It maybe the case that your accountant either doesn't know this rule or is factoring in something else 

Both are huge magnets for professionals to rent.With a condo/TH you'll have to factor in HOA fees, but there are some nice options that would generate higher rents.I have a California-based BiggerPockets client who purchased 8 homes in one year in the Southwest Valley.

The North Texas city's population has grown by 7% and its economic diversity has been a key factor in sustaining employment and population growth, according to the report.Austin's prosperity was tied with Fresno, California for a top 5 rank and total score of 59.9 points.

An occupied store front in a small town will factor into your current NOI, but if they go vacant in less than a year, you could be looking at a couple years of vacancy in a small town.And lastly, with limited appreciation potential, a 6 cap sounds low.  

Factors such as location, lot size, and zoning significantly impact property value and sales velocity.Let's share insights, challenges, and strategies for success in this dynamic market.

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 < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If 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).

I know alot of out-of-state investors are looking into other market for reasons like cash flow, section 8, lower price point, landlord laws, higher ROI's and all the other factors you could imagine that would make real estate investing seem like a great idea!

The monthly rent would likely be lower, but the entry costs and potential regulatory hurdles might also be less.Here are my main considerations:Rental Income: Higher in Berkeley ($2k/month) vs. potentially lower in the Midwest.Appreciation: Likely higher in Berkeley.Management: Easier to manage the ADU since it's close to home, but more regulatory headaches.Diversification and Simplicity: Potentially less hassle with a property in the Midwest.Given these factors, what would you recommend?

Since I’m not sure about the size and other major factors, take this advice with a grain of salt.Good luck with your decision! 

Two contributing factors are high construction costs and regulations that make obtaining a construction permit difficult.California already has a large housing shortage.