Choosing an Out-of-state Market

[Christian Conti]

I currently do not have any properties and live in central Vermont. As I have combing through potential deals and analysis, I have found that a combination of lack of cashflow, high property taxes, shrinking population and virtually nothing to attract potential tenants in much of the state is making out-of-state investing seem like a much better bet to a smaller, beginner investor looking to keep costs low and scale gradually through buy and hold. 

My question for out-of-state investors is how do you decide on a market to target? I feel like I have a good idea of what steps to take once I have decided on a particular market, but I am finding it difficult to narrow it down. Ideally I would like to have maybe 4-5 areas/markets that I can really drill down on and research, but right now I feel like I might as well close my eyes and throw a dart at a map. Can someone offer me some pointers as to where to start?

Thanks!

[Dave Poeppelmeier]

@Christian Conti Yes, the options are endless when you're looking to start investing out of state. You can crunch the numbers until the cows come home, but eventually you have to pick a market and start to work in it. To me, what it boils down to is do you want cash flow or appreciation? If you're looking for cash flow, look at the Midwest, specifically tertiary markets. I work and invest in Toledo, OH, and this is a cash flow town. Similar towns in Ohio are Dayton, Akron, and parts of Cleveland and Cincinnati. If you're looking for appreciation, look at the high growth cities of Columbus and Indianapolis, and the hot areas of Cleveland/Cincinnati. The competition is much greater there because they're booming, but people are making out very well over the long term. 

Otherwise, you do have to look at the municipalities as well as the states in how they handle evictions. I feel Ohio leans more towards owners, but different cities handle eviction differently. Toledo is pretty much back to normal from Covid and has been since March, I can't speak for other cities. 

For your Core 4, the first thing you need to find is a Realtor and Property Manager that you feel comfortable with. With a good Realtor in hand (who should also be an Investor), they will help you find the types of properties and neighborhood classes you're looking for, and the Property Manager will run it for you. Between the two of them, they will help you find local lenders, attorneys, insurance agencies, etc that you need to invest over distances. Good luck!