Investing Outside of My Area

[Nicholas Denning]

I live in the Denver Metro area and just got my first rental property. I am looking to acquire more, but with my price range and the Denver market it is hard to find deals that work right now. I am exploring the options of buying outside of Colorado and specifically in the midwest. I have family in Iowa, so I am somewhat familiar with that area. Overall I am having a hard time deciding where to start looking. Any feedback on areas to start looking at would be much appreciated. I would lean towards something that is rent ready, but not afraid of a little sweat equity. I am using a property management company on my first property and would probably look in to doing the same especially with it being in a different state. Thank you

[Andrew Johnson]

@Nicholas Denning If I were in your shoes (and you're committed to out-of-state investing) I'd start looking in Iowa.  I don't know the fundamentals of the city, property tax rates, etc. but at least with family there someone can tell you "you don't want to go west of _____ St. after 10:00 p.m."  Just crossing off deals that look good on paper because of some local knowledge will be a huge help to you.  And if you've visited the family back there over the years you might have a good sense of where new developments have gone in, major employers, what areas have gotten worse, etc.  Again, some of this isn't about trying to define the "path of progress" as much as it is to scratch off the "path of implosion" areas.  The reason I would start there is because most people in areas like Denver (or me in San Diego) are looking outside of the state because we want cash-flow.  The best pro-forma, on paper, spreadsheet numbers tend to skew us non-locals in the directions of really bad areas.  Not to mention it's no the worst thing in the world if Uncle Eddie can drive by the property every once in a while and make sure there isn't a gaping hole in the roof.

You can, of course, repeat this process with any of the popular geographies:  Cleveland, Akron, Memphis, etc. but you're not going to have someone local there (with no commission to be earned) to tell you a good vs. bad area.