In Berlin, rental arbitrage has been very profitable, with average annual margins of 25-40% after all costs but before taxes, so shifting to a market where arbitrage is barely breaking even is definitely a reality check.Given your experience, would you say the best way to enter the market now is through purchasing properties with financing?

The best strategy I seem to have deployed so far was to contact all my current tenants and let them know I’d give them a cash referral fee of $250 for anyone they recommend to me that goes through the vetting process and successfully moves in.

A mortgage lender can help determine if refinancing or tapping into equity might allow you to acquire additional properties.Consider a 1031 Exchange: If you're open to selling a current property, a 1031 exchange can defer capital gains taxes while enabling you to upgrade to a larger or more profitable asset.

It is my understanding that the new owner will have the house at the cost basis of my purchase price, for calculating capital gains taxes or depreciation.For gift tax purposes for you - FMV.For capital gain tax purposes for the recipient - your original basis/purchase price 

As U.S. citizens residing in Europe, we are required by the local tax code to hold the property in our personal name.

I would also share pros and cons of paying taxes on the windfall versus owner carry.

Zachary,Your concerns about Cleveland are valid—high property taxes and stagnant population growth are definitely challenges to consider.

If you think you can manage a mortgage, taxes, insurance and the upkeep of a home while paying your student loans then buying is not  bad idea but if you think you will overstretch yourself renting is nto bad either.

@Roger D Jones and @Dominic Mazzarella hit it on the head: try seller financing first and see what his cash flow needs are and/or if you can reduce his CG taxes. 

It is a tax write off.