New to Real Estate Investing – $50k Budget
Architect · NJ · Member since 2026 · 7 posts · 19 votes
New to Real Estate Investing – $50k Budget
Most Popular Reply
Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votesI am on team house hack or live-in flip in NJ over out of state investing in a cheap market. Those cheap houses are usually old and in areas that do not appreciate above the rate of inflation. They are typically cheap because they are not in locations that people with options want to live.
Out of state is harder than strangers on the internet make it seem. Also, $50k does not go as far as you think it will. You are probably looking at a realistic budget of $150-170k after taking into account 20% down, closing costs, make ready expenses, and cash reserves.
Cash flow with 20% down using long term rentals as a strategy does not exist if you are honest about your expenses. Anyone that tells you that it does probably has something to sell. Closing costs, repairs and maintenance to get it rent ready, vacancy, repairs and maintenance after renting, turnover costs (easily over $1000 per turnover) eat up your cash; you start in the hole and take several years to get it back assuming that there are no major expenses like a new roof or furnace.
With that said, buy the property you want to own the most 10 years from now. Leverage + rent and price appreciation is what gives real estate better returns than alternative investment options.
I've been investing in real estate for a while across a few different rental strategies. I have absolutely nothing to sell and would happy to help if you think that I can be a resource. Feel free to send me a direct message.
35 Replies
- 7moTravis TimmonsPro MemberRental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
I am on team house hack or live-in flip in NJ over out of state investing in a cheap market. Those cheap houses are usually old and in areas that do not appreciate above the rate of inflation. They are typically cheap because they are not in locations that people with options want to live.
Out of state is harder than strangers on the internet make it seem. Also, $50k does not go as far as you think it will. You are probably looking at a realistic budget of $150-170k after taking into account 20% down, closing costs, make ready expenses, and cash reserves.Cash flow with 20% down using long term rentals as a strategy does not exist if you are honest about your expenses. Anyone that tells you that it does probably has something to sell. Closing costs, repairs and maintenance to get it rent ready, vacancy, repairs and maintenance after renting, turnover costs (easily over $1000 per turnover) eat up your cash; you start in the hole and take several years to get it back assuming that there are no major expenses like a new roof or furnace.
With that said, buy the property you want to own the most 10 years from now. Leverage + rent and price appreciation is what gives real estate better returns than alternative investment options.
I've been investing in real estate for a while across a few different rental strategies. I have absolutely nothing to sell and would happy to help if you think that I can be a resource. Feel free to send me a direct message.
- Member since 2026 · 32 posts · 32 votes7mo
Welcome to BP, Janel! $50K is actually a solid starting point — more than enough to get into your first deal if you're strategic about it.
You're right that the NJ market is tough for cash flow, especially close to NYC. With $50K you're probably not buying in Secaucus or anywhere in Bergen/Hudson County unless you're house hacking with an FHA loan (3.5% down). That's honestly worth considering — a 2-4 unit in Newark or Jersey City where you live in one unit and rent the others can work really well for a first deal because you get owner-occupant financing terms on what's essentially an investment property.
If you want to go the pure investment route, $50K as a down payment on a $200K property (25% down) gets you into some solid Midwest markets where the cash flow math actually works — Indianapolis, Cleveland, Cincinnati, parts of Kansas City. The rent-to-price ratios are way more favorable than anything in the NJ metro area. The tradeoff is you're managing remotely, which adds complexity for a first deal.
My honest advice — don't rush to deploy that $50K. Spend the next 60-90 days running numbers on actual properties. Pick a market, set up alerts, and underwrite 20-30 deals before you make an offer on one. You'll learn more from analyzing real deals than from any book, and by the time you pull the trigger you'll have strong conviction about your numbers. What type of property are you leaning toward — single family, small multi, house hack?
- 7moAndres MartinPro MemberReal Estate Agent · Indianapolis, IN · Member since 2021 · 52 posts · 36 votes
Quote from @Alex Rastorgouev:
Welcome to BP, Janel! $50K is actually a solid starting point — more than enough to get into your first deal if you're strategic about it.
You're right that the NJ market is tough for cash flow, especially close to NYC. With $50K you're probably not buying in Secaucus or anywhere in Bergen/Hudson County unless you're house hacking with an FHA loan (3.5% down). That's honestly worth considering — a 2-4 unit in Newark or Jersey City where you live in one unit and rent the others can work really well for a first deal because you get owner-occupant financing terms on what's essentially an investment property.
If you want to go the pure investment route, $50K as a down payment on a $200K property (25% down) gets you into some solid Midwest markets where the cash flow math actually works — Indianapolis, Cleveland, Cincinnati, parts of Kansas City. The rent-to-price ratios are way more favorable than anything in the NJ metro area. The tradeoff is you're managing remotely, which adds complexity for a first deal.
My honest advice — don't rush to deploy that $50K. Spend the next 60-90 days running numbers on actual properties. Pick a market, set up alerts, and underwrite 20-30 deals before you make an offer on one. You'll learn more from analyzing real deals than from any book, and by the time you pull the trigger you'll have strong conviction about your numbers. What type of property are you leaning toward — single family, small multi, house hack?
Alex gave some really solid advice here. I especially agree with the point about being careful with remote investing for your first deal.
Midwest markets like Indianapolis, Cleveland, or Cincinnati absolutely have better rent-to-price ratios than the NJ/NYC area, which is why many investors look here. But managing a property remotely adds a whole extra layer of complexity — property managers, contractors, market knowledge, tenant quality, and local regulations. That’s a lot to learn all at once if it’s your very first investment.
I say this as someone who has helped multiple investors purchase properties in Indianapolis across different strategies — long-term rentals, mid-term rentals, short-term rentals, and both single-family and small multifamily. Remote investing can absolutely work if you build the right team, but it comes with challenges that aren’t always obvious at first.
One common misconception I see is the idea that just because a property is in a cheaper market, it will automatically cash flow or be a “cash cow.” The numbers still need to make sense after property management, maintenance, vacancies, and other real-world costs are factored in.
In my opinion, the best way to start investing is usually as close to home as possible. Either house hacking or buying a small investment property in your own market lets you really learn the fundamentals — underwriting deals, managing repairs, understanding tenants, and seeing how the numbers actually play out in real life.
Once you’ve gone through that process and gotten comfortable with it, expanding into out-of-state markets becomes much easier and less risky.
$50K is definitely a strong starting position though. The biggest thing I’d focus on right now is exactly what Alex mentioned — analyzing as many deals as you can so you really understand your numbers before jumping into the first purchase.
- Realtor · OH · Member since 2026 · 122 posts · 77 votes7mo
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Hey Janel, welcome to the community! Saving up $50k just five years after moving to the U.S. is a huge achievement and a fantastic launchpad for your investing journey. You are absolutely right that Secaucus and the surrounding North Jersey markets are incredibly pricey, and dropping your entire $50k on a traditional 20% down payment for an investment property will leave you dangerously thin on cash once you factor in closing costs and those notorious NJ property taxes. To keep your risk low while actually getting your money working, you have two strong plays: you can either stay local by "house hacking" a multi-family property in a more affordable nearby county using an owner-occupied loan (which only requires 3.5% to 5% down), or you can stretch those dollars by investing out-of-state in a stable Midwest or Southern market where $50k easily covers a 20% down payment on a solid $150k rental with plenty of safety net left over.
I hope that helps! - 7moJay TolugantiPro MemberInvestor · Clearwater, FL · Member since 2025 · 227 posts · 80 votes
Hey Janel, congrats on taking the first step in investing, investing in education. If I were you, I would not lead the conversation with how much money you have. Buying and renting it out is one of the many strategies. Try to educate yourself on what other strategies are there and try to find somethimg that makes you comfirtable and in control. Try attending your local REIA meeting and meet fellow investors face to face. I would recommend below books for you to read/listen to:
Strategy:
Rich man in Babylon
Robert Kiosaki
- Rich Dad Poor Dad
- Cashflow Quadrant
- Guide to investing
- Real book of Real Estate
Real Estate Journey:
Ken McKelroy
- ABCs of Real Estate Investing
- Advanced book of Real Estate Investing
- ABC of Property management
- 7moKerlous TadresBusiness MemberRealtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
I’d either house hack a small 2–4 unit a bit outside Secaucus or buy in a cheaper area where your money goes further, and a good manager can handle the day-to-day. In my experience, only buy if the rent still covers the payment, taxes, empty months, and repairs.
Kerlous Tadres | Reafco Real Estate542 Reviews - 7moMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 504 posts · 556 votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Hi @Janel Duran. Welcome to BP!
I'd recommend starting off with house hacking a 2-4 unit building. To start, you can probably self manage it and learn how to manage a property while saving on expenses. It's a great way to learn and build a foundation for future growth.
I'd also recommend investing locally if possible, even if it's 1-4 hours away from you, it'll still be easier for you to manage everything accordingly.
If buying locally, even 1-4 hours away isn't feasible, then start looking out of state. It's a bit riskier but definitely something you can do with the help of a local property manager. I had to go this route back in 2021 so happy to share some out of state investing experiences.
Reafco - Mike Paolucci 512 Reviews - Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes7moHi Janel, if you’re a new out-of-state investor, I recommend picking a market with these characteristics: steady population growth, solid job opportunities, a good rent-to-price ratio, landlord-friendly rules, trustworthy property management, and a diverse economy. Many out-of-state investors start in the Midwest markets because they offer better cash flow and more affordable entry prices. One market to consider is Columbus, OH, since it’s one of the fastest-growing cities in the Midwest, and big companies like Meta, Google, Amazon, and Intel are expanding in the area, which keeps housing and rental demand high.
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
- 7moRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Are you willing to do a house hack?
- 7moSam McCormackBusiness MemberReal Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 834 votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Hey Janel! Congrats on your savings, you'd be surprised on how hard it is to do that, especially with todays climate. 50k is a good place to start, and as you know, the most important thing to figure out is what you want in a location/property. Each market has its own attributes, like prices, type of properties, issues, returns, future outlook, etc. So find that out first what you want and find a market to try to fit that
Now onto your 50k, with that, it looks like you could be looking around 150k purchase price. Now there is a good way to get this higher, for example, asking the seller to cover some of your closing costs when writing your offer, that's an effective way. And here is a good way (in my opinion) to go about investable capital to purchase price capabilities (not including seller paid closing costs). 25% down, 3-5% closing costs
$50,000 capital is good for 150k PP
$75,000 capital is good for 250k PP
$100,000 capital is good for 325k PP
And it goes from there. I know this is a lot, so if you have questions for me regarding this and/or Greater Cincinnati, let me know
Sam McCormack Realtor - 7moNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
hi Janel. $50K isn't enough to do anything but house hack. and not everyone can house hack. but it's a good way to get started if you can.
good luck.
- 7moShawn McenteerBusiness MemberRealtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votesAs expensive as New Jersey looks using a 20-25% down loan to buy a property out of state will likely cost way more than an owner occupied house hack in your local market. $50k can literally buy you a $1million home if you are owner occupying. $50k will get you a $200k home out of state. $200k OOS means you need to travel long distance and get team in place far away. You need a place to live in your local market; you can live at home, you can rent, you can pay a mortgage on a single family for the next 30 year out of your own work, or live in one unit rent out the other having your tenants pay the bulk of the mortgage.
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
House Hacking New Jersey561 Reviews - 7moMarc RiceBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
With $50k ready to invest, most of the midwest markets are available to explore. Happy to help!
Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews - 7moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Great work on getting started @Janel Duran. There is a lot to learn from biggerpockets from the forums, books, and podcasts.
You need to buy in an out of state market. Your money will go much further. Choose a good cash flowing market in the Midwest where you can put down 15% down and buy a cash flowing property.
Tons of tech companies are investing in the midwest like intel, google, amazon. Good market for cashflow and strong appreciation.
I've got 28 units here and sold over 120 properties this past year to OOS investors in my market.
ReafCo | Ahmed Group 533 Reviews - 7moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 968 votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Janel, first off, great job taking action and setting aside capital to get started. With $50K, buying in Secaucus is tough, but many new investors look at Midwest markets where entry prices are much lower, and you can actually make the numbers work. Places like the Midwest are popular for first rentals because you can often find solid single-family homes or small duplexes that cash flow better compared to high-cost states. The key is focusing on buying right, keeping reserves, and building a simple plan you can repeat. You’re definitely on the right track by educating yourself first. - 7moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
Glad to hear from you, Janel! It’s awesome that you’re taking the first steps and educating yourself—that’s really the most important part early on. With $50K to invest and living in a high-priced market like Secaucus, NJ, it can be tough to find cash-flowing deals locally, so looking out of state is definitely worth considering. There are still markets across the U.S. where you can find properties in the $120K–180K range that hit the 1% rule and positive cash flow. Some of these areas are seeing strong population and job growth, with major companies moving in or expanding, which drives rent demand and long-term appreciation. Starting with a single cash-flowing property in a market like that can be a great way to learn the ropes, build equity, and scale over time without getting overwhelmed. Happy to connect and answer any questions you have!
Jimmy Lieu, Red 1 Realty4.9122 Reviews - New to Real Estate · Mesa, AZ · Member since 2026 · 2 posts · 0 votes7mo
Have you considered buying and renting mobile homes? Mobile homes can be a good way to enter the real estate market.
- Investor · NJ/NY · Member since 2026 · 11 posts · 2 votes7mo
If you're in Secaucus / Newark and working with around $50K, another angle you might consider is land in nearby markets rather than immediately trying to buy a rental property.
In some areas of Pennsylvania about 1.5–2 hours from North Jersey (Poconos region), entry prices for residential lots can still be relatively low compared to housing prices in NJ.
I’ve been analyzing parcels in that region where vacation home demand and long-term development potential are slowly increasing.
It’s obviously a different strategy than rentals since there’s no cash flow while holding, but the low property taxes and lower entry price can make it an interesting starting point for some investors.
Just another angle to consider while you're exploring options.
- 7moDominic RosatoBusiness MemberReal Estate Agent · Jersey City, NJ · Member since 2022 · 82 posts · 61 votes
Hi Janel, At that price point in North Jersey, the two most common strategies I see are either 1) house hacking a smaller multi-family or 2) buying a condo to rent out.
1) House hacking (with 5% down) works fine as long as you’re okay with a negative cash flow to start, since the long-term appreciation is so strong around here. Areas like The Heights or Bergen-Lafayette in Jersey City are good examples. You can still find smaller two-families around the $800k range there, and they’ve been strong growth neighborhoods. If you’re open to short-term rentals, Jersey City usually allows house hackers to get permits for up to two units in their multi-family building. That can get you close to breakeven, or even living free in a really desirable market. An underutilized strategy IMO.
2) The other route is buying a condo to rent out in places like Bayonne, West New York, North Bergen, or parts of Jersey City. You can still find units around the $200k range that break even or produce a small monthly profit with about 25% down. That strategy is usually more about appreciation and rent growth over a 5-10 year window. The key is sticking with well-run buildings that have solid financials so you don’t run into problems down the line.
Feel free to reach out if you want to chat further. I work with investors on these strategies - having a strong team is key!
Dominic Rosato529 Reviews - 7moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Quote from @Janel Duran:
Hi everyone!
I’m currently reading the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started, and that’s how I found this website.
I moved to the U.S. almost five years ago, and I feel like I’m finally ready to start investing in real estate. My goal is to buy a property to rent out. Right now, I have about $50,000 available to invest.
I live in Secaucus, NJ, but the market in my area is very expensive, so I’m open to learning about other options or strategies.
I’m still very new to this topic and just starting to educate myself step by step, so I would really appreciate any tips, advice, or recommendations you might have.
Thank you in advance!
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 outsourcing all of the above.
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”.
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?
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.”
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.
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
Logical Property Management4.9469 Reviews - 7moJames WachobBusiness MemberReal Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 893 votes
Hi @Janel Duran! Welcome to BiggerPockets! You’re starting the right way by learning first and building a solid foundation. Having ~$50K saved already puts you in a strong position for your first deal.
Since you’re in New Jersey, you’re right! it’s a high-cost market, and many investors in your situation choose to look out of state where the numbers make more sense for rentals. The key is to focus on markets with affordable entry prices, steady rental demand, and landlord-friendly laws so your investment can actually produce cash flow.
Your next steps should be to learn how to analyze a simple rental deal (rent vs expenses, vacancy, maintenance, management) and define a clear buy box. Starting with a single-family long-term rental is often the easiest way to get experience. From there, you can scale once you’re comfortable.
Markets in the Midwest and Southeast are popular for beginners because your budget can go further. I work with many out-of-state investors in Memphis, TN, where the price-to-rent ratios still allow for solid cash flow if you buy right. If you ever want to see what real deals look like or how to evaluate them, I’m happy to help.
- 7moDean HarrisBusiness MemberReal Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
There are some low entry properties in Memphis you can look at but these locations will be in question. OOS investors in Memphis need to be careful not to buy anything that rents below $900. Some investors use $1000.
I have ways you can invest without more cash than that to build your portfolio. I'm happy to share with you.
Best of luck!
CrestCore Realty4.713 Reviews - Real Estate Agent · Tacoma, WA · Member since 2019 · 53 posts · 20 votes7mo
@Jay Toluganti Thanks for all the book recommendations! I am am actively looking for my next out of state market to start investing in! I see you are an investor in Clearwater, FL. What do you think about middle Florida like Clermont/Leesburg are?
- 7moJay TolugantiPro MemberInvestor · Clearwater, FL · Member since 2025 · 227 posts · 80 votes
@Richard Miller please DM me. Lets take it offline.
- Real Estate Agent · Tacoma, WA · Member since 2019 · 53 posts · 20 votes7mo
@Alfath Ahmed Let's connect! I am considering Columbus OH for my first out of state market to invest in. Curious to get your thoughts on it.
- 7moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Richard Miller:
@Alfath Ahmed Let's connect! I am considering Columbus OH for my first out of state market to invest in. Curious to get your thoughts on it.
Sounds good, just messaged you.
ReafCo | Ahmed Group 533 Reviews
- 7moJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 700 votes
Hey Janel, love where you're at with this honestly $50k is a solid start, just probably not in your backyard in Secaucus where prices make BRRRR tough. I'm based in Tampa and we still see deals where that budget can work if you focus on the high end of the low end areas where there's room to force equity. From my experience doing thousands of deals the biggest thing I'd tell you is pick a lane early, either go after equity or go after cash flow because trying to maximize both on your first deal usually slows you down. BRRRR is more of an equity play so focus on buying under market, doing a clean rehab, renting it, then refinancing to pull your money back out and repeat. With $50k you can make that work if you stay disciplined on the numbers and keep the rehab simple. My early deals were far from perfect but I focused on equity first and that's what helped me scale, then later you can shift into more cash flow once you've built a base. If you're open to out of state I can show you real deals we're doing here so you can see how they're structured and decide if it fits your goals. Also you can use flip loans at 10% at the beginning and then "flip the rental to yourself" using DSCR. I am here to help.
Graystone Investment Group519 Reviews
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