How to Choose an Out of State Market

[Mike Doyle]

I live in Orange County, California and am looking to begin investing out of state. I'm trying to stay away from the "HOT" areas. Any suggestions as to how to research various out of state markets? Demographics, job trends, etc? 

[Mitch Messer]

Hi @Mike Doyle! Finding the next HOT market before the crowds show up is the Holy Grail of forecasting, of course. It's more art than science, but here are some considerations:

• Landlording Climate - I'm a buy-and-holder, so I'm looking for markets that are landlord-friendly. I want, among other things, zero unnecessary regulation and a fast and cheap eviction process. So, yes to states like Georgia and Ohio, and no to places like Vermont and Oregon.
• Market Growth - Our properties are generally aimed a working-class families. So, I want to see that folks like this are flowing into the target market, and not out. I've learned to be careful with aggregate demographic data: If most of the population influx is retirees, for example, that might not help me. I want to see the data broken down by age group.
• Market Size - Even when there is plenty of growth, I also want markets with a sizeable total population. Tiny markets, even fast-growing ones, are just more volatile and subject to disruption from unexpected changes. I don't want one plant closing to wipe out my entire portfolio.