First-Time Rental Property Investor

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First-Time Rental Property Investor

Erika JimenezPro Member
Los angeles Ca · Member since 2026 · 2 posts · 8 votes

Hi everyone!

I'm looking to purchase my first rental property and would love some advice from experienced investors.

I'm based in California but open to investing out of state. My maximum budget is $150K, although I'd prefer to spend less if I can find a property with good cash flow.

My main goal is to build long-term wealth through rental properties while generating positive monthly cash flow. Ideally, I'd like to net $600–$800 per month after expenses, but I'm also trying to understand what's realistic for my budget.

I've been researching markets like Montgomery, Alabama, but I'm not committed to any particular location.

I'd love to hear from other investors:

  1. What markets would you recommend for a first-time investor with my budget?

  2. Is my cash-flow goal realistic, especially if purchasing with cash?

  3. Would you recommend buying one property outright or financing to preserve capital?

  4. What should I look for in an investor-friendly Realtor and property manager?

I'm looking for a property that doesn't require major renovations, since I'll likely be managing it from out of state.

I'd really appreciate any advice or personal experiences. Thank you!

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Carl Millsap
Investor · Midwest · Member since 2019 · 350 posts · 229 votes
4d

@Erika Jimenez

What markets would you recommend for a first-time investor with my budget?

C: Where can you get to easily to check on the property? I think new investors miss a small but important fact: you're running a business. Even if you hire a property manager, you have to manage the person who is running your business. With that mindset I recommend you buy somewhere you can check on the business or develop the systems to check on the business independent of the property manager. So maybe it's some place where you have family / friends who can verify / check things for you.

Is my cash-flow goal realistic, especially if purchasing with cash?
C: If purchasing with cash or financing yes, but there are a lot of factors.

My question is how long would it take you to get that $150k back and what's that return rate? Factor property management fees, insurance, maintenance etc. and it's probably like a 4-6% return. Sure this doesn't factor in appreciation or tax implications but my point is you have to figure out what kind of return you want. The $500-$600 sounds good but this is an investment so look at the return on your $150k.

Would you recommend buying one property outright or financing to preserve capital?
C: This depends on your debt management ability. I would take $100-$125k to use as downpayment for as many properties as I could finance or a multifamily property 4,6, or 8 plex. I'd put $25-50k in a maintenance / rainy day account. Trust me when the hot water heater, HVAC, or roof needs replacing you don't want to scramble to find that money.

What should I look for in an investor-friendly Realtor and property manager?
C: I would look for a realtor who is an investor themselves. I have agents call me about properties, but they haven't done the math to see if it makes sense. So after a few questions about the math (rent / NOI) I can generally tell if it's worth looking at. I can't speak to the PM, because I self manage. I had one PM 20 years ago, it was enough to make me self manage. I do know some investors who have great experiences with/ PMs, again you have to manage the person managing your business.

Hope this helps.

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  • Carl Millsap
    Investor · Midwest · Member since 2019 · 350 posts · 229 votes
    4d

    @Erika Jimenez

    What markets would you recommend for a first-time investor with my budget?

    C: Where can you get to easily to check on the property? I think new investors miss a small but important fact: you're running a business. Even if you hire a property manager, you have to manage the person who is running your business. With that mindset I recommend you buy somewhere you can check on the business or develop the systems to check on the business independent of the property manager. So maybe it's some place where you have family / friends who can verify / check things for you.

    Is my cash-flow goal realistic, especially if purchasing with cash?
    C: If purchasing with cash or financing yes, but there are a lot of factors.

    My question is how long would it take you to get that $150k back and what's that return rate? Factor property management fees, insurance, maintenance etc. and it's probably like a 4-6% return. Sure this doesn't factor in appreciation or tax implications but my point is you have to figure out what kind of return you want. The $500-$600 sounds good but this is an investment so look at the return on your $150k.

    Would you recommend buying one property outright or financing to preserve capital?
    C: This depends on your debt management ability. I would take $100-$125k to use as downpayment for as many properties as I could finance or a multifamily property 4,6, or 8 plex. I'd put $25-50k in a maintenance / rainy day account. Trust me when the hot water heater, HVAC, or roof needs replacing you don't want to scramble to find that money.

    What should I look for in an investor-friendly Realtor and property manager?
    C: I would look for a realtor who is an investor themselves. I have agents call me about properties, but they haven't done the math to see if it makes sense. So after a few questions about the math (rent / NOI) I can generally tell if it's worth looking at. I can't speak to the PM, because I self manage. I had one PM 20 years ago, it was enough to make me self manage. I do know some investors who have great experiences with/ PMs, again you have to manage the person managing your business.

    Hope this helps.

    3Reply
  • Erika JimenezPro Member
    OP
    Los angeles Ca · Member since 2026 · 2 posts · 8 votes
    4d

    Thank you, Carl! I really appreciate you taking the time to explain all of this. You made some great points, especially about looking at the return on my investment and keeping reserves for unexpected expenses.

    I'm definitely leaning toward financing rather than using all my cash.

    Since I'm in California and looking at investing out of state, my biggest challenge right now is choosing the right market and building a reliable team.

    With your experience investing in the Midwest, are there any specific cities or markets you would recommend researching for a first rental property under $150K?

    Thanks again for your advice!

    0Reply
    • Carl Millsap
      Investor · Midwest · Member since 2019 · 350 posts · 229 votes
      3d

      @Erika Jimenez I'm in Kentucky. It's a good place to invest, you can find properties where the math makes sense.

      Another thing to consider is the local laws....research if the area has landlord / tenant (acts) laws.

      Example Louisville KY has a landlord tenant law, but other areas in the State don't. That doesn't make Louisville a bad place to invest but it can make it a little more challenging if you need to evict someone. Also if code enforcement gets involved it makes adverse actions a little more challenging. I have friends / family who invest in Syracuse and that's a challenge from the outside looking in.


      Some of my investor friends buy in Cleveland, Indy and St. Louis. I don't know those markets but hopefully it gives you additional places to look.

      0Reply
  • Joe Piccirello
    Lender · Peoria, AZ · Member since 2026 · 28 posts · 8 votes
    4d

    I love that you're thinking about cash flow and long-term wealth building before jumping into your first investment property! A few things I'd encourage you to consider. Your goal of $600 to $800 per month in cash flow is definitely something worth exploring, but I'd make sure you're factoring in property taxes, insurance, maintenance, vacancies, and property management fees. Those expenses can add up quickly, especially when you're investing out of state. One thing I'd really encourage you to look at is the difference between purchasing with cash versus financing. Paying cash can help maximize your monthly cash flow, but financing allows you to keep more of your money available for reserves or even another investment down the road. There's really no one-size-fits-all answer. It depends on your long-term goals. I'd also spend some time researching property management companies in whatever market you're considering. Having a reliable team on the ground is going to be incredibly important when you're managing a rental from California. I'm a mortgage broker, and I work with investment property financing, including DSCR loans, which can allow investors to qualify primarily based on the rental income a property generates rather than their personal income. I'd be happy to help you compare a few scenarios so you can see what purchasing with cash versus financing might look like. Sometimes seeing the actual numbers side by side can really help you decide which direction makes the most sense. Either way, I think you're asking all the right questions, and I'd be happy to be a resource as you get started!

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  • Divin KanyamaBusiness Member
    Accountant · Seattle, WA · Member since 2025 · 470 posts · 194 votes
    3d

    @Erika Jimenez That is a solid starting budget, but the market should come after the numbers rather than before them. A $600–$800 monthly net may be possible on a $150,000 cash purchase, but it becomes much harder after allowing for property management, vacancy, repairs, CapEx, taxes, insurance, leasing costs, and utilities paid by the owner. Instead of relying on projected cash flow, build a full-year operating model and stress-test the rent and expenses. Montgomery may produce workable deals, but results can vary significantly by neighborhood and property condition, so local due diligence matters more than a citywide rent-to-price ratio.

    For a first purchase, buying with cash can simplify the deal and create a larger safety margin, while financing preserves capital for reserves and future acquisitions. The better choice depends on whether the financed property still produces acceptable cash flow at realistic interest, insurance, and maintenance costs. An investor-friendly Realtor should provide rental comps, neighborhood-level context, inspection coordination, and honest feedback on properties that should be avoided. A strong property manager should be able to document vacancy, collections, maintenance response times, leasing standards, fee structure, and experience on the exact blocks being considered. Since this will be managed from a distance, favor a structurally sound property over the highest projected return, obtain independent inspections and repair estimates, and keep a healthy reserve after closing. One well-underwritten property with a reliable local team is usually a better first step than stretching for the maximum possible cash flow.

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 513 votes
    3d

    Investing in the Midwest and South can make it more realistic to find properties that cash flow if comparing to most parts of California. Cash flow is realistic depending on the deal. Financing makes it easier for real estate investors to scale and reach their real estate investing goals including cash flow. I would recommend visiting an area before investing in it as there are investors who invest who don't do that first sometimes and then they are disappointed with what they bought after when they didn't visit the area or see the property first. As far as real estate agents and property managers, I would do research and talk with different people before making any decisions.

    For financing, there are different options such as conventional loans or DSCR loans. Conventional loans will be based on your personal income and debt to income (DTI) ratios while DSCR loans are based on the actual or projected rents for the property.

    More on DSCR loans: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. 

    Here's a bit more in detail about how rates are calculated for DSCR loans especially for 1-4 unit programs:

    1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.


    2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

    3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

    4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs. 

    I've included an example below to help illustrate this.

    So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

    See example below:

    DSCR < 1

    Principal + Interest = $1,700

    Taxes = $350, Insurance = $100, Association Dues = $50

    Total PITIA = $2200

    Rent = $2000

    DSCR = Rent/PITIA = 2000/2200 = 0.91

    Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

    DSCR >1

    Principal + Interest = $1,500

    Taxes = $250, Insurance = $100, Association Dues = $25

    Total PITIA = $1875 Rent = $2300

    DSCR = Rent/PITIA = 2300/1875 = 1.23

    If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

    DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals. Happy to connect to discuss further.

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  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    3d

    Welcome, Erika, and congrats on starting with a clear budget and cash flow goal. On your numbers question, $600 to $800 a month net from a single house is a stretch in most markets once taxes, insurance, vacancy, maintenance and management come out. In my experience a more typical result is closer to $100 to $300 per door per month, so hitting your target usually means two or three doors or a small multifamily rather than one property. That is worth knowing before you pick a market, since it may change whether you put $150K into one house or spread it as down payments across a few.

    Where I'm based, Columbus, Ohio, we're still finding single families in the $120K to $180K range, though cash flow depends heavily on the neighborhood and condition. Happy to connect and compare notes as you narrow it down.

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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    3d

    Does anyone answer posts without ChatGPT/Claude anymore?

    1Reply
  • Aaron Zucker
    Realtor · New York, NY · Member since 2019 · 39 posts · 11 votes
    3d

    Hi Erika — direct answer on the numbers, because that is where first purchases usually go wrong.

    $600-$800 a month NET on a $150K purchase is not realistic in most markets right now once you count everything. Say you buy all cash for $150K and rent is $1,300. After taxes, insurance, 8-10% management, 5% vacancy, and money set aside for repairs and CapEx, you are usually closer to $400-$550 in a normal month — and one roof, HVAC, or long vacancy wipes out several months. People who quote $700+ are usually skipping vacancy and CapEx.

    That is why I would finance the first one instead of using all your cash, even though the monthly number looks smaller on paper. Keep real reserves. A paid-off house with no cash left for a $9K sewer line is riskier than a financed house with $40K still in the bank.

    On market: do not start with a map, start with the team. Pick one market you can get to in a day if you have to, interview 2-3 property managers BEFORE you offer, and ask them which streets they would not manage and what the same house actually rented for in the last 90 days — not the listing rent. For the agent, ask how many rental purchases they closed for out-of-state buyers in the last year and whether they will walk a property and video it before you go hard on earnest money.

    For a first out-of-state buy, light cosmetic work is fine. Major rehab from 2,000 miles away is where budgets die.

    1Reply
  • Nyisha Walton
    Lender · Houston, TX · Member since 2026 · 30 posts · 7 votes
    3d

    Hi Erika, your budget and cash flow goal are workable in several Midwest and South markets if you finance instead of putting all $150k into one purchase. A DSCR loan qualifies on the rents rather than your California W-2, which often fits first rentals bought from out of state. We fund rental projects in 30+ states, Alabama included, and can help you compare cash versus financed numbers before you pick a market.

    0Reply
  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 675 votes
    3d

    Everyone's covered the numbers pretty well, so I'll add one thing that's easy to skip on the first one: set up how you'll track it before you close.

    Open a separate checking account just for the rental and run everything through it, rent in and every expense out. Out of state with a PM, the monthly owner statement becomes your main record, so make sure you get one that shows gross rent, the management fee, and each repair, not just the net they send you. That's how you'll actually know if you're netting $600 or $350.

    Keep your closing statement somewhere safe too. Your CPA uses it to figure depreciation and which closing costs get added to your basis, and it's surprising how often people can't find it a year later.

    And so it's not a surprise, the cash you net each month and your taxable income won't be the same number. Depreciation usually pushes taxable income down, and if you finance, the principal part of the payment comes out of your cash but isn't an expense. Neither is good or bad, it just helps the first tax return make sense.

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  • Alejandro Lopez
    Real Estate Agent · Houston, TX · Member since 2026 · 20 posts · 5 votes
    3d

    The first thing to calibrate is that $600–$800/month net target. If you're planning to finance with 20–25% down (~$35k out of pocket), netting $700/door on a sub-$150k property is a 24% Cash-on-Cash return—which simply does not exist on turnkey inventory today once you account for true 8–10% property management, vacancy, and realistic CapEx reserves. If you buy all-cash for $150k, netting $600–$700/mo is mathematically possible (roughly a 5–6% unlevered yield), but you're locking up 100% of your dry powder in a single asset to earn a return barely outpacing risk-free paper, leaving zero liquidity for unexpected repairs from 2,000 miles away.
    In markets like Montgomery or lower-tier Midwest pockets where turnkey entry prices sit under $120k, pro formas look great on paper, but the friction almost always shows up in economic vacancy, collection loss, and tenant turnover that listing agents leave off the spreadsheet. If long-term wealth is the real goal, you're usually far better off using conservative financing to buy into a more resilient, landlord-friendly growth market—accepting a modest $150–$250/door true cash flow buffer—and letting amortization, tax advantages, and steady appreciation do the heavy lifting while keeping $25k+ liquid in reserve for when something breaks.

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  • Chad Davis
    Lender · Richmond VA · Member since 2012 · 313 posts · 33 votes
    3d

    @Erika Jimenez Happy to connect and run some scenarios by you from our buyers.

    0Reply
  • Luis Ochoa
    Lender · Miami, FL · Member since 2026 · 14 posts · 5 votes
    3d

    @Erika Jimenez , one thing I'd consider is using financing to stretch your purchasing power rather than buying a property outright.

    If you have $150K available in cash, you could potentially target properties in the $400K–$500K range. Many investment property lenders offer up to 80% loan-to-value, meaning you'd need roughly 20% down, plus closing costs and reserves.

    That opens the door to duplexes and other small multifamily properties where multiple rental units can help generate cash flow.

    Your $600–$800 monthly cash flow goal is possible, but I'd focus on the numbers after mortgage payments, taxes, insurance, maintenance, vacancies, and management fees.

    Since you're investing out of state, I'd prioritize a stable rental market, a property in good condition, and an experienced local property manager.

    If $150K is your total purchase budget rather than available cash, I'd approach the strategy differently.

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3d

    @Alex Olson

    I do!

    @Erika Jimenez

    this question gets asked a lot. no, you can't make that much cash flow with $150K. in fact, during the first few years, you won't make ANY cash flow. prices and rates are too high, and cheap midwest properties come with acute, brutal deferred maintenance. these folks thought they would cash flow:


    Turnkey Nightmare: Property Manager Ignored My Warning About a Missing A/C…

    Am I the only one that have realized real estate is an awful investment?

    Nightmare with my property manager - advice needed!

    Feedback Needed: $8.8k Turnover Quote for 2BR Duplex (Half)
    Out-of-State Landlord Nightmare: 4 Months No Rent, Cleveland Escrow Battle
    Failed BRR in Memphis TN

    A Cautionary Tale About a Property Manager in Cinncinatti

    What seems to get overlooked is that buying a rental and putting it into service anywhere is expensive, as you'll have thousands and thousands of dollars in costs and expenses - closing costs on the purchase, rent-ready costs, lease-up costs to get rented out, repairs, turnover, etc. These costs get ignored quite a bit when people tout their "returns." Factor these in and your return in year 1 is: zero or negative. Year 2: zero or negative. Year 3: zero or negative. You get it.


    Unfortunately, in general, returns on non-value add LTRs are very, very low right now, and so I am encouraging new investors to think very carefully about where to allocate their cash. You probably worked really hard to save up what you have and so throwing it into a random LTR in a market you have never been to is not an obvious move - in fact, it's high risk. (See above links).

    -Hope this helps

    -Not written with AI (I did cut and paste from a few of my own previous non-AI responses)

    2Reply
    • Marcus Auerbach
      Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
      2d

      Sorry, but totally unrealistic!

      Nicholas has the only level headed response one here, everyone else is just - IDK - daydreaming??

      Even in Milwaukee 150k puts you in the middle of the hood. And just to paint a picture what that means: some property managers and contractors don't want to go there, because they don't like their tools stolen. You may not be comfortable going there at night. And if you park your car on the street, it may or may not be there in the morning.

      The house is almost 100 years old and needs a new everything: the kitchen is original, the plumbing is galvanized pipes with water pressure measured in trickles per minute. You have one bathroom with a tiny sink (and it's not going to be good looking), lets not talk about electrical, HVAC and water heater. If you are lucky the roof has 5 years left. And then you have little pesky things nobody thinks about: the chimney needs to be rebuilt. And the driveway is so cracked up that you can't shovel the driveway. And you have a dying tree in the backyard that is so large you need a crane to remove it.

      Rent on a 150k home will be $1,400 and your PITI is $1,189. Your tenant may or may not have a job.

      You will actually receive rent most of the time, usually late There are different people living at the house, none of them are in the lease. Someone dumps two old mattresses and some garbage in the front yard and the city sends you a fine and gives you 48 hours to remove. But you don't get the letter until a week later. The tenant gets a pitbull and you find out only because it bit the neighbor kid and now the police calls you and is asking questions.

      They are 3 months behind on rent and you have to evict them. Your first eviction gets dismissed, because you did not deliver the 5 Day Notice correctly and the tenant got a free attorney fighting you. 2 months later the eviction is finally granted, you have not received rent in 5 months. You have to pay the attorney. And the property is trashed.

      Hope that paints the picture.

      I have been investing in SF homes in Milwaukee for 15 years. I feel very lucky to be able to invest here, it's one of the best markets in the US. Currently one of the last of 6 in the US that are still a sellers market and appreciating. We have a chronic housing shortage and rents are increasing. But you want to be in a solid neighborhood, buy a quality asset and be able to attract a good tenant. And that means you have to double your budget.

      3Reply
  • John Leland
    Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 128 posts · 39 votes
    3d
    Quote from @Erika Jimenez:

    Hi everyone!

    I'm looking to purchase my first rental property and would love some advice from experienced investors.

    I'm based in California but open to investing out of state. My maximum budget is $150K, although I'd prefer to spend less if I can find a property with good cash flow.

    My main goal is to build long-term wealth through rental properties while generating positive monthly cash flow. Ideally, I'd like to net $600–$800 per month after expenses, but I'm also trying to understand what's realistic for my budget.

    I've been researching markets like Montgomery, Alabama, but I'm not committed to any particular location.

    I'd love to hear from other investors:

    1. What markets would you recommend for a first-time investor with my budget?

    2. Is my cash-flow goal realistic, especially if purchasing with cash?

    3. Would you recommend buying one property outright or financing to preserve capital?

    4. What should I look for in an investor-friendly Realtor and property manager?

    I'm looking for a property that doesn't require major renovations, since I'll likely be managing it from out of state.

    I'd really appreciate any advice or personal experiences. Thank you!

    One of the things I suggest to my investors is that they visit the area before they invest and get a handle on what they are getting into. Another is to talk to 2 or 3 other remote investors in the area to understand what challenges they've had.

    When you make a mistake on buying a remote property, it gets very expensive to change course.

    0Reply
  • Adam Summerer
    Lender · Franklin, TN · Member since 2026 · 92 posts · 19 votes
    3d

    On cash vs financing: at today's rates the mortgage payment eats most of the cash flow, so $600-800 net is way more realistic on a cash purchase than a financed one. Financing mostly buys you reserves or a second door, investment loans usually want 20-25% down. A middle path some people use is buying cash, then doing a cash-out refi once it's rented, so you get most of your money back without overpaying for the first deal.

    0Reply
  • Arman AhmedPro Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 957 votes
    3d
    Quote from @Erika Jimenez:

    Hi everyone!

    I'm looking to purchase my first rental property and would love some advice from experienced investors.

    I'm based in California but open to investing out of state. My maximum budget is $150K, although I'd prefer to spend less if I can find a property with good cash flow.

    My main goal is to build long-term wealth through rental properties while generating positive monthly cash flow. Ideally, I'd like to net $600–$800 per month after expenses, but I'm also trying to understand what's realistic for my budget.

    I've been researching markets like Montgomery, Alabama, but I'm not committed to any particular location.

    I'd love to hear from other investors:

    1. What markets would you recommend for a first-time investor with my budget?

    2. Is my cash-flow goal realistic, especially if purchasing with cash?

    3. Would you recommend buying one property outright or financing to preserve capital?

    4. What should I look for in an investor-friendly Realtor and property manager?

    I'm looking for a property that doesn't require major renovations, since I'll likely be managing it from out of state.

    I'd really appreciate any advice or personal experiences. Thank you!

    With a $150K budget, I’d look at Midwest markets before settling on one. You can find lower entry prices, but netting $600 to $800 monthly depends on taxes, insurance, repairs, vacancy, and management. Since you’re investing from California, I’d prioritize a solid neighborhood and reliable local property manager over chasing the highest rent on paper. Happy to connect and share some opportunities!

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    • David C.
      Real Estate Consultant · Member since 2026 · 7 posts · 1 vote
      3d

      one thing nobody’s mentioned yet is the total monthly cost difference between markets with the same price point.

      a $120k house in Montgomery might have property tax around $500/yr and insurance around $900/yr, but a $120k house in a place like Illinois or Texas could run $3,000+ in tax alone. that’s $200/mo difference before you even look at rent.

      you should run the full PITI plus insurance plus PM fee for any market you're comparing, not just purchase price vs rent.

      Montgomery’s rent-to-price ratio could look good on paper but the tenant pool and property condition for that price rang may not be as attractive. So neighborhood matters more than the city average. Remember location, location, location.

      0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    3d

    @Erika Jimenez

    If there was an extra $150K in the budget, I would concentrate on areas where the purchase price and rent make provision for all of the above. In certain instances, it is realistic to earn up to $600-$800 per month after expenses, but this is certainly something I would have to calculate first; out-of-state investors, in particular, should think about hiring a competent property manager at such a location.

    Good luck!

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  • Gregory AcsPro Member
    Lender · MD · Member since 2025 · 221 posts · 85 votes
    3d

    For your first rental, I'd focus on finding a market with consistent rental demand and reliable property management before chasing higher cash flow.

    Your $600–$800 monthly goal might be challenging depending on taxes, insurance, maintenance, and vacancy costs. I'd also compare buying with cash versus financing, since preserving some capital could give you more flexibility for unexpected expenses or future purchases.

    Have you decided how much of your $150K budget you'd feel comfortable putting toward the actual purchase?

    0Reply
  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    3d

    @Erika Jimenez

    You should choose a really good market with a ton of tech growth because of job growth. Midwest is a very safe bet. Find a good realtor that can connect you with the right lenders, contractors, property managers and most importantly deal flow. 

    Buy some turnkey deals first then go onto do value-add/brrrrr deals. That is how you build equity and net worth, but make sure they are cashflow positive and you buy them at 75% ARV.

    Your money will go a long way. Flip a couple for reserves and re-evaluate your portfolio every 6-7 years and dump the ones you don't like.

    [email protected]614-802-5698
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  • Katrina PiercePro Member
    Investor · Chicago, Cook County · Member since 2026 · 6 posts · 2 votes
    2d

    "Hi, I'm Katrina. I'm looking to team up with a person or small group to buy and fix up properties. I have excellent credit and cash to contribute. I'm open to any market where the numbers work. If you're investing or putting a group together, I'd love to connect and compare goals. Please message me."

    0Reply
  • Mark UpdegraffBusiness Member
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 706 votes
    2d

    @Erika Jimenez Is $150K your total available cash or your maximum property price? Those lead to different searches.

    I’m a broker and rental owner in Rochester, and I’d compare one real property in each finalist market using the same expense assumptions. Keep closing costs and a repair reserve outside the purchase budget.

    I wouldn’t promise $600–$800 net from a listing’s rent estimate. Actual collections and the condition of the building will tell you much more.

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  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    2d

    Hi Erika! It’s great that you already have a budget and a specific cash flow target in mind! Since you’re looking out of state, I’d focus on finding a market where the numbers make sense and comparing the potential cash flow, expenses, and repair costs. Having a reliable local Realtor and property manager can also make a big difference when managing a rental from afar. Good luck with your first investment!

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    2d

    https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-painA common issue, so Copy & Paste info below:

    You’re ALWAYS better off investing locally, where it’s easier to:

    ·      Learn the market

    ·         Network to find deals

    ·         Network to find contractors

    ·         Be more hands-on

    ·         Driveby property to keep tabs on it

    ·         Network to find a decent Property Management Company (PMC)

    Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.

    If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully building a knowledgeable & trustworthy local team.

    The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!

    They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.

    Then they’re shocked when their performance expectations aren't met😞

    If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.

    You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:

    ·         Many of them don't know/care what Class the properties are, so they're incompetent.

    ·         Others know exactly what they are doing, so should be labeled as crooks!
    EITHER WAY YOU LOSE!

    Why is Property Class so important for investors to understand and apply in their investing strategies?

    Because the Property Class dictates the Class of the tenant pool that the property will attract.

    The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

    Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

    The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood/Market”.

    Why is that important?

    Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

    Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

    What do you think will happen if you rehab a Class D rental to Class A standards?

    So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

    We use the following to rank Property Classes, in order of importance:

    • Property Tenant Pool: closely linked to location, but not always.

    • Property Location: closely linked to tenant pool, but not always.

    • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood/Market.”

    Key metrics for each Property Class:

    Class A Properties:
    Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
    Tenant Default: 0-5% probability of eviction or early lease termination.
    Section 8: Class A rents are too high and won’t be approved.
    Vacancies: 5-10%, depending on market conditions.
    Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

    Class B Properties:
    Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
    Tenant Default    : 5-10% probability of eviction or early lease termination.
    Vacancies    : 10-15%, depending on market conditions.
    Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
    Section 8: Class B rents are usually too high for the Section 8 program.

    Class C Properties:
    Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
    Tenant Default: 10-20% probability of eviction or early lease termination.
    Section 8: Class C rents usually meet program requirements, proper screening still recommended.
    Vacancies: 10-20%, depending on market conditions and tenant screening.
    Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

    Class D Properties:
    Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
    Tenant Default: 20-30% probability of eviction or early lease termination.
    Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
    Vacancies: 20%+, depending on market conditions and tenant screening.
    Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

    Where did we get our FICO credit score information from?

    Check out this chart:

    FICO Score

    Pct of Population

    Default Probability

    800 or more

    13.00%

    1.00%

    750-799

    27.00%

    1.00%

    700-749

    18.00%

    4.40%

    650-699

    15.00%

    8.90%

    600-649

    12.00%

    15.80%

    550-599

    8.00%

    22.50%

    500-549

    5.00%

    28.40%

    Less than 499

    2.00%

    41.00%

    Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

    For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.

    Horror Stories from those that did NOT Understand What they were Buying:

    https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
    https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
    https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
    https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years
    [email protected]248-209-6824
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2d

    There are a lot of great comments here from other people. The one piece of advice I give to any investor getting started in an out-of-market area is to go visit that market and spend one or two days driving around and understanding the area. To me, this is critical for any investor.

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