When you live in a hot market, it's almost impossible to find a cash-flowing property. Some people are fine with breaking even (or taking a loss) on their investment, in hopes of appreciation. But, I find it very important to cash flow from Day 1. Nothing in real estate is guaranteed, and you definitely can't assume appreciation.
After you've decided to Jump In and invest in rental real estate (long-distance or not), the first thing you need to choose is a market. One thing you need to remember, from Chris Clothier of Memphis Invest, is "cheap houses don't make a great market." The condition of the market is exponentially more important than the actual property.
So, where are you going to invest your hard-earned money?
This is not a question to be taken lightly as it can make or break your investment journey. You HAVE TO develop a relationship with the market you decide to enter and have strong connections on the ground. In my case, I traveled more than 2,300 miles away from my home market. Here's key criteria when selecting a market!
1. Steady Population Growth: Google your city name and take a look at population stats. You want to be in a city that's growing, as that proves demand. Population growth = more jobs, more renters, and it's a place where people WANT to live.
2. Diverse Economy: If your city is tied down to a single job industry, or one major company, what happens if that industry/company go obsolete? Jobs are eliminated...and say "bye bye" to renters. Choose a city with plenty of employers, industries, and occupations.
3. Entertainment Factor: This goes back to demand and desirability of your city. People want to live in a fun city, because where you live, largely dictates your life. Look for professional sports teams, major universities, night life, a music scene, etc. In my case, Indianapolis has an NFL team (Colts), an NBA team (Pacers), major universities (Butler, IUPUI), and up-and-coming hipster neighborhoods where hot restaurants and bars are popping up.
4. Rent to Acquisition Price Ratio: VERY VERY VERY important because this is where cash-flow is created. A general rule of thumb: find a market where properties bring in AT LEAST 1% of their purchase price in rent. For example: a rental property for $100,000 should bring in at least $1,000/month in rent.
5. Relatively Low Cost of Living: a market where the average cost of housing is no more than three times the average income of someone living there, shows that housing is still affordable. This is where you can buy a house, renovate it, rent it, and make a return on investment.
These are the basics I look at when choosing a market. But, you must DO your due diligence. DO your research. MEET and TALK with people who have invested in your target market and with the individuals who are going to be your "boots on the ground."
Most importantly - VISIT your market. Make connections, drive through town, see each neighborhood, soak up as much as you can. If you're prepared to plop down your money outside of your home market, you better know where it's going.