Invest local or out of state?

Question

Hey BP community, I'm a fairly new investor and have been eating up as much information as possible. Heres my situation. I'm looking for advise, tips, opinions, experiences anything helpful regarding investing in my local market vs out of state. I'm located in Salt Lake City and have had my first and only rental property here for almost 2yr. It wasn't a "home run deal" but it cash flows a little over $100 a month and has appreciated well in the short time I've owned it. I'm ready to purchase my 2nd property but as I've been listening to BP podcasts,reading books and the forums, I'm thinking I might want to invest else where. I run the numbers on properties outside of UT and find greater returns on a property that is less than the properties I'm looking at locally. I just don't know what the best way to go about investing somewhere I'm not totally familiar with or have reliable/trusted connections? I work full time but manage my one local property just fine without a management company. If I were to purchase my 2nd property local I would do the same and continue to self manage.  I know at the end of the day it comes down to me taking that leap on a property out of state if I choose to. If I were to choose to invest out of state, what are the critical things I need to be aware of? How would I make the proper trusted connections? Should I just stay local and wait to find a "home run deal"? Thoughts, opinions, personal experiences, anything helpful please share! I'm young and hungry to continue to invest in real estate, just wanting to make sure I make the right decisions. Thanks in advance for the help/insight!

Patricia Steiner · Answer

Investing locally is easier and rewarding; you can self-manage, use known/vetted resources, and be proactive in tenant selection. But there are benefits to investing out of market beyond the price point including diversification of your portfolio. If it's of interest to you, I recommend investing in a market you actually would enjoy visiting frequently; many of my non-local clients have family/relatives in the area or come here several times a year to vacation. It allows them to be better connected to the properties and maintain relationships that enable them to self-manage from a distance.

Congrats on your successful first investment. I would rather be consistently profitable with solid performers in my portfolio than shooting for that home run. There' are a lot of variables in the "dirt business" (like Covid and Eviction Moratoriums - who saw that mess coming a year ago?) that consistently winning is consistently the best ROI.

Best...

Congrats on your successful first investment.  I would rather be consistently profitable with solid performers in my portfolio than shooting for that home run.  There' are a lot of variables in the "dirt business" (like Covid and Eviction Moratoriums - who saw that mess coming a year ago?) that consistently winning is consistently the best ROI.

Best...

Elise Hazzard · Answer

@Patricia Steiner, that's sound advice for @Ryan Tall, or any investor... if you invest out of town, you should really enjoy/need to be there. Regardless of who's managing, an investor should "be connected" to their properties.

We just 1031'd out of a multifamily many states away.  The property manager failed to report on the declining micro-market changes where the property was located and so the sales price reflected that reality.  We now are reinvested in an appreciating market much closer to home where we have a trusted friend and handyman, and can visit more often.

Diligence and patience are needed when there are thousands of eyes on the property you too are looking for, which is why you must be VERY confident to pull the trigger immediately when you see something that fits your criteria in the area you know best.

Enjoy your every win... you're in much better shape than many !

Cheers !!

Andy Jenkins · Answer

You'll get a lower buy in, and better cash flow up in Ogden, though probably less appreciation.

Alex Huhn · Answer

Ryan, I am in the same situation as you are. I just bought my house in Salt Lake City last December and have since renovated and am now renting out my basement. I have been looking for my next rental as well in Salt Lake City and there are definitely deals available in the area. I would highly suggest you look in areas surrounding Salt Lake City such Draper, Midvale, even up to Ogden. I have made a deal with myself to start evaluating 3 deals per day with the Bigger Pockets calculators. I'm sure some good deals will come from the continued search.

Best of luck.

Brian G. · Answer

@Ryan Tall all things being equal, local is better imo. No travel costs, etc. It’s not cheap if/when you need to travel and pay for airfare, rent a vehicle, eat out, etc. However, you may find a market where the opportunity is so great and so aligned with your goals that it makes sense to invest outside your local market. I live in So-Cal, thus to make progress on our goals, we invest outside our local market. If I could find the same opportunities and return locally, for sure I would invest locally. Make sure if you invest outside your local market that you find *great returns* (not good but great) to compensate for the complexity, extra travel costs, etc.

Marlen Weber · Answer

Good luck on your second property here soon. Great work building on your portfolio, keep up the great work.

Stewart Beal · Answer

I would recommend keeping it local, certainly no more than an hour from your personal residence.  Self manage and focus on local deals you can manage well.  I manage 1,000 apartments within 4 miles of my house.

Ryan Tall · Answer

Thank you for all the replies! Great to hear others thoughts/advise.

Invest local or out of state?

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