If it's a deal that is in a very very desirable location and has tons of built in equity and appreciation, I would be totally good with negative cash flow for Y1 and Y2.

It is located in an area that attracts college students/employees, working class families, and military families.

@Kyle LipkoRecommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

They get a higher return since they are covering housing cost, have the $250k per spouse primary residence deduction in gains, is a savings account, higher leverage position, lower interest rate possible, will pay more premium for location, etc.House might be overpriced for REITs but not for home owners.  

Great Location.

What if you had 5-8 paid off rental properties in great shape in great locations? 

Located in Los Angeles County (Los Feliz, 90027 zip).

@Phil Petite Forming an LLC in Tennessee is recommended if your rental properties are located there, as it simplifies legal compliance, avoids the need to register as a foreign LLC, and aligns the LLC with Tennessee's laws for property management and tenant disputes.

Dear All , I am located in Atlanta, GA .  

Chicago, with its vibrant neighborhoods and strong rental market, is a prime location for this strategy.