Vetting states for RE investing

[Wesley W.]

Hello All,

My wife and I are looking to relocate in about 5 years or so, and we'd like to move to a state that would positively affect establishing a RE buy-and-hold portfolio.

I realize that landlord-tenant laws is one element that would influence our relative success, but I also imagine there are others - such as taxes on income from real estate, property/zoning laws, small business laws, etc.

Since we aren't real estate investors (YET!), there are some aspects to the business that we don't even know we should be using to evaluate our potential move.

I guess what I'm asking is: what sort of things should we be looking at in choosing a state (realizing that within a state, things can vary widely - but we have to start somewhere).

Our intended destination is somewhere in the southeast, if that helps.

Thanks in advance!

[Ali Boone]

Hey Wesley!

I definitely don't recommend that you necessarily plan to move where you want to buy. The best places to buy are always changing (which is the big point) and you shouldn't adjust your whole life around moving where investments are good. As @Marco Santarelli would tell you, "live where you want and invest where it makes sense" :)

But, that doesn't answer your question. Here are the things I look at when choosing a state to buy in:

- Industry. I want to see some industry diversification so if one goes out, your investment should stay relatively safe (versus a market that only has one main industry)

- Population. The trends need to show growth! No trends of decline.

- Jobs. Is there a good amount of job creation happening? Jobs mean people are moving to the city. Good for your investment.

- Price-to-rent ratio. Can you buy a property that will rent for enough to cover the mortgage and expenses? Like in NY and LA, you have to pay so much for the properties that the rents won't cover your expenses and you'll experience a loss.

- Landlord/tenant laws. This is as big of an issue now as it has been because there is what they call "rent insurance" available now where you pay a small premium annually and they cover a huge chunk of you expenses (most of the expenses actually, including rent payments) should a tenant vacate or need eviction.

- Taxes and insurance. It's fine if they are high as long as they still allow for positive cash flow each month. Like TX, very high taxes and insurance but prices still allow for profit. FL, the insurance and taxes pretty much void profits.

Hope that helps!