Navigating the vast landscape of American real estate can often feel overwhelming, particularly for investors looking beyond their local borders. With close to 20,000 cities in the United States, prospective buyers frequently experience analysis paralysis, struggling to choose where to deploy their capital. However, according to industry experts Dave Meyer and Henry Washington, the process of selecting an investment market is far simpler and more personal than many realize, relying on a structured funnel approach rather than an exhaustive search of every municipality.
During a recent discussion on the BiggerPockets podcast, Meyer, the chief investment officer at BiggerPockets, and investor Henry Washington broke down a comprehensive framework designed to help out-of-state investors whittle down a massive list of potential cities to a manageable top three. Rather than hunting for a mythical "best" market, the strategy encourages investors to align their personal goals, available capital, and operational preferences with the right geographical location.
Cutting Through the Noise with a Top-Tier Market List
For investors living in high-cost metropolitan areas like New York or California, purchasing a first rental property often necessitates looking out of state. This reality immediately introduces hundreds of prospective cities into the equation. To bypass initial analysis paralysis, investors are advised to begin with a curated list of top-performing cash-flow markets that also demonstrate positive economic fundamentals.
While locations like Cleveland and Detroit often boast some of the highest rent-to-payment ratios in the country, experts note that factoring in broader economic indicators such as job growth and population expansion helps refine the selection. A balanced baseline list of top markets typically features cities like Hartford, Philadelphia, Milwaukee, Louisville, Indianapolis, Columbus, Kansas City, Dallas, Atlanta, and Chicago.
Rather than spending excessive time on this initial broad phase—which can easily be streamlined using standardized data or analytical tools—investors should quickly transition to a more nuanced filtering process. This second phase combines quantitative metrics with qualitative factors, separating raw science from the art of real estate investing.
Applying Quick Filters: Distance, Strategy, and Accessibility
Once an initial list of ten to twenty cities is established, the next step involves applying practical filters to narrow the options down to a core group of five. High on the list of practical considerations are travel logistics and investment
strategy alignment.
For many out-of-state buyers, geographical convenience plays a major role in market selection. Travel preferences, such as the desire for direct flights and manageable transit times rather than exhausting multi-leg journeys, naturally eliminate certain regions from consideration. An investor based in the Pacific Northwest, for example, may find remote markets in the Southeast or deep Southwest logistically impractical for regular property oversight, regardless of their financial potential.
Furthermore, a market must align with an investor’s specific operational strategy. Whether an individual focuses on long-term buy-and-hold properties, fix-and-flips, or short-term rentals, the chosen city must support that specific business model. A market heavily saturated with new construction multi-family developments offering rental concessions, for instance, might present significant hurdles for an investor attempting to acquire class-B assets in the same area.
The Value of Competitive Advantage and Local Connections
As the list shrinks further, building a localized team and establishing a competitive advantage becomes paramount. Because out-of-state investors rely heavily on local operators to manage their assets, having existing connections or a strong grasp of the regional geography provides a distinct edge.
Familiarity with a city—whether through past residency, professional networks, or established relationships with investor-friendly real estate agents and contractors—can elevate a market to the top of an investor’s consideration set. Understanding regional micro-markets, neighborhood trajectories, and the local "path of progress" allows remote buyers to compete more effectively against local market participants.
Experts emphasize that out-of-state investors do not need to be the absolute top performers in a given city; rather, they need to excel at being disciplined operators who leverage strong local partnerships. Developing rapport with reliable agents and attending in-person networking events are critical steps in securing access to quality inventory.
Incorporating Climate, Housing Stock, and Cultural Fit
Beyond financial returns and logistics, lifestyle preferences and regional culture—often referred to simply as the "vibe check"—play a surprisingly vital role in long-term portfolio performance. Investors are encouraged to consider whether they genuinely enjoy spending time in their target market, noting that personal enthusiasm often translates into more proactive asset management.
Caring about the broader community, the quality of local neighborhoods, and the well-being of tenants fosters a sense of pride in ownership. Property owners who appreciate the atmosphere and culture of their investment market are more likely to stay on top of property maintenance and tenant relations, ultimately driving better operational efficiency and financial results.
Evaluating the physical housing stock is equally crucial. Investors must ensure that the age and condition of available properties match their risk tolerance and operational capacity. Purchasing aging housing stock in harsh climates can lead to unforeseen maintenance challenges, making a thorough assessment of local infrastructure and building characteristics essential during the research phase.
Finalizing the Decision Through In-Person Visits
The culmination of this systematic filtering process typically leaves an investor with two or three viable markets. At this critical juncture, experts stress the necessity of boots-on-the-ground validation.
Purchasing property remotely without ever visiting the market introduces unnecessary risk. Scheduling an exploratory trip to tour neighborhoods, inspect typical housing stock, and meet face-to-face with prospective agents, property managers, and local investors provides the clarity needed to make a final decision. Viewers of the process frequently find that stepping foot in the market instantly solidifies their preference and dispels lingering uncertainty.
Ultimately, selecting an investment market is an individualized journey that requires balancing rigorous data analysis with personal operational preferences. By treating travel and research as a fundamental part of the investment cost rather than an optional expense, out-of-state buyers can transition smoothly from broad market exploration to decisive, confident action.