Los angeles Ca · Member since 2026 · 2 posts · 5 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.
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.
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?
@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.
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!
@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.
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.
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.
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.
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.
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.
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.
@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.
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:
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)
Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 106 posts · 29 votes
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!
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.
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.
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!
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!
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.
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.
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?
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.
"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."
