Out of State

[Jordan Santiago]

I live in expensive New York City and cannot really afford to invest here at the moment. Looking at properties out of state is extremely tempting and looks good. Much less expensive. Any thoughts? Is it a good idea? Pros and cons? Thank you.

[David Faulkner]

Bad idea ... in my opinion, the logic behind it is flawed in the following ways:

1. Investors can't make money or will make less money in an expensive market. Network with some local investors ... I'm sure you will find a lot of them making a lot of money in real estate ... see what they are doing and if you can help.
2. Cash flow is the only valid way to make money in real estate. It is one way, but not the only way, and perhaps not even the best way. And just because it is not cash flow does not mean it is gambling or any more or less valid or profitable. 
3. Related to 2 above, it is the investor that makes great investments, more so than the market in which they operate. If you understand all the ways to make profit in real estate, then you can tailor your methods to your market and each and every property and profitably invest anytime, any place ... that should be your goal IMO.
4. Even if you don't buy into any of the above, in just about every market, within a couple hours drive there is a sub-market that is dramatically less expensive. I don't know NYC, but would be shocked if it were not the case there too. In LA where I invest, for example, I can drive 1 hr inland and prices for single family homes go from $700k to under $200k. And to just reinforce my points above, I've bought both kinds of houses in both places, and have made way more money on the $700k houses. 
5. You can't afford it. In my opinion, this is actually the most valid of your concerns, but still not 100% valid. If it is really true that you can't afford to own any property (including your primary residence) in the market you live, then I submit that maybe you can't afford to live there at all ... I'd either find a way to make or save more money or look to physically move to a less expensive place. I bet this is not the case, though ... I bet when you say it is too expensive, you mean you think it is too expensive to make money, in which case I'd refer you to the other points above.
6. You are not considering the effects of "home court advantage" and correspondingly the huge disadvantage you face by going out of state. Out of state, you will be 100% dependant on the kindness of strangers to make or break your investment. If things go wrong, and they always do, then you will either have to depend on these strangers to sort it out for you, or if they created the problem, fire them and hire somebody else to clean up the mess. In addition to being competent, they will need to be honest and have your best interests at heart ... this is far rarer than you can imagine. It is a needle in a haystack that is 1,000 miles away from you. What's more, if you've never invested in Real Estate, you've never even seen a needle, none the less a haystack, so how will you possibly have any hope of sorting the two out. You may get lucky, but if that is your business plan then you might as well buy a lottery ticket instead.

I've come by all these lessons the hard way and have nothing to sell you either way ... good luck to you whichever path you choose.