Out-of-State LTR Investing

[Daniel Windingstad]

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

[Aristotle Kumpis]

It depends on what you are looking for. If you are seeking cash flow, a linear market is usually the best. But if you want faster appreciation, look at markets that have lots of job and population growth. You need to have a good property management in place too. I live in SoCal and have several properties in the midwest and south. 

[Drew Sygit]

@Daniel Windingstad

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

PM us if you’d like to discuss this logical approach in greater detail!

[Sam McCormack]

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

 Hey Dan, that is becoming a bigger issue in a lot of places. Especially places that are seeing growth, therefore making it more expensive to invest. Greater Cincinnati is a market I have many people looking in and I think you will be surprised with what you find here. Let me know if this area interests you

[Chris Grenzig]

@Daniel Windingstad someone else mentioned Florida, I'll just chime in and say Florida is probably not much better for cash flow unless you go C/C- properties, but regulations probably are better than your current situation. Much/most of Florida is still very much an appreciation investment, especially in and around the major metros.

Cash flow opportunities are probably better found in midwest markets but I'm no expert so I don't actually know that for sure. 

[Bob Stevens]

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

 I have been buying along with 100s of others in the Cleveland markets for 10 years. We used to buy all in 30k, with 1k in rent. Prices have tripled, quadrupled or more on top of the 25-30% net caps. I am still getting 15- 20% NET per year. based on cash purchase. I am not aware of any other market were so many from around the word invest. We are closing on two more this /next week, 15- 20% NET per year

[Samuel Diouf]

Columbus, Ohio is a great market to consider if you're leaning towards appreciation. I moved here from Florida after seeing the expansive growth in the Columbus market.

There are multiple billion dollar companies dumping money into the city, such as Intel, Google, Honda, and Amazon. This is causing a huge influx of people moving here for jobs. And a lot of start-up companies are migrating to this city as well because of the OSU campus that has thousands of talented students graduating and looking for positions locally.

Everything that’s going on here in Columbus is attracting investors and other businesses from all over. A recent study showed that 80 people are moving to this city every single week, which will continue to increase housing demand.

[Brian L Harris]

Daniel - Hi - My market and knowledge is Arizona,  Phoenix and surrounding area's. If you would like to know more about the Phoenix market potential I am happy to do a zoom call so I can show you a map and talk about each area.  Usually takes about 30-45 minutes.  

[Bob Stevens]

Quote from @Brian L Harris:

Daniel - Hi - My market and knowledge is Arizona,  Phoenix and surrounding area's. If you would like to know more about the Phoenix market potential I am happy to do a zoom call so I can show you a map and talk about each area.  Usually takes about 30-45 minutes.  

 How can we make money on a rental in AZ ? Im always open to new " ideas " 

\

[Daniel Windingstad]

Quote from @Bob Stevens:

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

 I have been buying along with 100s of others in the Cleveland markets for 10 years. We used to buy all in 30k, with 1k in rent. Prices have tripled, quadrupled or more on top of the 25-30% net caps. I am still getting 15- 20% NET per year. based on cash purchase. I am not aware of any other market were so many from around the word invest. We are closing on two more this /next week, 15- 20% NET per year

 Sounds like a great market. But why do you think it is that way, vs, minnesota? Happy to connect and learn, I have heard of many successful investments in the OH areas 

[Daniel Windingstad]

Quote from @Jackson Ebersole:

Hi Daniel,

I hope you’re doing well! It sounds like you’re ready to dive into some out-of-state investment opportunities, and I’m excited to share some thoughts that could help you boost your cash flow.Here are a few markets that might catch your interest:

• Florida: Cities like Orlando and Tampa are booming with tourism and have no state income tax, which can really enhance your rental income.
• Texas: Austin and Dallas are hot right now. With their job growth and vibrant culture, they attract a steady stream of renters.
• North Carolina: Charlotte and Raleigh are on the rise! They offer a fantastic quality of life and affordable housing, making them appealing to families and young professionals.
• Georgia: Atlanta is a thriving city with a strong economy. The diverse rental market here means there are great opportunities for consistent cash flow.
• Arizona: Phoenix and Tucson are seeing an influx of new residents, especially from California. The warm climate and affordable housing make these cities prime for rental investments.
• Ohio: Columbus and Cleveland offer affordable properties and stable job markets, providing solid cash flow and appreciation potential.
• Tennessee: Nashville and Memphis are experiencing rapid growth. Nashville’s vibrant culture and Memphis’s affordability make them attractive for investors.

Investing out of state can lead to higher returns, especially since many of these markets offer better opportunities compared to Minnesota. Diversifying your investments across different states can also help reduce risk and protect your portfolio. Plus, tapping into markets with strong job growth can enhance your overall returns.

As you consider these options, I recommend connecting with a reliable real estate agent, property manager, and contractors in your target area. Using property management software and virtual tours can also help you manage your investments effectively from afar. Starting with just one property is a great way to get a feel for the market before expanding.

I can assist you with funding for your rental properties! Whether you’re looking for traditional financing or creative funding solutions, I’m here to help you turn your investment dreams into reality.

If you have any questions or want to dive deeper into specific markets, just let me know. I’m here to support you.

Best,

Jackson

This is great information! allow me some time to review and I would love to connect and learn. 

[Bob Stevens]

Quote from @Daniel Windingstad:

Quote from @Bob Stevens:

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

 I have been buying along with 100s of others in the Cleveland markets for 10 years. We used to buy all in 30k, with 1k in rent. Prices have tripled, quadrupled or more on top of the 25-30% net caps. I am still getting 15- 20% NET per year. based on cash purchase. I am not aware of any other market were so many from around the word invest. We are closing on two more this /next week, 15- 20% NET per year

 Sounds like a great market. But why do you think it is that way, vs, minnesota? Happy to connect and learn, I have heard of many successful investments in the OH areas 

 I do not know anything about the MN market. I "found " Clev, 10 - 12 years ago and jumped in with both feet my 1st week there, never looked back . I wish I would have held 50 or so of the 500 I flipped MASSIVE mistake, cost me millions, 

[Brian L Harris]

For AZ,  the best values, with the long term in mind, are single family new homes. There are a couple of new home builders that are offering attractive interest rates to investors. As an example one of them is offering a 5.75% 30 year fixed to an investor and the development is in a growth area.  They are also negotiating things like backyards, window coverings, etc. Hope that helps answer the question. 

[Joseph Bui]

Hi Daniel, I'm also a Midwest investor like you but I'm based out of the Seattle. Over the past 4 years I've scaled my portfolio to 10 doors across mostly Detroit and Memphis. All my properties have been cash flow positive through a combination of Turnkey, BRRRRs and everything in between. I've also seen great appreciation as well when in the right areas. Happy to connect and knowledge share if you (or anyone) is interested.

[Jimmy Lieu]

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

Hi Daniel! I personally recommend checking out the Columbus OH market. My out-of-state clients are successfully purchasing BRRRRs and buy and holds here that are positive in cashflow, hit the 1% rule, and have lots of potential for appreciation. The macroeconomics looks great - growing population, more jobs, and major companies investing and developing here like Intel, Google, Meta, Honda, etc. I personally own a rental portfolio that I grew to over 7 figures. My best advice is to work with someone who also invests and can easily plug you in with their network of GCs, PMs, and lenders. You can also find boots on the ground on FB groups. Happy to connect and answer any questions you may have.

[Bob Stevens]

Quote from @Brian L Harris:

For AZ,  the best values, with the long term in mind, are single family new homes. There are a couple of new home builders that are offering attractive interest rates to investors. As an example one of them is offering a 5.75% 30 year fixed to an investor and the development is in a growth area.  They are also negotiating things like backyards, window coverings, etc. Hope that helps answer the question. 

 So buying with no cash flow with hopes of appreciation, I wish you all the best, not for me. I I like to be in control  

[Austin Wolff]

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

Hi, I'm the Market Intelligence Analyst here at BiggerPockets--so analyzing markets is all I do. Also, I live in Los Angeles, so investing out-of-state was my only option when I began my analysis. While you may not be considering moving to a market and house-hacking, I think this BiggerPockets article still offers great data for out-of-state buy-and-hold investors.

Key takeaways: Fayetteville, AR and Indianapolis, IN may be good places for you to start if you're new. Not included in the article (but in an upcoming one I'm drafting right now) is Columbus, OH like others have stated. These 3 metros have prices cheaper than the national average, healthy rent-to-price ratios, and growing economies--solid market fundamentals. 

I recommend hopping on Redfin, Zillow, or the BiggerPockets Deal Finder right away to start looking at what's available in your price point. Hope this helps.

[Taz Zettergren]

@Daniel Windingstad I work with hundreds of investors who prefer the southern/middle part of the country because the price points are more affordable and the laws are landlord friendly. Areas like Memphis, Little Rock, Oklahoma, Texas and even Alabama. The most important thing in out of state investing is the team you are working with so be sure to vet them thoroughly and I'd even recommend visiting them in person so you can get a feel for who they are and the areas they're recommending you to invest in. 

Feel free to reach out if I can be of any assistance, Best of luck! 

[Daniel Windingstad]

Wow I am getting tons of great info, thank you to everyone for sharing. It sounds like Columbus OH is pretty hot, Memphis TN, and some areas in the southern Midwest as well. 

Its scary for me, being a smaller investor, but I am eager to grow my business, and with the inflated costs here in Minnesota, I find it hard to keep growing, especially, since i am trying to start a family now. 

I came from doing everything self motivated and always had a battle with all the things i do in life, and continue to try and cultivate positive self-belief. It is refreshing to be surrounded by supportive people eager to help. Though, my Naivete has gotten me into trouble before. I am rambling, but i appreciate the help and am happy to connect with people if you want to send a DM. 

Cheers,

Dan  

[Bob Stevens]

Quote from @Daniel Windingstad:

Wow I am getting tons of great info, thank you to everyone for sharing. It sounds like Columbus OH is pretty hot, Memphis TN, and some areas in the southern Midwest as well. 

Its scary for me, being a smaller investor, but I am eager to grow my business, and with the inflated costs here in Minnesota, I find it hard to keep growing, especially, since i am trying to start a family now. 

I came from doing everything self motivated and always had a battle with all the things i do in life, and continue to try and cultivate positive self-belief. It is refreshing to be surrounded by supportive people eager to help. Though, my Naivete has gotten me into trouble before. I am rambling, but i appreciate the help and am happy to connect with people if you want to send a DM. 

Cheers,

Dan  

 Columbus was 5 years ago unless you are happy with 4- 6% . I have a buddy there with 250 props, he can't even find more deals there.  I have contractors there ready to go but there is nothing that gets me excited. Memphis, we left that market 7 years ago. 

[Jordan Moorhead]

@Daniel Windingstad cashflow is hard everywhere dude, where it isn't typically the appreciation isn't as good. I know a ton of people doing well in MSP. Despite the communist landlord laws you have good appreciation and rent growth.

Check out the FB group Twin Cities Real Estate Investing if you want to connect with more locals there too

[Travis Biziorek]

Hey Dan, I live in California but have got 12-doors in Detroit that have done extremely well both from a cash flow and appreciation perspective. 

Major pros of Detroit is its rapid revitalization and cash flow potential. Prices in the city have literally doubled over the last 5 years, and it doesn't seem to be slowing down. The median price is still just $90k and I wouldn't be surprised to see it double again pretty quickly.

The other nice thing about Michigan is property taxes are capped at the rate of inflation with a max annual increase of 5% per year.

The biggest drawback of Detroit is tenant quality IMO. You're more likely to have a non-paying tenant and go through eviction than you are higher end markets. Evictions take 3-4 months though and there's a very clear path to executing them.

[Bob Stevens]

Quote from @Jordan Moorhead:

@Daniel Windingstad cashflow is hard everywhere dude, where it isn't typically the appreciation isn't as good. I know a ton of people doing well in MSP. Despite the communist landlord laws you have good appreciation and rent growth.

Check out the FB group Twin Cities Real Estate Investing if you want to connect with more locals there too

 cash flow is easy if you have the right team and knowledge, I can get as many as I want in my market, all with double digit net caps, 

All the best 

[Jackson Harris]

Quote from @Daniel Windingstad:

Hello,

I own 2 properties (1 sf, 1 duplex) in Minnesota, and find that the rules, fees, tenant laws, taxes, etc. In Minneapolis are making it very hard to be profitable. The best thing i seem to have going is appreciation, which is nice, but cashflow is struggling a bit. 

What are the best out of state markets, and who has invested out of state? What are the major pros and cons, and tips to making it successful out of state? Open to all shared knowledge. 

cheers, 

Dan

 Hey Daniel,

I'm personally in the Phoenix market and invest here myself. I think it really depends on what you want, do you need high cash flow or just quicker appreciation? 

Down here you can definitely find both. If cash flow is key for you then you could get a short term rental for a decent price, long term rental cash flow may be harder to come by but you can find it. 

My partner and I have a few str's here that cash flow really well. Would be happy to talk with you about what we've done as well as our experience working with out of state investors in AZ.

[James Wachob]

Hello @Daniel Windingstad, Memphis could be a solid option for investors right now. For starters, the rental yields are looking really good. The property prices are quite affordable compared to places like Minneapolis, so you might find that your cash flow improves significantly. Plus, with the steady demand for rentals, you’re looking at potentially lower vacancy rates and consistent rental income.

The job market in Memphis is also pretty strong. Big players like FedEx and St. Jude’s keep the economy humming, which helps support a robust rental market. It’s always nice to see economic stability when you’re investing out of state.

Another cool thing is that some neighborhoods are getting a lot of attention and revitalization. Areas like Midtown and Downtown are buzzing with new developments and amenities, which could be great for property appreciation down the road.

And let’s not forget that Tennessee’s landlord laws are generally more investor-friendly compared to some other states. That could make managing properties a bit easier.

If you’re thinking about branching out into new markets, Memphis might be worth a closer look. Let me know if you want to chat more about this or if you need any help with research or connections in the area!

[Regina Blake]

Hi, yes, Ohio is the place you want to invest in real estate. Reach out with any questions please good luck to you!