Just a quick follow up to @Christie Gahan's comment: ** Yes, Long term capital gains are taxed at lower rates, but it isn't as simple as the first $500K of gains are taxed at 15% -- rather, the 15% bracket will account for your total income from all sources. 

Many investors from California, are investing in the midwest because of the yearly returns making more sense in these lower priced markets.

Then I’d hire a professional PM, pay 2/3rds the expenses and keep 2/3rds of the income. 

They will always go off the lower number, and you will need to bring a down payment and closing costs (the standard title and insurance fees for escrow, as well as document and origination fees).

I'm certain there are markets out ther that the do not cashflow that have lower-than-average appreciation.

Do you have any capital expense required on this property?

Property managers can also be expensive.

There is no legal limit, but there is almost always a practical limit because a sponsor can only deploy so much money before they have to lower their underwriting standards etc.

However, the issue for me is after doing my numbers he'd still need to be way lower than $175k.

Account Closed Since this is within the close friends, no issues on any "common expenses".