Out of State Investing

[Asiel Zermeno]

Hello, 

My name is Asiel Zermeno and I am from Los Angeles California. I am currently looking to invest out of state. I am using private money to finance my deals. I was having trouble deciding on which state to invest in. If anyone would like to send me suggestions and tips I would appreciate it. 

[James Hamling]

@Asiel Zermeno rather than pandering to chanting "my market my market, were best" how about I instead help you walk through the logic for it all. 

Being out-state your going to be best served with a A/B class tenant and A/B class property as the death to profits are being maintenanced to death, vacancy, tenant nightmares and the such, A/B is risk mitigation for ease of operations. Now we have eliminate C, D and below markets. 

A/B tenant/property combination has the con of low COC yields. To keep this a profitable venture we will make up for low COC yield via equitable gains and to best get that is in strong expansion markets, sizable growth expansion markets with well founded metrics to rely upon. Now we can zero in on expansion markets.

And last but not least, area economics. A strong area economy is not the priority actually, as that can rise and fall, we want good economic diversity for the same reason that stock diversity is king, insulation against market fluctuations. As a big plus we have area economic "power-houses", that is say an area with a concentration of industry centric leaders with massive area investment to a level that relocation would be all but impossible. Example, Quad Cities (Davenport), and the manufacturing base located there, john Deere for 1 will be there until the second coming. 

Now the question comes where can a person find all this in 1, with some added pro's on top of it. For myself the answer is obvious, Twin Cities Minnesota. We are "the" medical industry center of not only the U.S. but for planet Earth, very literally. We have a long list of impressive organizations headquartered here from 3M too Honeywell, Medtronic, Best Buy and on and on and on. We have a Federal Reserve and the financial industries that follow. We are home to an inland sea port, international airport and international land border making for a massive shipping and logistics hub. A massive skilled blue collar segment which as some may know is "the" cream of the crop investor base. Major Universities pioneering in agriculture, genetics, bio-research, engineering and on. Boeing, got it. Major tourism, land of 10,000 lakes baby. Honestly, name the metric Minnesota is nailing it which is probably a reason that in the list of top 10 places to live in the US without fail MN has at least 1 city if not 4 in that top 10 list year after year after year without fail, despite winters. 

So last but not least, growth. Look up the top 10 developers/builders in the US, all of them are here and have been, if not the top 20 in nation, and for good cause, growth is off the charts and has been for decades. Fun fact MN had some of the only micro markets that never stopped through 08/09 collapse, that's strength. 

A out-state investor can get into class A properties, even newer built, with class A tenants, vacancy measured in days very literally. Receive modest COC yield, nothing to flip over but generally the $10k+ annual equitable gains help to pump up the excitement factor. And growth rates are not slowing at all, during covid lockdown. Eviction moratorium, yeah it suck yet we are bouncing 97%-98% rents collected, during moratorium (granted this may be a result of good planning, strategy and just being good at it). MN has inclining incomes, populations, top shelf quality of life.

So yeah, that's my experience of markets today and opinion. I have to say i also like DFW but hate the epic competition to get a good deal. I also fear contraction as the rate feels it may be a bit over-heated. 

For those who think you can't make $ on new-construction, I am doing it every month for my clients. As i said, modest COC yield year one but we are writing leases with automatic annual growth on rents of 4%, which if you do the math it comes out to a rather sizable yield growth rate as it's compounding, yr3 get's rather nice on that COC and 4 almost feels criminal when looking at the equitable gains at that point as well, often being enough to pay for another property itself.