the construction of a new recreational faculty that has since been completed. Franklinton has been seeing lots of developments like the completion of Gravity Phase 1 and phases 2 and 3 on the way. Also, coffee shops like Bottoms Up Coffee are moving in, and small microbreweries like Brew Dog and Land Grant.

    [email protected]614-412-4565
    Reafco-557 Reviews
    View Page
    1Reply
  • Tyler Warrick
    Lender · Chandler, AZ · Member since 2023 · 88 posts · 48 votes
    2y

    Well done on the $100k saved up! Unpopular opinion, but Texas. I have more clients from CA either moving to TX (saving on state income tax) or purchasing rental properties in TX than any other state.

    The state does come with it's headaches (cash out refinance rules, higher property taxes etc), but there is no dispute in the growth in various cities. I don't care what your political affiliation is (believe it or not this comes up a lot with my investors), but a LOT of people are gung-ho on Texas as a state and lots of businesses are migrating there as well.

    Strategies can include buying properties near: major businesses/plants and colleges. There shouldn't be a shortage of people who have money and need a place to live. 

    2Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Ashni Modi

    let's be very clear.

    you likely will NOT cash flow in the first year, or the first few years, unless you (1) buy something in PRISTINE condition, and (2) you put a substantial amount down.

    and think about it - the more you put down, the longer it takes to recoup that initial outlay before you actually cash flow.

    contrast that with a savings account.  month 1?  genuine cash flow.

    here's some good reading for you.  please do not buy a random property in the midwest with your life savings.

    https://www.biggerpockets.com/forums/48/topics/1159104-overl...

    https://www.biggerpockets.com/forums/12/topics/1171104-the-m...

    3Reply
  • Tyler Warrick
    Lender · Chandler, AZ · Member since 2023 · 88 posts · 48 votes
    2y
    Quote from @Nicholas L.:

    @Ashni Modi

    let's be very clear.

    you likely will NOT cash flow in the first year, or the first few years, unless you (1) buy something in PRISTINE condition, and (2) you put a substantial amount down.

    and think about it - the more you put down, the longer it takes to recoup that initial outlay before you actually cash flow.

    contrast that with a savings account.  month 1?  genuine cash flow.

    here's some good reading for you.  please do not buy a random property in the midwest with your life savings.

    https://www.biggerpockets.com/forums/48/topics/1159104-overl...

    https://www.biggerpockets.com/forums/12/topics/1171104-the-m...


     Are you referencing cash on cash return? Or simply cash flow? Two different things for sure, but want to clarify what your point is.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y
    Quote from @Nicholas L.:

    you likely will NOT cash flow in the first year, or the first few years, unless you (1) buy something in PRISTINE condition, and (2) you put a substantial amount down.

    Or.....you buy a very distressed property and fix it up....                         

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    2y
    Quote from @Ashni Modi:

    I am starting out my journey in real estate investing. I live in orange county, California where there is basically nothing under $1 million. Is investing in California still viable? Say if I have 100K available for downpayment, what are some markets for out of state investing? I would like to have a good balance of positive cash flow as well as appreciation. I have heard of Midwest but any recommendations for which cities to look into? 


     The Midwest is solid for cash flow and appreciation. BP helped me a lot in 2017 when I first started buying rentals in Ohio

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    1Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Tyler Warrick

    both! the easiest way to cash flow - to generate net cash - is to put more down. but that lowers your CoC return. that was my point.

    1Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Bruce Woodruff

    yep! BRRRR works, I've done it as I own several. But it's difficult and time consuming, and despite David Greene's book, I do think it's difficult for a brand new investor to BRRRR in Ohio or Alabama from California =)

    1Reply
  • Tyler Warrick
    Lender · Chandler, AZ · Member since 2023 · 88 posts · 48 votes
    2y
    Quote from @Nicholas L.:

    @Tyler Warrick

    both! the easiest way to cash flow - to generate net cash - is to put more down. but that lowers your CoC return. that was my point.


     I see, and agree. OP should define goals more specifically if they want more direct answers. The current state of the question will get broad answers.

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y
    Quote from @Nicholas L.:

    @Bruce Woodruff

    yep! BRRRR works, I've done it as I own several. But it's difficult and time consuming, and despite David Greene's book, I do think it's difficult for a brand new investor to BRRRR in Ohio or Alabama from California =)


    I agree. But still a good way to get both more equity and cash flow because of the lower entry $$...

    Certainly not for everyone tough :-)

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Bruce Woodruff

    yep agree.  here are some things I personally did on my last one (which didn't appraise, so I sold it):

    -the demo

    -cleaning out junk in the garage dating back to the 1950s

    -mowing the lawn when it got 0.1" past the neighbors' liking

    -called 37 contractors to get 3 bids

    https://www.zillow.com/homedetails/108-Ellsworth-Ave-Elizabe...

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y
    Quote from @Nicholas L.:

    @Bruce Woodruff

    yep agree.  here are some things I personally did on my last one (which didn't appraise, so I sold it):

    -the demo

    -cleaning out junk in the garage dating back to the 1950s

    -mowing the lawn when it got 0.1" past the neighbors' liking

    -called 37 contractors to get 3 bids

    https://www.zillow.com/homedetails/108-Ellsworth-Ave-Elizabe...


    Nice! I would have bought the place just for the junk in the garage. Anything good in there?

    0Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Hey Ashni, lots of good comments here already but I'll chime in as someone who invests in Detroit from California.

    With $100k you can do BRRRR's out of state. It's not easy unless you have a team you can plug yourself into. I've helped do 100 BRRRR's already in 2024 in Detroit. The key is having realistic expectations with timelines, numbers, etc.

    I personally have 12-doors in Detroit and I'm working on a duplex (currently in probate). But I'm also building an ADU here at my primary in California. Beyond that, I don't see it making sense for me, personally, to invest in CA. So I'll keep investing out of state for the time being.

    Happy to connect and discuss things in more detail if you'd like.

    1Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    2y

    @Ashni Modi

    If you invest in the Midwest (from CA) please find a good PM. CA investors have taken over properties out here and soooo many are just horrible horrible landlords.

    0Reply
  • Leslie Pappas
    Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
    2y

    Hi Ashni, California can be a great place to invest but my advice would be to take the money to a different market. There plenty of other opportunities elsewhere, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country. There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.

    A very good source of local analysis is rereport.com

    0Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @Ashni Modi welcome to the forums! I work with hundreds of investors from CA and they seem to like the southern/middle part of the country because the price points are easier and the landlord laws are much more favorable. Places like, Memphis, Little Rock, DFW, HOU, SAN or even OK. Each of these markets provide healthy appreciation and cash flow, TX will be more challenging to cash flow bc of the taxes but there's much more appreciation there. 

    Feel free to reach out if any questions arise along the way. Best of luck on the journey! 

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    2y

    @Ashni Modi 

    Your journey into real estate investing like mine starting in Seattle now Hawaii, poses not so unique challenges, especially with the high entry prices that can often exceed $1 million or 600k to get out of the bad areas. But if you have a $100,000 downpayment range you could split it up 2-3 ways with a 20-30k downpayment three ways.

    In primary markets like Orange County, where achieving a Rent-to-Value Ratio of over 1% becomes challenging, looking out of state is the answer. The Rent-to-Value Ratio, a critical metric where monthly rent divided by purchase price should ideally exceed 1% for sustainable cash flow post-expenses. 

    Exploring secondary or tertiary markets can be a strategic move, especially in regions where this ratio is more favorable. Less cool cities within the Midwest offer a blend of cash flow and lower appreciation, several cities are noteworthy:

    1. Indianapolis, Indiana
    2. Kansas City, Missouri
    3. Memphis, Tennessee

    In 2012-2015, I bought 11 of these turnkey rentals. After went into syndications.

    0Reply
  • Jake AndronicoBusiness Member
    Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
    2y

    @Ashni Modi

    Congrats on saving $100K! I'm from CA originally but moved to Reno, NV to live and invest. The Midwest is a common place to look, but a lot of Californians also look at Nevada because it's right next door, taxes do NOT reassess on the sale, there's no state income tax, steady job/population growth, landlord friendly (especially compared to CA), and limited land (particularly in Reno). 

    We're not a "cheap" market, but for a good reason. It may not make sense for you, but wanted to throw it out there. My family and I have been investing here for years. 

    Whatever you decide, best of luck to you!!

    415-233-1796
    0Reply
  • Alex HilemanPro Member
    Real Estate Agent · Pittsburgh, PA · Member since 2023 · 225 posts · 147 votes
    2y

    Welcome Ashni! I used to be a property manager in Los Angeles and moved back to Pittsburgh, PA during COVID. I would strongly advise against being a landlord in California or New York. The laws are not landlord friendly at all and it's common for landlords to get stuck with a non-paying tenant or squatter and have to legally keep paying the utilities, taxes, mortgage, etc. while the eviction gets delayed in court for months or years. It is a fast way to go bankrupt. It's easier for landlords who own a lot of units or an apartment complex to bear the burden of non-paying tenants.

    Look for areas with population growth and population changes. For example, there was a huge migration of renters from California to Texas during COVID. That would be a good place to invest if you're looking for cash flow and appreciation. Rentals near hospitals and universities tend to have lower vacancy rates and more steady cash flow. 

    Since you have $100k to work with, you have the option of investing in a few different markets instead of putting all of your eggs in one basket.

    [email protected]412-804-1171
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free