Does "Buy less house than you can afford" apply to investments?

[Joseph Robele]

I am planning on buying a duplex in downtown Indianapolis to be a live-in landlord and have been looking at properties ranging from $150k-300k. I know that the benefits of buying a cheaper duplex is generally an increase in positive cashflow and ROI, since the more expensive ones here seem less likely to hit 1% rental income potential. However, should I be taking into account that the more expensive properties are near "hot" neighborhoods which could allow for the chance of greater appreciation in addition to any cashflow? Should I just be limiting my calculations to cashflow and cash on cash returns? I know if I choose a cheaper place, I would have to lower my standard of living, but I would be ok with that if it meant a great investment.

Additionally, as a first time buyer, I don't have a lot of capital, so I am wondering if the adage of buying less house than you can afford still applies to investment properties.

Appreciate any thoughts, advice, or experiences to share!