And, keep in mind, things can get worse in a down economy. 

One big reason is the fact that if California were a country it would be the 5th highest economy in the world.

Hi Jagger-Great question.I am a fellow Michigander from Ann Arbor.Nothing against Maine but the Midwest has seen some of the strongest rent growth in the country.When I consult with my clients, if they don't have the budget for a market like Ann Arbor, I direct them to Lansing, MI.The cashflow is strong, the economy is stable, it is the State capital so there is always economic development creating new jobs, the price point is relatively affordable because the cost of living is lower there, and appreciation is predictably linear.I also advise investors to buy duplexes and up so you always have a rent check coming in most of the time if you have a vacancy.

For those people there's really no good answer because aside from a few times when you hit a lucky economy, nice returns in RE generally requires time.

Focus on areas boasting strong job markets and growing economies.

You are all set to begin your search.I work with a lot of out-of-state investors that like investing in Columbus because it is an investor-friendly state and properties have good cash flow and stronger appreciation.

It can be a great opportunity to run an STR for those three years that he says he's going to be there and build up a bit of a stronger reserve fund for when he converts to medium or long term rental when he moves out. 

lower the size of your unit and therefore your build cost per unit, your sale price will go down but focus on density and get familiar with zoning and what your city will approve. my best suggestion is to do it in downtown districts where there is unlimited height and unlimited floor area and you can build every square inch of the property and reduce parking because of proximity to transit. property values are higher, rents are higher in downtown markets, there are just too many economies of scale compared to suburban deals.

There are real benefits to hitting economies of scale when it comes to running STRs.

If the fund purchases and renovates or buys and holds property for an extended duration of time, the sponsor team will need to make stronger efforts in property management.