How Do You Choose the Right Out-of-State Market?

Question

Hi everyone,

I’m a beginner real estate investor based in California, exploring the idea of investing out of state — likely in single-family homes or duplexes.

I’m curious to hear from experienced out-of-state investors:

How did you decide on your market? What factors made you feel confident about the area?

What resources and tools do you use to analyze markets before committing? (e.g., job growth, population trends, landlord laws, rent-to-price ratios, crime rates, cash flow potential, etc.)

What states or cities do you recommend for a first-time out-of-state investor? Any areas you’d avoid?

I’d love to hear about your process, any lessons learned, and the specific tools, websites, or data sources you found invaluable — whether that’s BiggerPockets' calculators, Rentometer, Zillow, or others.

Thanks in advance for your insights!

Drew Sygit · Answer

@Ivette Raygoza

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class
greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class
and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

• Property Tenant Pool: closely linked to location, but not always.
• Property Location: closely linked to tenant pool, but not always.
• Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years. 
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Jay Hinrichs · Answer

well you got the usual Columbus agents responses kind of an inside joke on BP..

I have quite a bit of experience in this myself as a investor and lender of OOS since 2002 started in Detroit and have funded and owned in about 20 plus states throughout the mid west and rust belt.

The markets by and large are darn near interchangeable.

Property taxs

Insurance

are two things to check on and this is what makes Las Vegas really attractive lowest in the country for both basically.. Plus weather is important for long term maintenance

However regardless of market you choose I always suggest you determine the Median price point for an SFR in the MSA and buy at that or above for an OOS investor.. this will get you better neighborhood better tenant and usually better schools. And we know those items are the driver for values to hold and rise..

U don't want to invest in a market that has a median of 250k then buy a 120k property logic will dictate the price point sets for RISK and desirability..  Locals who self manage and live there can take more risk but when your 1500 miles away you should de risk your purchase and go for solid property.

Plus the 250k and above will appreciate the 120k is investor dominated sales and values will only track rental income which moves very slowly.. homeowners always pay more for a home to live in than an investor will pay.

Stephanie Walker · Answer

I would say that it depends on your budget, ideal strategy, and goals.

I think Charlotte and the surrounding markets are a strong, dependable buy. But of course I'd say that 😂 Most of my investor/owner clients have consistently made second and third purchases with me for me to manage every 2-3 years.

However, if I were to choose a market other than the one I'm in, I'd likely choose Austin or Ohio depending on my budget at the time.

Kerlous Tadres · Answer

Hey Ivette!

Great to see you exploring out-of-state investing! Here’s how experienced investors choose their markets:

Pick the Right Market:

Affordability & Rent-to-Price Ratio – Look for strong cash flow markets where rent covers expenses.Job Growth & Population Trends – Stable or growing economies attract long-term tenants.Landlord-Friendly Laws – Avoid areas with strict rent control or difficult eviction laws.Crime & Neighborhood Quality – Use crime maps and local insights to avoid high-risk areas.

Resources for Market Analysis:

Rentometer & Zillow – To compare rental comps.City-Data & Census.gov – For demographic and job market trends. Local Agents & Property Managers – On-the-ground insights are invaluable.

Tips for First-Time out-of-state investors:

Start in landlord-friendly, stable rental markets.Build a strong local team (agent, property manager, lender, contractor).Visit the market if possible before buying.Run conservative numbers to account for maintenance, vacancies, and management fees.

Rick Albert · Answer

This is a tough question because this is where Realtors will come out saying that their market is best.

The reality is you can make it work in almost any market. From Los Angeles to Birmingham, the numbers work if you employ the right strategy.

I invest in four different states and have different perspectives on each one. A few things I consider/learned:

1. Population over 100K. I want to make sure there is a big enough tenant pool.

2. Major job hubs. Things like hospitals, universities, manufacturing, whatever. Just want to make sure that tenants can get a job.

3. Are you looking for good cash flow or good appreciation? Not too often to have both right off the bat.

4. A new thing I look into is weather conditions and insurability. My business partner and I bought in Saint Louis and when it had massive snow the tenants asked if we would split the cost of snow removal. Not a big fan because who's to say that it won't snow the next day? These eat away at your profits.

5. What is your current living situation? Are you house hacking? Do you rent? This can play a role as well because sometimes investing in your own backyard might make more sense. With an FHA loan, you can put $35K down and acquire a $1M asset. Home appreciates 3% ($30,000) and that's 85.7% cash on cash return on your equity. You wouldn't be able to do that anywhere else as a straight investment property without partners or creative financing.

6. Keep it SIMPLE. Too many times I'm seeing beginner investors try to make it extremely complicated because that's what they see active investors doing. What is the result? I never see them buy. You can get more creative later on with experience.

Hope this helps!

Andres Montbrun · Answer

In my experience, choosing the right out-of-state market really comes down to solid due diligence. I start by aligning macro-level data—job growth, population trends, and rent-to-price ratios—with local insights from trusted contacts. Tools like Rentometer, census data, and local market reports are invaluable for verifying the numbers. It’s also critical to check out landlord-friendly laws and economic diversity; these factors can make or break your cash flow potential.

Jimmy Lieu · Answer

Hi Ivette, if you're looking to invest out of state, I would recommend taking a look at Columbus Ohio! A lot of my out of state real estate clients really like this market because the macroeconomics look so good for this market - population is growing, job growth is growing, and so many companies moving and developing here. Look at Intel headquarters, Google, FB, Microsoft, LG, Amazon, Nationwide, Honda, etc. Additionally, the price point is still cheap enough to find the 1% rule and positive cash flow and it's super landlord friendly (so you will never have to go through a 12 month eviction or anything close to that!). Lastly, the price point is still very cheap here in the sense that you can still find investment deals that hit the 1% rule for 120-180k!

To answer the other part of your question, the biggest thing when it comes to whether someone successfully out of state is whether they have systems, processes, and a SOLID real estate team - agent, lender, PM, contractors, etc.

Your investor agent should be the focal part of your team - they should be able to send you personalized deals (on-market, off-market, pocket listings, etc), they should walk properties and provide investor commentary for why it's a good/bad deal, estimate renovations and develop a scope of work, and should be able to build the rest of your real estate team!

Happy to connect and answer any questions you have! :)

Happy to connect and answer any questions you have!

Remington Lyman · Answer

I picked Columbus, Ohio, because I moved here from Connecticut to compete on The Ohio State University Rifle program.

I recommend Ohio because it is cheap. I would avoid any D or lower locations for your first deal

Bradley Buxton · Answer

@Ivette Raygoza

The "right" market is the one that will fit your goals, budget, time, and lifestyle. There are many great markets which you can be successful. Maybe start with markets that will not work. For example, if traveling to the Ohio for 3 days to check on properties is not feasible then pick a market in western America. If your goal is to have a short-term rental to offset W2 income a more tourist-driven market might be better than a high population growth area. Some people don't buy in places they won't live. It is good to look at the data such as appreciation, population, and diverse industries in an economy. It might help to eliminate markets where you won't invest. Then narrow your search to areas in those cities.

Alan Asriants · Answer

this is a very tricky question to answer, because there are so many choices out there. I can tell you: You should invest in Philly becasue "blah blah blah"

And inevitably someone will say: Don't invest in philly!

This is the cash for every market out there.

The answer to this questions is simple. The best market to invest in, is the one you know best.

I live in Philly and grew up here. I'm still learning about little pockets here and there and other zoning challenges, etc.

if I were you I would start in your neighborhood. If yours is too expensive, perhaps you have family members or close friends in more affordable areas. Start there and get to know those areas as well as possible, and then invest.

Also don't fall into the trap of investing into an area because its cheap.

How Do You Choose the Right Out-of-State Market?

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