Criteria for out of state investing?

[Zubair Afzal]

Hi Everyone,

I could really use your advice on a few items.  I am currently looking to invest out of state as my current area in Orange County is kind of crazy to invest in.  Right now I have a few different areas that I’m leaning towards I was hoping to get some feedback on what criteria that I should look at before selecting a particular market.  My strategy is to buy and hold.  My current criteria are as follows

1.  What is the unemployment rate in the area?

2.  What is the population growth over the last few years?

3.  What economic sectors employ the most people?  (Ideally this should be diverse)

4.  What is the price to rent ratio?  Ideally we will have the 1% rule apply here.  

I’m currently looking at 5 different markets.  They are all in landlord friendly states.

Once I find out the numbers I will then look at specific areas in the market with low crime rate.

Any thoughts or ideas?  Right now I’m just getting started so I feel like there is a lot to learn.  I just want to make sure I do due diligence before jumping in.  Any advice or feedback would be appreciated.  What else do you look at before picking an area to invest in?

[Jay Hinrichs]

I like to advise that when looking OOS  keep in mind each of the go to cities have their plus's and minus.. at the end of the day I beleive you want to buy as close to the median price point as possible.. reason being in those areas you have homeowners buying as well.

the second you go into low end low value ( where the numbers look the best) you are now for ever in the land of investors and the exit is ONLY to an investor and the rental pool is much tougher.. 

the reality is inverse to what many think.. you go for high cash flow % returns you take on greater risk limit exit and take on the risk of a very bad investment over time.

you be happy with modest cash flow returns  buy were homeowners are still buying with decent schools etc.. and your return although not the magic that those on bP talk about but for out of area investors much safer.  thats my thought process.

RISK/REWARD is very real in the rental business.. and bottom end tenants are VERY difficult and are not changeable.. IE they will always be who they are.