Ready to invest out of state for cash flow.... Landlord Friendly or Not?

Question

Hi BP Community,

I am a Realtor in California and also a property manager that deals specifically with Section 8 tenants. I have saved my commission and other money throughout the years to finally invest, but where I live in San Diego, it's very expensive and cash flow is almost non-existent on a 20% down conventional loan so I have decided it is best to invest out of state.

I have been doing a ton of research online (mostly BiggerPockets) and came to the conclusion the Mid-West (Cleveland, Akron area) is a good place to start. It seems as those there is an abundance of properties for sale there. I am looking solely for cashflow.

Has anyone invested there? Are they landlord friendly? Should I look more for a landlord-friendly city and state?

I'm getting analysis paralysis, am I making the right decision, is Cleveland/Akron oversaturated with investors, should I choose another place? HELP!!

Thank you in advance! Anthony

Dan H. · Answer

Mention cleveland or any large city in Ohio and it typically results in a dozen responses from Ohioans that extol the virtuals of their market.  Most of these people are agents or turnkey providers that make a living selling RE.

The reality is you can make money in most markets or do poor in most markets, but the locals always have the advantage on non-locals.  This is especially true for those starting out.

I personally would avoid most of the cheap cities.  The reason is the rent growth and appreciation outlook is poor which is why they are cheap cities.  The cash flow on a Cleveland property looks tempting, but when that rent does not in the long term keep up with inflation and many of the expenses rise with inflation, the result is declining cash flow especially in inflation adjusted numbers.  Have you looked at Cleveland's population history?  It explains its poor long term appreciation.

I recommend everyone start their RE investing local.  I recognize there are challenges in doing this, but all markets have challenges.

If you start OOS, recognize the need for a trusted, competent team and the need to maintain this team.  It is tougher than it seems to keep a good team together.

Good luck

Mackaylee Beach · Answer

Hey Anthony,

I know you didn't mention Kansas City, but there is currently lots of potential. Let me know if you'd like to further explore KC options!

Travis Biziorek · Answer

Hey Anthony, I'm up here on the Central Coast in CA but invest solely in Detroit.

I know that's not on your list (yet) but chose that market for the same reasons you're citing. Happy to discuss it if you'd like. I also help others get started there all the time.

Najma Osman · Answer

Hi @Anthony D'Angelo,

I believe the Cleveland area still has good numbers. I would also look into Columbus, Ohio. I invest here locally and we have a good mix of cash flow and appreciation.

Melissa Nash · Answer

This is a fine market, I just bought a property there but the houses are older - so you need to watch that and make sure the team is doing a good renovation, it is pretty landlord friendly. message me if some good Pm's there that I can recommend.

John Liberati · Answer

on a side note there are some zipcodes in cleveland that are so slightly increasing.

John Liberati · Answer

Anthony the biggest problem in Cleveland market is the decline in population. Cleveland has declind evey decade since 1950. There hasn't been any increase in population. SO that would be a concern to me, unless you can really beat the owner up on price that you have a deal that is soo cheap that if the cash flow starts to decline and you lose value, it wouldn't matter.

Jimmy Lieu · Answer

Hi Anthony, personally, I really like Columbus Ohio and work with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. Just a few weeks ago, I helped a client close on a deal getting them 20% cash on cash return. My biggest advice for out of state investors is finding the right team members who has your best interest at heart (and not chasing a commission check or see you as a paycheck!). If that means interviewing multiple people, you should definitely do so! As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!

Sam McCormack · Answer

@Anthony D'Angelo

Hi Anthony, it doesn't hurt to look around! I would stretch yourself out a little, not too much, and look into multiple cities. Cleveland/Akron is a good area to start, especially for cash flow. I recommend Cincinnati as well. At least open your eyes a little more to other markets in the area just to see what is there. Cincinnati has recently got a lot more inventory in SMF so if you would like I can help you navigate with my team around the area! Let me know if you have any questions about Cincinnati or are interested in looking here!

Ready to invest out of state for cash flow.... Landlord Friendly or Not?

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