Out-of-state investing is on your radar, now where should you invest?
This is probably the number one question I get asked. Where is the best place to buy? The answer is…it depends on your goals!
In this guide, I am going to outline four things that you must consider when making the leap into a new geographic investment territory. Plus, I am going to list the top 20 cities to buy affordable B-class rental properties.
No matter why you’re considering a new long-distance geographic market, looking to invest beyond the market(s) you’re familiar with must be done intelligently, objectively and strategically if you want to succeed.
For two years, I asked this question to other investors who all gave me their opinions.
Quite frankly, I couldn’t get a straight answer and so I’ve been where you are, which sucks. And let’s be honest, picking a market you’re unfamiliar with can be very confusing. It can also be a bit intimidating.
If you listen to my Bigger Pockets podcast, I talk about how I googled the top 10 cash-flow markets in the US and then drove around in the only one I had ever been to looking for a good submarket, Kansas City.
Today I own 50+ doors in Kansas City!
However, after several weeks of exhausting myself in the car I thought to myself, there must be a better way, right? RIGHT?!
The former scientist in me asked… ‘What about a large meta-analysis of census blocks and tracts? Certainly someone has overlaid all the factors that matter, such as growth, crime, rent and schools? Where can I find this data?’ Please someone take my money to solve this problem!
Not only did I end up empty-handed, I struggled mightily entering Kansas City that first year.
These frustrations and challenges forced me to develop my own detailed methodology, which I call the D.I.S.C.E.R.N.™ Method.
Here are the four steps I used to deduce for the best affordable, growing, out of state markets:
Now if you’ve read this far, it’s safe to assume that you are an aspiring long-distance real estate investor, so go down this list and look at your options.
From there, your next step is to drill down into the submarkets that are in these MSAs and start looking at good deals. Now, you might be asking yourself, how do I know what submarkets are best once I’ve picked my city?
Simple. Go to VestMap.com and run a free report. VestMap is the technology company that I built from my need to drill down to census blocks and tracts within submarkets, so that I could quickly make objective data-driven decisions. This tool has saved me so much time flying into new cities and driving around neighborhoods scouring for deals.
VestMap gives you location-specific information down to the census block group, or in other words, it’s very small. You can get detailed location information for an exact property location, including: crime ratings, schools and rents.
You can also see forecasted population growth, demographic group, and median household income for that exact location.
Methodology #1: Here is the list ranked by most housing units in zip codes that meet the criteria I laid out in the four steps above. Although some of these cities might be ‘expensive’ they still have affordable pockets with a lot of housing stock. Gotta love data!
Now maybe you’re saying to yourself, ‘But Lee, I only want to invest where there is massive population growth! My goal is to cash in on all sorts of benefits correlated with rising demand like market appreciation and rent appreciation.’
No problem! Here are the 20 cities (Methodology #2) where the forecasted population growth is 2X the national average. The major growth centers of the US are in Texas, Florida, Arizona, and North Carolina with a little bit of Tennessee and South Carolina thrown in. So that I am crystal clear, the below cities are ranked by the number of housing units in zip codes that have 2X the national average population growth.
What do you do once you pick the market? That is where long-distance RE investing comes in. This has already been written about extensively, so I recommend you pick up the book Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties by David Greene.
The goal of this article is to cut out the guesswork in finding growing affordable markets to buy rental properties in. Did you find this useful? Let us know!
Oh, and if you forgot already, no problem, here is your second reminder to let us do the heavy lifting for you! The first one’s on us. Go to VestMap.com and run a free report.