Out of State Investing Pros vs Cons

[Grey Stone]

Who has done out of state investing? Have your experiences been good or bad, easy or hard? Do you feel it has been worth it? We have a good portfolio that we are happy with in the Los Angeles county exurbs. It has made my family good money and has been really easy to self manage. We're now wanting to diversify into a new area, but I am concerned about fixing something that is not broken. I have been looking into other areas like Colorado Springs, Scottsdale, Phoenix and Vegas. We're looking for places that are growing and can cash flow (even if modest). Opinions and experience is appreciated.

[James Carlson]

Originally posted by @Grey Stone:

Who has done out of state investing? Have your experiences been good or bad, easy or hard? Do you feel it has been worth it? We have a good portfolio that we are happy with in the Los Angeles county exurbs. It has made my family good money and has been really easy to self manage. We're now wanting to diversify into a new area, but I am concerned about fixing something that is not broken. I have been looking into other areas like Colorado Springs, Scottsdale, Phoenix and Vegas. We're looking for places that are growing and can cash flow (even if modest). Opinions and experience is appreciated.

 All of our rentals are in Denver and Colorado Springs where we work and live, so I don't have any great tips for out-of-state investing. But you mentioned Colorado Springs.

The OOS investors we work with like it for several reasons. It's growing fast. It will surpass Denver as the largest metro in the state by 2050 because weird is our about it and there's a lot of spillover from Denverites seeking lower prices. It's also got a lot of high paying defense and tech jobs. The formerly lazy downtown is getting a huge influx of development, from cooler restaurants to higher end apartments and condos abd a few big attractions. And its quality of life can't be beat. 

That said, it's tough to cash flow with traditional long term rentals. Home price growth has outpaced rent growth, so unless you're getting creative, you're mostly looking to cover costs and bank on long term appreciation of the market, which all makers indicate will continue if you hold for the long term. 

You could do a rent by the room, house hack style rental, and that will cash flow. You could also furnish a place and medium term rent to traveling nurses and remote workers. That gets a lot closer to cash flow. 

This is a similar dynamic as seen in Denver. The only way my clients have cash flowed there is by buying an Airbnb/STR in one of the few cities that allow them.

I don't mean to turn you off of Colorado Springs or Colorado in general. But it's good to know what you're looking at. 

Whatever you choose, good luck!