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:
What markets would you recommend for a first-time investor with my budget?
Is my cash-flow goal realistic, especially if purchasing with cash?
Would you recommend buying one property outright or financing to preserve capital?
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!
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.
I am not as pessimistic as @Nicholas L. on cash flow but I am as pessimistic at that price point. I believe up to 6% cash flow may be obtainable at higher rent points. On $150k mls rent ready purchase it is not happening and I offer anyone that believes otherwise to post their underwriting.
The issue at that price point is many things will be at a higher percentage. This includes maintenance, cap ex, vacancy (I challenge anyone to find a market with a $150k rent ready mls listing with area vacancy rate of 5% or less) and even PM. In addition most of these markets have high eviction and delinquency rates.
Now for leverage versus no leverage. I believe up to 6% cash flow can be achieved with no leverage. This return and even double this return (and for me 3 times this return) does not justify owning residential RE. This implies leverage is required to obtain the necessary return to justify the work and risk of residential RE. Leverage is RE’s super power, use it.
I concentrate on total return and do not care if it cash flows. Most investors are not in a position to supplement heavy negative cash flow. Most newer RE investors require cash flow. I understand that. Here is the reality of cash flow, initial cash flow has a poor correlation to long term cash flow. Historically markets with good initial cash flow have produced poor long term cash flow. Case Schiller used to publish stats for return on residential rentals for this century. None of the top cash flow cities for this century had good initial cash flow.
I will use my San Diego market (that has always had poor initial cash flow) to show how this is possible
City of San Diego median rents
- 2025: $2995/month. 2 Beds $3,095, 3 Beds $4200.
- 2020: $2344/month
- 2010: $1323/month
- 2000: $747/month
Note over $600/month rent increase between 2020 and 2025, so an average of over $100/month increase YOY (($2995 - $2344)/5= $130/month average YOY increase). Average YOY rent increase since 2010 ($2995 - $1323/15 = $111 month YOY increase. Average YOY rent increase since 2000 ($2995 - $747/25 $90/month YOY increase. Has Cleveland, Detroit or Memphis ever had a year with over a $130/month average increase?
Which market do you think has the better cash flow for the long term hold? I think the numbers answer that question.
So what does have a good relationship to long term cash flow? I have found nothing that correlates better to long term cash flow than appreciation. Here is San Diego’s appreciation
- 2026: $950k
- 2020: $676k
- 2010: $277k
- 2000: $220k
If you purchased in and had average appreciation
- 2020 (69 months ago), you wound have $3,970/month appreciation.
- 2010 (183 months ago, you wound have $3,680/month appreciation.
- 2000 (303 months ago, you wound have $2,400/month appreciation.
These numbers show why I emphasize total return.
So what market should you start with:
diverse economy
Population growing
Building constrained (I like Austin but this is why Austin RE prices are falling, it is also why San Diego’s appreciation is so good)
Somewhere you can get to easily or have trusted friends and family that are willing to help on occasion. Note direct flights count as sometimes flying is less expensive than driving one person.
Note if you have a market with a strong and trusted PM, I would consider that market even if it was not super strong in the 4 points.
Note I did not include landlord friendly but I do understand those that do. They can be frustrating, but a market can do great even though it is not landlord friendly. I will use San Diego again as an example. San Diego has near lowest delinquency and eviction rates in the country.
Simple Google search on delinquency rates.
- Cleveland: 43.1% (this is crazy high),
- Memphis: 20% (high),
- Indianapolis: 14.2 (moderately high),
- San Diego: 7.6% (just over half of Indianapolis and less than 1/5 of Cleveland’s delinquency rate.
Per hemline the national rent delinquency rate is 11%. This depicts that LL friendly does not have a strong correlation with delinquency rates, eviction rates, or quality of tenants.
@Erika Jimenez I'd weigh the team more than the city. Out of state, the turnover itself isn't the headache. Managing the contractors and making sure the work gets done right is. Ask property managers exactly how they handle turns and maintenance, and ask the agent what they personally own. Run your numbers both with cash and with financing before you decide.
@Erika Jimenez I'd sanity-check the $600-800 a month net before picking a market. On a $150K property, once taxes, insurance, vacancy, repairs, capex, and management come out, that's a high bar, and a deal that shows it on paper often looks different after the first turnover. With this many replies naming cities, I'd focus less on which one and more on whether you can build a team there: an agent who invests, a contractor you've tested, and a property manager. Hope some of that helps you work through the numbers.
Quick reality check on the goal. $700/mo net = $8,400/yr. On $150k all-cash that's a 5.6% cash-on-cash, which is basically your cap rate since there's no debt. Doable in some of those markets on paper, but here's how a $150k house usually shakes out:
Rent maybe $1,300-1,400. Take off ~10% PM, 8% vacancy, 8-10% repairs/capex, then taxes and insurance (insurance has gotten ugly in the Southeast, get real quotes). You often end up at $550-700/mo all cash. Finance it at today's rates and that same house is close to break-even.
So: realistic if all cash and you underwrite conservatively, not realistic financed. I'd pick NOI as the number you screen with (rent minus all expenses, no mortgage), then divide by price. Under ~7% for an out-of-state, turnkey-ish house, I'd keep looking. And verify rent with signed leases or the PM's actual rent roll, not the listing.
@Erika Jimenez on the agent and manager piece, I'd ask both of them for specifics instead of taking 'investor-friendly' at face value. From the agent: how many investor deals they closed recently, and whether they'll show you sold comps and real rent comps, not just the listing. From the manager: average days to fill a vacancy, who their contractors are, what repair amount needs your approval, and how often you'll hear from them. On the $600-800 net, run it with vacancy and capex in as real numbers. One month empty can wipe out most of a year's cash flow. Best of luck getting started.
