Best Market for Long Distance Small Multi-family Rentals

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Best Market for Long Distance Small Multi-family Rentals

Nick Hulme
New to Real Estate · Califonia; Utah · Member since 2023 · 20 posts · 27 votes

My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

Some spots I've been considering so far:

Florida - Jacksonville / Orlando

Tennessee - Nashville

Texas - Austin / Dallas / San Antonio

Alabama - Birmingham?

Missouri - Kansas City / St. Louis

North Carolina - Raleigh / Charlotte

Utah - Salt Lake City / Provo

Arizona - Phoenix

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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
3y

@Nick Hulme another factor to consider is the size of the market opportunity. For the Raleigh area, consider that there are very few 2-4 family properties in the Total Available Market. See also this BP post I wrote four years ago: Total Available Market - 2, 3, and 4 units. Unfortunately, BP removed all the graphs. 

With few properties and a lot of potential buyers, unfortunately there are generally not many good opportunities in the Raleigh 2-4 family market. 

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  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    3y
    Quote from @Nick Hulme:

    My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

    We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

    That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

    Some spots I've been considering so far:

    Florida - Jacksonville / Orlando

    Tennessee - Nashville

    Texas - Austin / Dallas / San Antonio

    Alabama - Birmingham?

    Missouri - Kansas City / St. Louis

    North Carolina - Raleigh / Charlotte

    Utah - Salt Lake City / Provo

    Arizona - Phoenix


     Hi Nick! If you are not just sold on those markets I think you should consider the Ohio markets. Honda has invested $3.5 Billion in Fayette County for a plant that will make batteries for electric vehicles. https://www.dispatch.com/story... buying even more land! 

    According to Licking County Auditor records, Amazon Data Services Inc. bought 392.11 acres of land ($ $116,653,320.) on the west side of Beech Road and straddling Miller Road on January 17, 2023.

    Intel has invested $20 billion initial investment in two fabs (short for fabrication plants; they typically produce silicon wafers), with construction beginning in late 2022 and the facility expected to open in late 2025.“At full buildout, the total investment in the site could grow to as much as $100 billion over the next decade, making it one of the largest semiconductor manufacturing sites in the world,” reads Intel’s press release. https://www.theverge.com/2022/... 

    The market here is booming and out of state investors are flocking here because of the price to rent ratio. 

    4Reply
  • Adrienne Green
    Real Estate Consultant · Chattanooga, TN · Member since 2018 · 384 posts · 330 votes
    3y

    @Nick Hulme smart idea to start investing out of state!  A few things here: why is the "best strategy long distance long term rental properties"?  It could be, it depends on a lot of factors: risk tolerance, goals, timeline, expertise, etc.  You don't dig in to those for you personally here, I'll assume you looked into those and determined that this was the best strategy for you personally.  (There are a lot of possible strategies, and they all are the 'best' for the right person!)

    BRRR can be great, if you're going to do that, read David Greene's book on long distance real estate investing, and do what he says in terms of working with contractors. It is certainly challenging to oversee any rehab, after all you're getting more reward by taking on more risk. If you actually do what David Greene recommends, you greatly increase your chances of success.

    In terms of markets, most on your list are ones I'd consider already pretty played out, expensive, with non-optimal rent/return ratios.  I think you want the NEXT Nashville, Austin, etc., you don't want to be buying into those now.  In fact, for both of those, I work with several investors who even live in those markets, and are investing here in Chattanooga instead.

    I think you're right to focus in the southeast, I'd just move to smaller cities where there's still more opportunity!

    2Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
    3y

    Montgomery, Alabama is also a good option.  Maxwell AFB, 10 colleges and universities, USAF Air War College, amazon fulfillment center, Hyundai manufacturing.  Alabama has the second lowest property taxes in the nation.

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  • Garrett Christensen
    Real Estate Agent · Orem, UT · Member since 2021 · 98 posts · 80 votes
    3y

    Provo/Salt Lake is a solid option, I personally just bought a 7 unit myself. It’s a strong rental market, but is definitely more of an appreciation play than cash flow. Reach out directly if you’d like to go over the market in more detail with me.

    2Reply
  • Elenis Camargo
    Property Manager · Jacksonville, FL · Member since 2018 · 514 posts · 470 votes
    3y

    Hi Nick, it's great to meet you! My husband and I started out as an out-of-state investor like yourself. When we lived in NYC we purchased our first SFH rental in Jacksonville, FL in Feb 2018. We looked at a few markets before settling on Jackonville. We were both born and raised in Miami, FL so we felt the most comfortable investing in this state, but we never lived or visited Jacksonville. It was always this "forgotten" city in FL compared to Tampa, Orlando and Miami. And that's now what we love about it so much so we moved here in 2020 and opened up a brokerage and property management company.

    The fact that it's the last major city in FL that hasn't grown to the same size of the 3 other major cities. So for us that means opportunity. It's a growing city with lots of plans to expand downtown. SFH in the right areas can generate strong rents and have lots of appreciation opportunity from our view. There are plenty of SFHs here, but a limited supply of multi-families. Not saying you can't find multi families, but you have to be actively looking and move fast when you do find one. Obviously, taxes are great here because there is no state income tax. Property taxes have gone up since the Covid RE boom, but no where near Miami, Tampa and Orlando.

    Let me know if you have more specific questions. Happy to get on a call to chat further!

    - Elenis

    2Reply
  • Sherief Elbassuoni
    Realtor · Bellevue, WA · Member since 2019 · 882 posts · 1k+ votes
    3y

    You are on the right track. I typically look at markets with steady job and population growth, a landlord-friendly state, and diversity of jobs. 

    2Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    3y

    @Nick Hulme another factor to consider is the size of the market opportunity. For the Raleigh area, consider that there are very few 2-4 family properties in the Total Available Market. See also this BP post I wrote four years ago: Total Available Market - 2, 3, and 4 units. Unfortunately, BP removed all the graphs. 

    With few properties and a lot of potential buyers, unfortunately there are generally not many good opportunities in the Raleigh 2-4 family market. 

    5Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    3y

    @Nick Hulme if you're going to invest long distance I would recommend San Antonio. We have a great agent, PM and contractor there

    [email protected]512-888-9122
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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Nick Hulme

    don't invest OOS in a random market for $87 a month in cash flow. BRRRR is a tough strategy.

    find a market within driving distance at a lower price point than SJ.  start there.

    don't do this.

    https://www.biggerpockets.com/...

    4Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    3y
    Quote from @Nick Hulme:

    My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

    We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

    That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

    Some spots I've been considering so far:

    Florida - Jacksonville / Orlando

    Tennessee - Nashville

    Texas - Austin / Dallas / San Antonio

    Alabama - Birmingham?

    Missouri - Kansas City / St. Louis

    North Carolina - Raleigh / Charlotte

    Utah - Salt Lake City / Provo

    Arizona - Phoenix

    Hey Nick, 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!

    [email protected]614-300-7535
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  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    Houston, Texas is an excellent real estate investment choice. Its steady job and population growth, landlord-friendly laws, and diverse economy make it a great option. Investing in Houston real estate can provide returns that are both reliable and profitable. With the right research, you can find properties with good potential for appreciation - making your investment even more worthwhile. So if you're looking for somewhere to invest in real estate, consider Houston as your first option! It could prove to be a wise decision.

    [email protected]832-889-5607
    2Reply
  • Trevor Richardson
    Real Estate Broker · Reno, NV · Member since 2023 · 267 posts · 297 votes
    3y

    You should look at Reno. It’s the first city outside Nor Cal. We have helped a lot of Bay clients over the years. They love the proximity to where they live, and Reno is very stable. Just need to know how to find deals, our team leads the market in small multifamily transactions. Let us know if we can help. 

    2Reply
  • Najma Osman
    Real Estate Agent · Columbus, OH · Member since 2023 · 161 posts · 217 votes
    3y

    Hi @Nick Hulme

    I have to agree with the others in the chat that Ohio is a great option for you to explore! Columbus is a good market if you are looking for job and population growth because of the mentioned developments. We see great appreciation here. I would also recommend Cleveland, Ohio if you are looking for lower prices and higher cashflow.

    1Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    3y
    Quote from @Nick Hulme:

    My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

    We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

    That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

    Some spots I've been considering so far:

    Florida - Jacksonville / Orlando

    Tennessee - Nashville

    Texas - Austin / Dallas / San Antonio

    Alabama - Birmingham?

    Missouri - Kansas City / St. Louis

    North Carolina - Raleigh / Charlotte

    Utah - Salt Lake City / Provo

    Arizona - Phoenix


     I'd recommend cosmetic BRRRRs to start instead of large renovation projects. Ohio offers a low entry point and a growing population - specifically Columbus.

    [email protected]614-363-2787
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    2Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    3y

    @Nick Hulme

    Hi Nick, rat off the bat, I would recommend OH. Cleveland, Columbus, Cincinnati, these are the areas where you can get a good deal done. I can speak on behalf of Cincy, not so much others, but Cincinnati has a mix of what you are looking for. Lots of SMF on MLS, appreciation potential, and cash flow potential. If you have questions for me about Cincy or are interested, shoot me a dm!

    [email protected]859-443-4952
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  • Anthony L Amos Jr
    Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes
    3y
    Quote from @Nick Hulme:

    My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

    We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

    That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

    Some spots I've been considering so far:

    Florida - Jacksonville / Orlando

    Tennessee - Nashville

    Texas - Austin / Dallas / San Antonio

    Alabama - Birmingham?

    Missouri - Kansas City / St. Louis

    North Carolina - Raleigh / Charlotte

    Utah - Salt Lake City / Provo

    Arizona - Phoenix



    Invest in the wonderful town of Columbus, OH. Home to The Ohio State University with nearly 60,000 students, 5 fortune 500 companies, over +25% population change since 2000, 2016 smart city challenge award winner gaining 50 million dollars in funding from the government ( https://www.columbus.gov/smartcity/), Intel is spending 20 Billion dollars to build two semiconductor plants, and many many more great things presently and coming in the future. Needless to say Columbus will remain a strong real estate market for the foreseeable future.

    0Reply
  • Jennifer Volek
    Real Estate Agent · Arlington, TX · Member since 2016 · 151 posts · 54 votes
    3y

    I can help if you want to look in DALLAS!

    0Reply
  • Brandon Sinkler
    Real Estate Consultant · Charleston, SC · Member since 2022 · 4 posts · 0 votes
    3y

    Hey Nick! You should also consider Charleston, SC (pop and job growth, big military presence, Volvo and Boeing as well as a teaching medical university) and Green Bay, WI (just voted #1 place in US to live). If you need info or assistance investing in either market, let's chat! Im a licensed Contractor/Realtor/Investor in Charleston (live here) and licensed Contractor/Investor in Green Bay (born/raised) with a team up there as well (also licensed Realtor in FL). @milavaconsulting on IG and FB. Always happy to help other investors!

    0Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
    3y

    FYI.

    Affordability in homeownership has been an elusive concept for the past several years, and a new data analysis by WalletHub has identified the major cities which are the most and least affordable for prospective buyers.

    In a number crunch of 300 cities using 10 metrics ranging from home prices to tax rates to vacancy levels, WalletHub determined that Montgomery, Alabama, was the nation’s most affordable city for homebuyers. Rounding out the top 10 of affordable homeownership cities were Flint, Michigan; Toledo, Ohio; Detroit; Akron, Ohio; Warren, Michigan; Pittsburgh; Yuma, Arizona; Springfield, Illinois; and Palm Bay, Florida.

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  • Account Closed
    Columbus, OH · Member since 2023 · 427 posts · 254 votes
    3y

    Hi Nick,

    As others have mentioned, Columbus, OH is a great market for MF rentals. Many employers are investing big money in the city, and large employers like OSU and various medical centers make rent demand strong. The price:rent ratio is far more favorable for an REI than California, which is why so many of you have come to invest in Ohio! Cleveland, OH is also a very strong market for cashflow.

    1Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    3y

    Hi Nick, I am a huge fan of out of state investing and Long Distance Real Estate Investing was one of the first books I read before I built my portfolio in Cleveland. One of the strategies I used was working with a couple of turnkey companies and getting started in a mid-west market. I would love to connect and help out so feel free to reach out.

    0Reply
  • Samuel Boyd
    Realtor · Melbourne, FL · Member since 2021 · 111 posts · 51 votes
    3y

    @Nick Hulme I think most of the markets you identified are all pretty solid. Obviously, everyone is going to recommend their own city lol, so that being said I think the greater Palm Bay / Melbourne Area is such a hidden gem for real estate investing. It's not super hidden any more but with extremely low crime, very affordable houses coupled with good school systems, and tons of developments coming to the area (MLB airport expansion, Margaritaville, Water park, etc.) the appreciation potential is certainly there. I can give you an estimate for long term rental income in the area if you're curious, But I would highly encourage you to look into the STR route and Airbnb it. We just opened one in Palm Bay and it's crushing it. Looking to do more ASAP. Good luck on your journey and let me know if you're curious about the Melbourne/palm bay area!

    0Reply
  • Nathan Harden
    Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes
    3y

    This is always going to be my answer because depending on what you’re looking for out of a property, then you choose the market for that goal. Are you looking for cash flow or appreciation market?

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    3y

    Hey @Nick Hulme - While you didnt mention Chicago, Illinois....i'll throw it out there.  Despite what might hear or think about Crime and taxes....Chicago is a great market for long-distance small multi-family rentals because...

    • Strong rental demand: Chicago has a strong rental market, with over 50% of the population renting their homes. This means that there is a high demand for rental properties, which can help to ensure that your units are rented out and that you can generate a steady stream of income.
    • Affordable prices: Chicago is a relatively affordable city, which means that you can purchase small multi-family properties for a reasonable price. This can help to make your investment more accessible and can also help to boost your potential returns.
    • Strong economic growth: Chicago's economy is strong and growing, which is another positive factor for investors. This means that there is a good chance that the demand for rental properties will continue to grow in the future.
    • Diversified economy: Chicago has a diversified economy, which means that it is not overly reliant on any one industry. This can help to reduce the risk of your investment if one industry were to decline.
    • Strong job market: Chicago has a strong job market, with over 2.7 million jobs. This means that there is a large pool of potential tenants who are looking for housing.
    • Central location: Chicago is a centrally located city, which makes it a great place to invest in real estate. It is located near major transportation hubs, which makes it easy for tenants to get to work and for you to manage your properties.
    • Up-and-coming neighborhoods: There are several up-and-coming neighborhoods in Chicago that are ripe for investment. These neighborhoods are becoming increasingly popular with renters, which can help to boost your potential returns.
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  • Max FeinbergPro Member
    Real Estate Agent · Pittsburgh, PA · Member since 2017 · 150 posts · 70 votes
    3y
    Quote from @Nick Hulme:

    My wife and I are renting out the basement of some close relatives in San Jose, CA. We're comfortable and are in no rush to leave. We both have good jobs in the south bay. I also grew up in this area and most of my family still lives here, so we would like to stay in or around San Jose... We also want to start investing in real estate, and the bay area isn't exactly a friendly market for people in their mid-twenties just getting started.

    We've done some research, and the best strategy seems to be long distance long term rental properties. I like the idea of small multi-family and would like to use the BRRRR method if possible (might be difficult from another state though).

    That said, what are the best markets to consider? We're looking for the best combination of job growth, population growth, vacancy rates, equity forecasts, rent prices, multi-family home prices, weather, and tax burdens. Please let me know what other factors I ought to take into account!

    Some spots I've been considering so far:

    Florida - Jacksonville / Orlando

    Tennessee - Nashville

    Texas - Austin / Dallas / San Antonio

    Alabama - Birmingham?

    Missouri - Kansas City / St. Louis

    North Carolina - Raleigh / Charlotte

    Utah - Salt Lake City / Provo

    Arizona - Phoenix


    Pittsburgh is a fantastic market for out of state investors. We have a decent amount of small multi family compared to a lot of the markets that you mentioned, and are far more affordable than the likes of Phoenix, Raleigh, Austin, etc.


    Over the years, I have helped many people from the Bay Area find property here is western Pa! I’d be happy to connect you with some of them if you are interested…maybe they could share their experiences here with you!

    0Reply
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