Where To Buy My First Rental Property

[Zachary Young]

Hi all, I am looking into buying my first rental property. As with many others I'm sure, looking for guidance on affordable cities that still provide a solid return / cash flow. Preferably looking for properties under $200k, but up to $300k. It will have to be out of state since I live in a HCOL location so I am open to anywhere in the country, but most of my research has taken me to the midwest (e.g. Cleveland and others) and some spots in the southeast (e.g. Huntsville and others). However, from my research, it's extremely difficult to find any cities where the properties cash flow other than places like Cleveland which has its own set of drawbacks. Cleveland almost seems like the best option because of the affordability and rental demand, but worries me due to the high property taxes and lack of population and economic growth. For the most part, due to interest rates, breaking the 1% cap rate still won't provide positive return after expenses. I also have no problem doing some sweat work to build equity in the beginning as well. I just want it to work and be a positive experience because I know that will keep me motivating to continue investing and building my portfolio.

What are some cities that might provide cash flow, but remain affordable? Does anyone have better insight into the cities I named? How can I best find undervalued properties in desirable locations?

[Travis Biziorek]

Zachary,

Your concerns about Cleveland are valid—high property taxes and stagnant population growth are definitely challenges to consider. Given what you’re looking for (affordability, cash flow, and the ability to add value), Detroit might be worth looking into. It’s a city I know well because I built a 12-door portfolio there between 2019 and 2021.

Detroit offers a lot of value in terms of affordability and rental demand. You can still find single-family homes in the $80k–$100k range and duplexes in the $130k–$150k range, even in C and C+ neighborhoods that are seeing steady improvements. The population is officially growing again, and there’s been a lot of investment in infrastructure and development in recent years, which makes it unique compared to some other Midwest markets.

One thing to keep in mind, though, is that Detroit is very much a block-by-block city. It’s crucial to have local market knowledge or work with someone who does. If you’re willing to put in the work and learn the nuances, it can be a great place to build a portfolio.

Feel free to reach out if you’d like any pointers or resources—I’m happy to share what I’ve learned from my time investing there.

Best of luck!