What Criteria Do You Use To Decide Where To Invest Out Of State?

[Lou Ruggieri]

I'm looking to start investing out of state and trying to figure out how to decide which areas are better than others. it's a little overwhelming the amount of information out there so I was just curious and wanted to know what sort of factors you guys with experience use to gauge a city or towns potential that you have had limited personal exposure to. So for I've been looking at the largest local businesses and their potential for longevity, population growth, median income and a few other smaller factors. How do you guys do it?

[LaDonna Smith]

First, define what your exit strategy is. Is this a buy and hold investment?  If so, the first criteria I would consider it Landlord/tenant laws.  I would recommend narrowing your search to landlord friendly states like Texas, Florida, Tennessee.  I have rentals in Florida and an eviction for non-payment of rent can be completed in about 30 days.  Second I would recommend understanding the impact of real estate taxes on your investment.  An inexpensive property can be enticing but if the local tax rate is high, it eats into your profit. Third is cash flow.  If I were to purchase a property, I would want my rent to be at minimum 1% of the investment but preferably closer to 1.25%.  The cost of the property is only relevant to the cash flow.  I would gladly pay $250,000 all in for a property that rented for $3600 a month.  After you solve those 3 factors, then consider the other stuff - job growth, crime, etc.