Buying Rental Property OUT OF STATE (How To Choose A Real Estate Market)

what’s up guys it’s James Allen the
out-of-state investor and today I’m gonna share with you in this video about
buying rental property out of state and how to choose a market now when it comes
to buying rental property out of state picking the right market to invest in
can be the most important step in getting started now with that said when
I’m deciding on a market I like to break it down into three different levels of
research to narrow down my farm area or specific area that I’m targeting level 3
research would be specific neighborhoods or certain streets that I’m targeting
level 2 research would be geared towards information on a city or a county and
level 1 research would be information regarding a metropolitan area now when I
pick a market I like to start with level 1 research so that’s what I’m gonna
focus on today teaching you how to pick a metro area to invest in I’m gonna
share with you seven different things that I look at when I’m analyzing a
market to invest in but before I do that go ahead and click that like button to
show support and push the subscribe button below to get notified whenever I
post a new video on the channel alright let’s get into it
number one population growth always look for metro areas that are seeing
population growth to check on this number I look at statistics from the
Census Bureau which you can find if you go to now population size has a massive effect on the market and can affect
supply and demand which is what ultimately drives the prices of real
estate and market rents you want to pick areas that are showing strong growth and
are on the upward swing this is a must if you’re looking to mitigate risk on
your investment and looking to maximize opportunity now I only focus on metros
that are in the top 150 as far as population size is concerned and make
sure that whatever you do stay away from cities with declining populations number
2 job growth job growth is another huge factor that can turn a market into a
real winner jobs are great because they can often lead to population growth as
well now to look at the most recent job growth in a market I like to look at the
US Bureau of Labor statistics they always have up-to-date
stats within a month or two and they’re a go-to resource for many of the news
outlets as well now aside from that I like to look at the latest information
regarding new jobs coming to town recent business moves or upcoming corporation
relocations to find this information I’ll search on Google the city along
with the words jobs or economy and look specifically in the news tab for any
articles I’ll also look into the local business journal newspapers online and
I’ll speak with local real estate investors as well number three diverse
economy when I’m choosing a market to invest in it’s important that you don’t
choose one market that relies too heavily on one job sector when I think
of a local economy failing I think of cities like Detroit and how they relied
so heavily on the automotive industry many major auto plants ended up leaving
and caused major population decline over the past decades in addition to major
job loss these are exactly the kinds of situations that can mess up your real
estate investments and are good lessons learned to focus on markets that have a
strong and diverse economy to get an idea of a markets diversity search for
their biggest employers and check what kind of sector these companies are apart
of while doing that research ask yourself are the companies in this area
reputable and are their products and constant growing demand number four rent
to price ratio rent to price ratios are what a property rents for versus what
the purchase price is for instance if I was gonna purchase a property for let’s
say $100,000 and it rents for $1000 a month I would be looking at a 1% rent to
price ratio when I’m looking at properties in a market if I can’t find
any properties that meet or come close to at least the 1% rule then I won’t
invest in that market and the reason for this is that I’m looking for a certain
cash flow when I purchase my rental properties and I know that for me I
won’t get my desired return on investment if the properties are below
the 1% rule when doing research on this in a metro area I look for places where
you can buy a 3-bed 2-bath single-family house for under $150,000 that’s the absolute
maximum for me because I found that when you start going higher than that the
rents are not going to keep climbing at the same rate and you’re gonna start
losing on your return number five landlord friendly states picking a
landlord friendly state is important because well you’re gonna be a landlord
and you’re gonna want to have the law on your side when push comes to shove every
state has their own set of laws regarding how things operate between
landlords and tenants and when researching how landlord friendly a state
or area is the most important thing to understand are eviction laws rent
control laws and what the tenants rights are some areas may even require you to
get licensed or certified just to rent out the property which can be a bit of a
pain and normally it’ll come with fees attached to it as well to show you how
important it is to pick a landlord friendly state I’ll give you this
example you’re just getting started in real estate and you just purchased your
first property you put in a tenant and unfortunately they just don’t feel like
paying you rent so what are you gonna do well your next move would be to evict them
now if I was to evict them in a landlord friendly state I can get them out as
fast as a few weeks whereas if I’m in a tenant friendly state I could
potentially be spending three to six months trying to get my tenants evicted
imagine how much that would cost you in lost rent this is just one example of
why it’s important to pick a market located in a landlord friendly state
number six new development activity one other thing I like to see in a market is
new development plans for the area new buildings, shopping centers, highways being
built, downtown’s being redeveloped, school or
airport expansions, things of that nature this can be a sign of a market on the
upswing and my favorite way to see what new developments are in the plans is to
go to the city’s official website or the city’s Chamber of Commerce website and
go to the economic development section where they should have some sort of
economic development plan some other ways to find this information is by
searching on Google speaking with city officials reading your local business
journal newspapers online or talking with local real estate investors number 7
supply and demand supply and demand has the biggest effect on the price of real
estate more than anything else in your market of choice when it comes to rental
properties ideally supply should be low and demand
should be high supply is easy to check on checking in with team members such as
real estate brokers or property managers they should be able to give you a good
picture of the rental supply and statistics to back it up demand can be a
little trickier to figure out if you see a bunch of move-in specials for the rental
properties in your market this could be a sign of low demand whereas if there
are no incentives at all and you’re seeing listings removed within a week or
two this could be a sign of high demand in an area it’s also important to
consider future supply when you’re looking at a market you don’t want to
choose a market that’s gonna have an overabundance of supply in a few years
time this will make it harder to rent create longer vacancy periods and can
bring down rent prices some cities even have urban growth boundaries that limit
the amount of new construction within that boundary and this can often
increase prices and market rents in an area since there will be a lack of
supply while maintaining a strong demand in conclusion these are seven steps I
use anytime I’m considering investing out-of-state in a new market I hope you
guys found these to be helpful as always guys thank you for watching if you
enjoyed watching this video give it a thumbs up if you haven’t already done so
already and if you haven’t subscribed yet go ahead and click that subscribe
button below so that we can keep you updated every time we post a new video
and if you have any thoughts about the video don’t be shy give me your feedback
and comment down below I love hearing what you guys have to say and lastly if
you want to stay up to date with things going on with me check out my instagram
page at the out-of-state investor thanks again for watching and I’ll see you guys
on the next one

10 Replies to “Buying Rental Property OUT OF STATE (How To Choose A Real Estate Market)

  1. James!! Super awesome video!! Links are huge thank you for pointing those out vs just speaking about criteria! 😀 what kind of job do you have to obtain capital to invest elsewhere?

  2. I'm definitely interested in real estate it's something I really want to do. I don't have money now though lol I'm only 20 years old and I live in South Africa 😅

  3. Great video. What has been your biggest challenge when investing out of state? I have just started investing in my home town (Perth, Australia) and looking to invest in New Zealand next year as it is much more investor friendly. I am struggling to get over the fact that I won't be able to see my property etc.

Leave a Reply

Your email address will not be published. Required fields are marked *