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

[Dean Harris]

@Daniel Windingstad

This is alwasy a popular question and everyone will likely suggest the location they are investing in. I invest in Memphis, TN and have a large portfolio of SF properties here. Im sourcing a strong tenant base with the properties I am buying and my average rent is just under $1700. You will be able to find cash flow and some appreciation here in Memphis. I often see the 1% rule all they way yo to the $140,000-$150,000 price range. 

Best of luck!

[Bob Stevens]

Quote from @Dean Harris:

@Daniel Windingstad

This is alwasy a popular question and everyone will likely suggest the location they are investing in. I invest in Memphis, TN and have a large portfolio of SF properties here. Im sourcing a strong tenant base with the properties I am buying and my average rent is just under $1700. You will be able to find cash flow and some appreciation here in Memphis. I often see the 1% rule all they way yo to the $140,000-$150,000 price range. 

Best of luck!

 So are you saying ALL IN 170k with rent of $1700? All in 150k rent of $1500 ? 

[Dean Harris]

I dont see them much in that 1700 range. I do see the 1% rule in 80,000-150,000 range in Memphis

[Bob Stevens]

Quote from @Dean Harris:

I dont see them much in that 1700 range. I do see the 1% rule in 80,000-150,000 range in Memphis

 Ok so 125k all in rent 1200? WOW I really am spoiled. I get 2% rule. All in 75k rent 1700, all in 90k, rent 2k, 

All the best to you 

[Dean Harris]

Quote from @Bob Stevens:

Quote from @Dean Harris:

I dont see them much in that 1700 range. I do see the 1% rule in 80,000-150,000 range in Memphis

 Ok so 125k all in rent 1200? WOW I really am spoiled. I get 2% rule. All in 75k rent 1700, all in 90k, rent 2k, 

All the best to you 

 Single Fam? Section 8? There has to be some challenge or the entire country would be in your back yard! :)

[Bob Stevens]

Quote from @Dean Harris:

Quote from @Bob Stevens:

Quote from @Dean Harris:

I dont see them much in that 1700 range. I do see the 1% rule in 80,000-150,000 range in Memphis

 Ok so 125k all in rent 1200? WOW I really am spoiled. I get 2% rule. All in 75k rent 1700, all in 90k, rent 2k, 

All the best to you 

 Single Fam? Section 8? There has to be some challenge or the entire country would be in your back yard! :)

 Actually no, and the entire word is and has been " in my backyard"  for many years. I know dozens of investors from Israel, Spain, Belgium and all over America, that have purchased 100s and 100s there We used to get 3% rule however prices have tripled and much much more over the last 10 years, 

[John Williams]

Start with an established team member in your desired out-of-state market. A great broker, property manager, lender, flipper, etc. can open many doors for you and allow you to leverage their networks. You don't have to reinvent the wheel - just align yourself with a great group of folks who are doing what you want to do in that market!

[Bob Stevens]

Quote from @Dean Harris:

Quote from @Bob Stevens:

Quote from @Dean Harris:

I dont see them much in that 1700 range. I do see the 1% rule in 80,000-150,000 range in Memphis

 Ok so 125k all in rent 1200? WOW I really am spoiled. I get 2% rule. All in 75k rent 1700, all in 90k, rent 2k, 

All the best to you 

 Single Fam? Section 8? There has to be some challenge or the entire country would be in your back yard! :)

 No Challege, I have a team that takes care of it all for me, of course I oversee and consult. I have been and am still doing, lets just say a lot of business in my market. Best part I'm on the beach in FL,,,,,,  

All the best to you 

[Bob Stevens]

Quote from @James Wachob:

Hello, 

Have you considered looking into Memphis, TN? It could be a fantastic market for what you're trying to achieve. Memphis offers a relatively low cost of entry compared to many other markets, which can help with cash flow right from the start. The city has a diverse and growing economy, with a solid rental market that's often appealing to investors. Additionally, the landlord-tenant laws there are generally more favorable compared to what you might be experiencing in Minneapolis.

Of course, investing out of state comes with its own set of challenges, like managing properties from afar and understanding local market nuances. However, with the right property management team and a bit of research, Memphis could offer the cash flow and profitability you’re looking for.

If you decide to explore this option, I’d be happy to share more insights or connect you with resources that could help you get started

 My partner did a lot of biz there about 7 8 years ago then left to join me. Have the numbers improved? Please provide an example of your last deal, all in and rent. If attractive I'm open 

Thanks 

[Marcus Auerbach]

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  

Dan, investing OOS is like drilling for oil off-shore vs on land: everything is harder, you need different tools and skills, and everything costs more. I know the landlord tenant law situation in Minneapolis is not great, but I don't think you have enough of an economic delta to make it worth while to go OOS. All you have to do is go out of town and as long as you can drive there and not have to fly things are a LOT easier!

I see that all the time with Chicago investors, who want to explore Milwaukee. Yes, it's not far and yes Milwaukee is a little better market to invest, but overall the cost and in-efficlencies of operating remote are not worth the effort.

[Min Zhang]

Hey Dan, if you're focusing on cash flow, check out Cleveland and Dayton. Cleveland offers 3-7% appreciation and 10-18% cash flow, with strong rental demand. It’s home to the Cleveland Clinic, one of the top hospitals in the country and Case Western. Dayton has similar appreciation but shines with 10-18% cash flow and steady rental demand. Don't hesitate to ask if you need anything!

[Tim Swierczek]

@Daniel Windingstad I think @Marcus Auerbach makes a very good point. I have owned up to 200 units in one market at a time and I've owned as little as 40 long-term units in one market, excluding our vacation rental.  The issue with OOS investing comes to scale. It's not worth the travel and time to travel to a market to check on a property when your upside is a few extra hundred per month. You need to have many units or very high monthly CF to justify OOS investing.  I agree that finding CF is next to impossible in MN, but if you work hard to find the right deal and you get creative on your execution it can be done. I've found 2 duplexes in the last year and I haven't even looked all that hard. I'm having a meet-up at one of the properties on October 1st. I can't post about it here, but PM me if you want to more info.

[Lettitia L.]

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 Dan, 

Best out of state markets in our experience and observations: sunbelt regions and parts of the mid-west. There are many factors to consider when expanding to new markets but our requirements are landlord-friendliness, insurance costs, lower price points, and institutional-investment presence. For example, Florida checks all the boxes except insurance costs, which is why we advise our clients to shy away from Florida as it significantly impacts cashflow.   

In a nutshell - we're strongly for out-of-state investing. 

Pros: diversification, stronger local economies in other metros/states, better price points and variety of products. 

Cons: really hard to self-manage (property and tenant-wise). You'll need a trusted team on the ground, you'll need communication and transparency. If nothing else - you need to make sure you're growing your rental income meaningfully which requires a pulse on market rates. If you're unfamiliar with the area or market, or if you don't have access to data, you're probably missing out on making more $$. On top of that, it's hard to manage a growing portfolio if it's across different markets - something as menial as receipts and documents for tax filing needs to be super organized.  

Feel free to send me a DM if you'd like to chat further! We specialize in out-of-state investing, all our investors are owning remotely through us :) Hope this helps.

[Ashish Acharya]

Investing out of state can boost cash flow in more affordable, landlord-friendly markets, especially if you're struggling with high costs in Minneapolis. Look at places like Texas, Florida, or parts of the Midwest for better returns.

The key is building a strong local team (property manager, agent, contractors), visiting the market if possible, and making sure the numbers work after management costs. It's a great way to diversify, but you'll need reliable people on the ground to manage things for you.

If you need detailed analyzers, reach out to us.

[Brendan Harrison]

Hey Dan,

I hear you on the challenges of profitability in certain markets, especially when tenant laws and taxes start cutting into cash flow. I’m a real estate investor and agent based in Oklahoma, and I’ve had success investing in markets like Tulsa and Oklahoma City. Here’s why Oklahoma could be a solid out-of-state market for you:

1. Cash Flow Focused: Oklahoma tends to have affordable property prices while still delivering strong rental demand. In my case, Section 8 rentals have worked well because of the guaranteed monthly income.

2. Landlord-Friendly:Tenant laws here are more favorable for landlords compared to more regulated markets like Minneapolis, which could be a game changer for you.

3. Stable Market:While we don’t see the same wild appreciation as some hotter markets, the steady demand for rental properties, especially multi-family, makes for reliable income and decent returns.

Tips for Out-of-State Investing:

- Build a Reliable Team:Property management is key if you’re not local. Having people on the ground you trust is a game changer.

- Research the Market: Understand the local economy and rental demand—Oklahoma has a strong workforce, particularly in healthcare, aerospace, and energy.

- Off-Market Deals: In competitive markets, off-market deals can get you better pricing. My team specializes in these and has found some great opportunities.

Hope this helps! Feel free to reach out if you have any questions about the Oklahoma market.

Best, 

Brendan 

[Lindsay Davis]

@Daniel Windingstad,

I believe @Taz Zettergren mentioned Alabama, and I wanted to chime in since I’m active in multiple markets across the state.

I’ll talk specifically about (property) taxes since this data can be easily compared. The statewide average property tax rate in Minnesota is about 1%. You can expect to pay about 0.4% of your home’s value per year in Alabama, or about half the rate in Minnesota.

Cash flow is also easier to achieve in Alabama, especially in more affordable markets like Birmingham or Montgomery. For example, we’re seeing $120,000 single-family homes rent for about $1,100 in B/B+ Birmingham suburbs, which falls just short of the 1% rule that’s often talked about on this forum.

As for your question about succeeding as an out-of-state investor, I wouldn’t say it’s too different from being a good in-state investor—at least from a dealflow and deal making perspective. From a “landlording” lens, however, I’d recommend recruiting a solid team of locals (e.g. attorneys, leasing agents, property managers, contractors, etc.) who can help you with closing, leasing, maintenance, repairs, and capex.

New construction and turnkey assets are also popular among long-distance investors, since you either won’t have to do much maintenance or capex at the outset (in the case of new construction) or can work with a single, full-service point of contact (in the case of a turnkey property).

[Ashish Acharya]

@Daniel Windingstad Investing out of state can boost cash flow in more affordable, landlord-friendly markets, especially if you're struggling with high costs in Minneapolis. Look at places like Texas, Florida, or parts of the Midwest for better returns.

The key is building a strong local team (property manager, agent, contractors), visiting the market if possible, and making sure the numbers work after management costs. It's a great way to diversify, but you'll need reliable people on the ground to manage things for you.

[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

 Cleveland has been the #1 overall market for about 10 years and is still in the top 2, or 3 . I am not sure where there is a better market. Where can you get all in SF 75k with 1500 1700 in rent. Duplex all in 90k, rents from 1800- 2k, ? If there is a better market I'm all ears. Best part all you need to do is connect with those that do it from OOS.

Good luck 

[Adam Bartomeo]

Only choose landlord friendly states for long term holds. Invest in states that are projected for long term population growth. Invest were there are jobs. That should narrow the search to a few states and a dozen or so cities.

[Alfath Ahmed]

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 recommend looking into the midwest. There is a ton of opportunity here. I own several rentals here in Columbus and work with many OOS investors from california and Seattle who like to invest here as well. Very landlord friendly state. 

I created some resources like an investor package, neighborhood graded map, and contractor rolodex that I can share with you. Very helpful for my out of state investors. 

[Eric Fernwood]

Hello @Daniel Windingstad,

Live where you like but invest where you can make money.

Out-of-state investing is often your best option if your goal is financial freedom through real estate, because the chances of living in a city that can support this goal are slim. Financial freedom goes far beyond simply replacing your current income. It requires an income that meets four specific requirements and their dependencies, as shown in the illustration below. (Click to enlarge.)

Unless the city where you live meets the requirements shown above, you'll need to invest out of state to achieve financial freedom.

If you would like a process for finding a city that does support financial freedom, let me know