Investing Outside Your Home Market? Do This First.
Several years ago a coaching student burst into my office with what looked like the deal of the decade. He had tied up a forty unit property in Eden, North Carolina for thirteen thousand dollars a door. The seller’s rent roll boasted average rents of six hundred fifty dollars, and the pro forma flashed an eight cap. On the surface that sounded like an easy win, yet something felt off.
We drove to Eden and found that barely forty percent of the apartments were occupied.
Vacant units had broken windows and kicked in doors. A quick chat with the local hardware store clerk confirmed our worst suspicion: the town’s paper mill, long the largest employer, had just closed. Three bedroom houses nearby were renting for only three hundred ninety five dollars, and many were still sitting empty.
Could we have repositioned that community and forced appreciation? Possibly.
But our mission as multifamily investors is to buy future income streams, not today’s mirage. Without credible evidence that cash flow would rise or at least hold steady, the deal no longer made sense. We walked away and never regretted the decision. That experience forged the rule I now teach every investor who dares to buy beyond city limits: rely on disciplined data analysis, not wishful thinking.
Operating in your own backyard offers priceless informal intelligence. You drive past new construction on the way to work, overhear parents talking about school quality at the grocery store, and know whether downtown traffic is steadily increasing or tailing off. Cross a state line and those daily signals disappear. You are now blind unless you build a replacement system grounded in hard numbers and supported by competent boots on the ground.
Distance does not automatically equal danger. In fact, geographic diversification can reduce portfolio risk and open doors to stronger yields. The key is to turn guessing into measuring. Numbers keep emotion out of the decision. A repeatable framework keeps you from chasing shiny objects in unfamiliar zip codes.
Think of every potential acquisition as two puzzles that must interlock.
Map clear value add levers. Can you install premium vinyl plank floors, pave the parking lot, or introduce washer dryer rentals?
Measure present rents against the true market ceiling. Call competing properties and mystery shop them to verify real leasing velocity.
Project renovation costs and timelines conservatively. Add at least a ten percent contingency for remote projects.
Stress test exit strategies. Could you refinance in three years if interest rates rise two full points? Could you sell to a local operator at market cap rates if agency debt terms tighten?
Evaluate durable economic drivers. A college town with multiple hospitals is more resilient than a single plant city.
Compare current and trailing five year population growth. Consistent net in migration signals healthy demand.
Study median household income in relation to median asking rent. The thirty percent rent to income line is still the gold standard.
Scan the new construction pipeline. A flood of class A units can drag class C occupancy lower even when employment rises.
Only when both puzzles show upside should you advance to earnest money.
You do not need to be an economist to gather solid intel. Start with free public sites and layer in subscription platforms as your business scales.
If you want everything on a single dashboard, subscription tools such as RealPage Market Analytics or Yardi Matrix provide rent growth forecasts, supply risk scores, and capital market comps. The fee is well justified once you regularly underwrite out of town deals.
Numbers whisper stories. Your job is to listen closely. Focus on these eight metrics each time you enter a new market:
Total population today and ten years ago
Steady gains suggest employers are expanding and local leadership welcomes growth.
Net migration versus natural birth growth
High net migration often predicts rent pressure because new residents usually rent before they buy.
Job creation rate
Look for employment growth that outpaces national and state averages by at least one percent.
Diversity of employers
No single company should represent more than ten percent of metro jobs. A balanced mix of healthcare, education, government, technology, and manufacturing is ideal.
Median household income trajectory
Five year compound annual growth above three percent signals healthy wage momentum.
Rent to income ratio
Target submarkets where the average resident spends no more than thirty cents of each dollar on housing.
New supply pipeline
Check permits, units under construction, and planned communities. Compare projected deliveries to historic absorption.
Crime and school rating trends
Public safety and education quality directly impact tenant retention and renewal premiums.
Grab local median household income from the Census website. Suppose it is forty eight thousand dollars. Divide by twelve to get four thousand dollars per month. Thirty percent of that number equals twelve hundred dollars. That is the ceiling average households can afford without becoming rent burdened. If your pro forma assumes average effective rent of fourteen hundred dollars, you are betting tenants will accept a thirty five percent burden. That may work in coastal gateway markets with limited land and strong wage earners, but it often spells trouble in secondary cities where home ownership remains affordable. Align your business plan with what the math says residents can comfortably pay.
Even perfect data will not plunge clogged drains or mediate noise complaints at two in the morning. Your on site talent matters just as much as market metrics.
Property Manager: Demand a track record with assets that match your vintage and tenant profile. Verify online reviews and secret shop current clients.
Commercial Broker: Choose an agent who owns rental property personally and who tours comps weekly. That insight is priceless during lease up and disposition.
Lender or Mortgage Broker: Select professionals experienced with out of state borrowers. Strong banking relationships speed approval when timing is tight.
Contractors and Inspectors: Confirm licenses, insurance, and local reputation. Remote owners need contractors who document progress with time stamped photos.
Visit the market at least twice before closing. Tour competing communities, drive rush hour routes to major employers, and dine where residents gather after work. Sensory impressions often validate or challenge your spreadsheet assumptions.
Below is the exact sequence my team uses whenever we evaluate a distance deal. Copy it into your project management tool and adjust to fit your workflow.
Click here to download full due diligence checklist.
Pull a demographic report for the area using Costar or BestPlaces.
Compare rent growth and employment growth over one, three, and five year windows.
Order a rent survey that lists asking rents, concessions, occupancy, and lease-up speed for the ten closest comps.
Obtain crime heat maps and verify trends with local police community outreach.
Request five year business license data from city hall to track openings and closures.
Walk the property, speak with tenants, and photograph every mechanical system.
Review trailing twelve month financials and check for seasonal income swings.
Conduct a lease audit to confirm real rents and delinquency.
Re inspect vacant units to gauge turn cost accurately.
Model conservative rent growth of no more than half the five year historic average.
By the end of this checklist you will either possess unshakable conviction or a clear list of deal breakers.
If you want to learn more about Due Diligence, check out our comprehensive free guide.
Closing day marks the start of a deeper relationship with your chosen city. Schedule quarterly reviews of the same data points that justified your acquisition. Ask tough questions.
Has job growth slowed below national averages?
Are concessions rising faster than seasonal norms?
Did a major employer announce layoffs or relocation?
Is new construction absorbing as predicted?
When reality diverges from your original thesis, pivot early. You might delay unit interiors and focus on exterior curb appeal if absorption weakens, or accelerate premium upgrades when wage growth beats forecasts. Active asset management preserves cash flow and positions you to exit on your own terms.
Buying apartments outside your familiar stomping ground is neither reckless nor heroic. It is a professional expansion that demands the mindset of a private equity analyst and the field skills of a property manager. Begin with verifiable data, layer in thoughtful stress tests, and surround yourself with a team that treats your building like their own. If you do those things faithfully, distance becomes just another line item in the underwriting, not a deal killer.
When you encounter a puzzling data set or want feedback on a new market, post your question inside our Multifamily Mastery Facebook Community. Thousands of investors share lessons learned every week, and you will sharpen your instincts faster than working alone.
RodKhleif.com hosts dozens of free articles, videos, and downloadable checklists that expand on every concept mentioned here.
We may never predict the future with perfect clarity, yet by reading the story hidden in reliable numbers and verifying it through local partners, we can stack the odds heavily in our favor and create income that endures.
This article was created with the assistance of AI and reviewed by Rod Khleif to ensure accuracy and relevance.
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