How do you analyze an out-of-state market?

[Anthony Bielecki]

Hello all,

How do you personally determine if an out-of-state market is worth investing in? I live in the California Bay Area and real estate prices are astronomical. Being new to real estate investment, jumping into the game in an area with such high competition scares me. Since I want to invest in multifamily properties, my plan is to invest in a triplex or quad out of state where the numbers make more sense and hire a (hopefully) good property manager. But I'm overwhelmed by the sheer number of options I have. There are a lot of quads in the US. Where to start...

From various books and BP articles, I've been introduced to the basics of rental property analysis. Most of what I've seen recommends the following:

1) Make sure the city and neighborhood you're considering has the right demographics (growing population, ideally in the 20-30 year-old range since they tend to rent more), a diversified economic base, good schools, public transportation and low crime. Most of these facts can be gleamed from a city's CAFR.

2) Make sure that the numbers work for the specific property you're considering (using GRM, etc).

Is there anything major not included above that you personally do before investing in a market?

How do you pick areas to consider (since comparing every city/state in the US is infeasible)? 

Any and all suggestions and insights are appreciated. Thanks for your time.