When investing out of state, how did you decide where to invest?

[Alyssa Feliciano]

Hey there Bigger Pockets! 

Im a rookie investor, living in Souther California, looking to invest out of state.  I want to start looking for deals but I'm getting hung up on where to look. 

For out of state investors, what criteria did you use to pick your market? Ideally I would like a market that is cheap, so I do not have to put a lot of money down.  What should I search when looking for a market like this?  Should also include population growth, job diversification, landlord laws, etc? Having major analysis paralysis. 

Any advice would be appreciated.  Thanks for you help!
   

[Joseph Cacciapaglia]

You have to start off by determining what your goals are. Is your day 1 cash flow most important to you, are you trying to maximize cash flow over your hold period, or is wealth maximization your goal? What hold period are you planning on? How much time do you want to devote to investing?  Do you want to be able to travel to the market regularly, or are you planning to be completely hands off? These are all decisions that you need to make, before you can start looking for a market. There are some markets that provide great in place cash flow (think 1%+ rule) and others that will provide better total returns over time, due to rent growth and appreciation. Knowing what you're looking for will help you decide on the criteria you need for the market. There is no 1 right market, just the market that's right for your particular goals and circumstances.

When I was choosing a market, long term total returns was my number one goal. I don't care if my cash on cash is somewhat lower day 1, if there is strong rent growth and appreciation. I know that in the long run both my cash flow and total return on investment is maximized by strong growth in the market. I'm also relatively risk averse, and have seen too many investors get crushed in smaller markets. With all that in mind, I was looking for a major market with strong population and job growth and a diverse economy, but with lower prices relative to similar sized markets. This led me to move to San Antonio a couple of years ago, and most of the factors remain relatively unchanged today. This is certainly not the right market for everyone, which is why you need to figure out your personal goals first.