Choosing an Out of State Market to Invest

[Eric B.]

How do you decide on choosing a market when your first starting out and doing long distance real estate investing?  

I'm in the military and am currently stationed overseas.  I just finished David Greene's book, "Long-Distance Real Estate Investing," and feel like it gives a good foundation for how to get started doing everything but choosing a market.  I've asked around and read the forums for specific advice on how people do this, but so far have only really found generic advice.  Even podcast guests seem to speak the same generic advice.

• Invest where you have friends/family
• Invest where you used to live
• Invest in a market you know
• Invest where jobs are growing, the economy is doing well, or where there is good growth potential.

This is the essence of the advice I've received.  The last bit of advice is the most helpful but I struggle with coming up with the information unless I go from city to city and pull local data.  How do the big time investors like David Greene, Brandon Turner, and others choose on a market to begin their search? How do they narrow down the list of cities/metropolitan areas to a manageable one to begin their due diligence?  

I've found sites like, Rent Data, City-Data, and GDP by State which all give results from data from 2017/2018 and older.  They don't help with predicting future growth.  

So far my strategy is analogous to throwing darts at a map and looking into whatever city they hit.  I don't want to get lucky, I want to figure out a repeatable process that works so I can invest across the country with confidence.  

Am I making this process too difficult?  What do you all do to choose a new out of state market?

[Scott Passman]

@Eric B.  What exactly are you looking to find as a metric to determine where to invest?  All the "generalities" you listed are stated for a reason, because they're important. In all likelihood, the Brandon Turners and David Greene's of the world likely choose markets based on where opportunities arise with and from people they know as a result of networking and meeting people in the industry. They will certainly due their due diligence in the market, but likely after interest has already been initiated based on an opportunity. 

Are you making this more complicated than it should be?  Probably.  But it is something many of us are guilty of (myself included when I started) as there is a tendency to think there's a "perfect" market and we would do ourselves a disservice to invest elsewhere.  Truth is, you can make money in real estate virtually anywhere, you just have to determine what method of investing works best in each area.  Look to make sure an area is growing in population, has a diverse job economy and isn't overly reliant on one industry, strong job opportunities in tech, health care, energy, food, pharmaceuticals etc. are great because they are more recession resistant.  If you are looking for long-term buy and hold, look for solid rent:buy ratios (the lower the better) and loosely look to see if there are properties conforming to the 1% rule. This just helps you determine whether or not the area is conducive to rental property investing. 

Another strategy would be to evaluate macro trends on where people in the country seem to be migrating, and why.  Everything occurs in cycles and trends so investing in areas and regions that people are flocking to has potential upside and could be something to look into. The most important thing is to pick a location and get to work on networking with people there, learn as much as you can about the market, and commit to it and you will waste far less time bouncing around a never ending list of cities in hopes of finding the next "best" location.  Good luck my friend and thank you for serving our country.