What actually makes a good rental market?
The neighborhood, and which way it's heading. The city and the state matter far less than most rankings pretend.
Here's the hierarchy as I see it. The state and the county set the rules: how fast an eviction moves, how a lease is enforced. The metro sets the economy: jobs, population, wages. Those two are the floor, and they're why this list is Midwest and South rather than Sunbelt.
But you don't buy a city. You buy a house on a street, and in any of these cities the streets run from A to D-grade. The ranking gets you to the right metros. The neighborhood decides the outcome. On one Kansas City street I graded two houses in the same ZIP 17 points apart, and nothing a city-level search shows would have told you which was which.
The core idea is that trajectory beats level. A cheap area getting worse and a cheap area getting better look the same on a listing. They're completely different investments. I want to see incomes rising, crime falling near the house, more owners moving in, rents climbing, and empty lots getting built on. I grade the direction, not just today's snapshot.
Why does the neighborhood matter most? Because cheap houses are cheap for one of two reasons: a weak neighborhood, or poor condition. From 4,000 miles away you can't run a renovation with any degree of precision or control (I learned this the hard way), so you buy renovated. That takes the condition discount and the renovation value-add margin off the table. What's left is the neighborhood. A $150,000 house sits in a $150,000 neighborhood, and the only question is where that neighborhood is going. With that said, a big part of what I do is helping my overseas clients buy at a discount, and in most cases we're able to lock in at least a little equity, even on a fully-renovated turnkey property.
I sort neighborhoods into three phases. Phase 1 is the cheapest, with no sign yet of lasting improvement. Lots of other investors call these D-class neighborhoods. Here, you'll find the $100,000 duplex rented to a Section 8 tenant. Too high risk.
Phase 2 is still affordable and clearly improving, moving from C quality toward B. It might take 10 years or more, and there's still lots of risk to consider, but it's heading in the right direction. You'll find some poor quality housing stock, and also some good quality renovated houses priced between $150,000 and $250,000. That's where I typically buy, and where most of my clients buy too.
Phase 3 is established B quality: safe, but thinner returns, because the improvement is already in the price. A good example of this is a property we helped a Colombian client purchase recently. Appraised at $300,000. Purchased for $285,000. Rented for $2,400/mo.
There's no universal grading standard for any of this. My letters are my opinion, not an industry measure.
| Factor | The level (today) | The direction (what I grade) |
|---|
| Landlord law | State eviction speed and lease enforcement | Stable; rarely changes fast |
| Rental demand | Vacancy, days to lease | Rents rising or flat; tenant pool deepening |
| Crime | Incidents within half a mile | Falling near the house, even if still above city average |
| Owner-occupancy | Share of owners on the block | Rising, and residents staying put |
| Property tax | The verified current bill | Abatements expiring, reassessment on sale |
| Insurance | A full-replacement quote | Rising fastest in wind and hail zones |
Sometimes I'll accept a higher crime level if the trend is strongly down. I won't accept a low level heading the wrong way. A good example of this is a property in my inventory right now. Crime rates are roughly 20% above the city average, but down 50% over 3 years, and a consistent downward trend every year over 5. That's progress, and it's driving up demand which in turn is driving rents and house prices.
My full method, the eleven segments I score and the geography rule behind them, is its own article. Here the short version is enough.
Here's the property I'd buy myself out of the six. A real 4/2 single-family house in Marlborough, Kansas City, 64131. The seller's pro forma shows a 9.0% net yield. Priced on a real full-replacement insurance quote and the reserves a remote owner really needs, the same house returns 6.4%. Here is each line.
| Line (per year) | Seller's pro forma | Reality |
|---|
| Gross rent (actual lease, $1,800 a month) | $21,600 | $21,600 |
| Vacancy | 5% ($1,080) | 10% ($2,160) |
| Maintenance and capex | 5% ($1,080) | 20% ($4,320) |
| Management | 8% ($1,728) | 8% ($1,728) |
| Property tax (verified) | $181 | $181 |
| Insurance | $858 (basic policy) | $1,375 (full replacement) |
| Net before financing | $16,673 | $11,836 |
| Net yield on $185,000 | 9.0% | 6.4% |
That's $403 a month between the two columns, on the same house with the same tenant. Nothing went wrong. The only difference is which numbers you believed. You can run your own deal both ways with my rental property cash flow calculator.
Two things drive the gap. The first is insurance. A pro forma uses the cheapest policy it can find, or none at all. The policy you actually want covers full replacement cost, water backup, wind and hail, and loss of rent.
The second is reserves. The pro forma shows vacancy at 5%, maintenance at 5% and nothing for capital replacement. Reality, across my own 30 houses and a decade of turnovers, is closer to 10% vacancy and 20% for maintenance and capex together.
I ran a deep dive into tenancy lengths and eviction rates in neighborhood the above property is in, right down to census tract level. From what we can tell from the verified data and court records that are available, private tenants tend to stay for 4 to 6 years, voucher tenants stay for on average 11 years, and the general turnover rate in the neighborhood is about 12%. What a single turnover really costs is why that line is never small.
Now the same exercise across all six markets. One real house per city, priced in 2026.
| Market | Property (anonymized) | Source | Price basis | Rent (month) | Tax (year) | Insurance: pro forma vs real | Pro forma yield | Reality yield | Gap | My grade |
|---|
| Kansas City, MO | 4/2 SFH, Marlborough, 64131 | Vetted and offered | $185,000 asking (my offer, plus $5,000 seller credit) | $1,800 (lease) | $181 (abated) | $858 vs $1,375 | 9.0% | 6.4% | 2.6 pts | C, Phase 2 |
| Cleveland, OH | Duplex, West Boulevard, 44102 | Vetted and offered | $150,000 (my offer; asking $175,000) | $1,800 (two leases) | $1,405 | $0 vs $1,878 | 10.9% | 6.7% | 4.1 pts | C+, Phase 2 |
| Birmingham, AL | 4/2 SFH, East Pinson Valley, 35215 | Vetted and offered | $178,000 asking | $1,300 (comps) | $1,287 | $917 vs pending | 5.9% | Pending quote | Pending | B-, Phase 2 to 3 |
| Indianapolis, IN | 3/2 SFH, Mars Hill, 46221 | Competitor listing | $175,000 asking | $1,625 (lease) | $2,014 | $1,596 vs $1,962 | 7.1% | 4.6% | 2.4 pts | C |
| Toledo, OH | Duplex, Ottawa, 43607 | Sourced and passed | $165,000 | $2,200 (two leases) | $2,015 | $0 vs $2,661 | 11.9% | 7.1% | 4.8 pts | C-, Phase 1 to 2 |
| Memphis, TN | 3/2 SFH, Whitehaven, 38116 | Competitor listing, cautionary | $159,500 asking | $1,337 (lease) | $1,687 | $1,055 vs $1,480 | 6.5% | 4.3% | 2.3 pts | C- |
| Across the five markets with a real insurance quote | Figure |
|---|
| Average pro forma net yield | 9.1% |
| Average reality net yield | 5.8% |
| Average gap | 3.3 points |
| Pro formas that budgeted $0 insurance | 2 of 6 |
| Understatement where a figure was given | 23% to 60% |
| Range of real full-replacement quotes | $1,375 to $2,661 a year |
| Range of verified property tax | $181 (abated) to $2,015 a year |
Method and limitations. Each row is one real house priced between June and September 2026. Rents are the actual lease where one exists, or local comps where marked. Property tax is the current bill verified against the county assessor. Insurance quotes are full-replacement landlord policies from a national carrier, quoted in 2026.
The pro forma column uses 5% vacancy, 5% maintenance, 0% capex, 8% management and the insurance figure the seller printed.
The reality column uses 10% vacancy, 20% maintenance plus capex, 8% management and the real quote.
Yields are net operating income before financing, divided by the price basis shown.
Offered deals are priced at my negotiated entry; competitor listings stay at asking, because asking is what a retail buyer pays.
Seller credits reduce cash to close, not the yield, so they don't move these figures. These are point-in-time figures for one house each, not market averages, and the Kansas City tax is a ten-year renovation abatement that will expire.
Two more things about the tax column. The Kansas City bill of $181 will revert to something over $2,000 when the abatement ends (after 10 years), and it may not survive a resale. The Birmingham bill of $1,287 sits on a county appraisal of $128,400 against a $178,000 price, so a sale could pull it toward $1,784. Neither is in the cells. Both are the reason I never take the tax line off a listing, and how US property tax really works shows you where to check it yourself.
Why does the best deal on paper make the worst rental to own?
Look at the Toledo row again. A duplex at $165,000 with $2,200 a month in rent. Rent-to-price of 1.33%, the best of the six by a distance. An 11.9% pro forma yield, and even on honest assumptions the highest reality yield on the page at 7.1%.
I sourced that deal. I priced it. And I told the client not to buy it.
The neighborhood was the worst of the six. Higher management cost, because the manager works harder. Higher delinquency. Higher insurance. A higher crime rate, and less sign of improvement than anywhere else on this list. A thinner tenant pool, and less chance of the house being worth more in ten years than today. In this case, the eviction rate was 3 times the city average. All that makes the yield high on paper is what makes the house expensive to own.
I know this because I built a portfolio of exactly these houses once. By 2022 I had 124 properties, most of them cheap houses in poor neighborhoods bought for the yield. When the vacancies, the repairs and the evictions arrived together, the cash flow swung from plus $30,000 a month to minus $60,000. I sold some, lost some, and walked away from others. That's the story behind my whole strategy, and it's why Toledo is on this list as the deal I passed on rather than the deal I sold.
Cheap is not the same as good value. The best deals on paper are often the worst deals to own.
Is cash flow actually profit?
No. And the sooner you accept that, the fewer bad houses you'll buy.
Here's the mechanism behind almost every angry turnkey owner I've spoken to. The property is fine. The tenant pays. The rent arrives each month. But the real running costs come in well above the pro forma, so the projected $250 a month evaporates. Over a five-year hold the owner can be underwater on cash flow without a single thing going visibly wrong. That's the gap in the table above, lived out one month at a time.
So here's how I think about it, after ten years and 120-plus purchases. Expect no cash flow to spend, but the house should never cost you money. Any cash flow you do get stays in the property. It funds the reserve and services the debt. It isn't income. Your real return is appreciation and mortgage paydown, over a long hold, in a neighborhood that's improving.
I'm not anti-cash-flow. I'm anti-fake-cash-flow, and I'm anti using cash flow as an ROI metric. Look at it this way. If you started any other business, and made some profit in year 1, would you consider that your profit to spend and leave the business account empty? Or would you consider that operational income to reinvest in the business to grow it, or hold as reserves for a rainy day?
Positive real cash flow still matters, because it's the test of whether the house pays for itself after honest costs and reserves. The Midwest markets on this list pass that test on real numbers. The appreciation markets, Florida, Texas and most of the Sunbelt, fail it. That's why the list looks the way it does. Whether a house will lease, and at what rent, is a separate check, and Fair Market Rent is not your rent is where I explain it.
Why do sellers grade a C- neighborhood as a B?
Because the grade is theirs and the risk is yours. And honestly, a buyer is more likely to buy a B than a C, and no one is regulating that grading.
The Memphis row is a real turnkey resale in Whitehaven, 38116. The seller's pro forma grades the area a "solid B". It points to the logistics employers near the airport and bigger lots, and it bundles three ZIP codes into one grade. The job base is real. But I grade it C-. The difference is what the seller's grade leaves out: crime, which in this ZIP sits in the bottom 1% nationally on the data I use, and collection risk, which is what decides a remote owner's operational stability. Maybe no one lied outright, but it's definitely selective weighting. The gap between B and C- is neighborhood-grade inflation. It can mean $30,000 in turnover costs over three years, and it's the twin of the pro forma yield inflation above.
Then there's the public record, which is the part sellers never show you.
| The Whitehaven 3/2 turnkey resale | Date | Price |
|---|
| Bought distressed, per public record data | Nov 2021 | $31,000 |
| Renovated and sold turnkey | Sep 2022 | $154,900 |
| Relisted by the turnkey buyer | Aug 2026 | $162,500 |
| Reduced | Sep 2026 | $159,500 |
| County appraised value | 2025 | $128,000 |
The turnkey buyer paid $154,900 four years ago and is asking $159,500 today. At a realistic 7.5% cost of sale in Memphis, roughly $12,000, the net proceeds would be about $147,500. That's a loss of around $7,400 against the purchase price. It comes before their own buying costs in 2022, and before four years of thin cash flow on a pro forma with a cheap insurance policy. The county, meanwhile, gives a market value to the house of $128,000, below what the turnkey buyer paid 4 years ago.
Be careful with the first line. The $31,000 was a distressed purchase, and a real renovation went into the house before it sold, so the gap to $154,900 is not profit. The honest point is different. The retail price left the buyer no equity headroom, so the appreciation that was supposed to be the real return was used up before they owned the house. I've traced where the money goes on a $30,000 house sold for $163,000 document by document, and the shape is the same. It's why I check the seller's numbers before the yield persuades me of anything.
I won't publish the deed trail on the houses I offer. The public record shows the renovator's margin on those too. I'd rather lead with the forward numbers I'm asking you to buy on than pretend that margin doesn't exist. What I will tell you is that on the Cleveland duplex the asking price was $175,000 and my offer was $150,000. That one negotiation moved the reality yield from 5.8% to 6.7%.
Which cities make the list, and why?
Strongest first, and you'll notice the order isn't the yield order. That's deliberate. Like I already said, the best on-paper yield or cap rate doesn't always translate into the 'best' deal. In fact, often it's the opposite.
Before the cities, we need to work down from state and metro level in three tables.
The first is the rules of the game in each state. The state decides how fast you get a house back from a tenant who stops paying.
The second is the metro floor. Is the place growing, working and earning enough to fill a rental?
The third is the housing market itself. Treat all three as the screen, not the decision. A metro passes or fails here. The neighborhood decides what you actually earn.
How landlord-friendly is each state?
| State | Notice before filing for nonpayment | Typical time to regain possession | Security deposit cap and return | Local rent control | Late fees | Effective property tax rate | State income tax on nonresident rental income | Transfer tax on purchase |
|---|
| Missouri | No statutory waiting period; landlord files rent-and-possession after demand | About 3 to 6 weeks | Capped at 2 months' rent; return within 30 days | Preempted statewide | No statutory cap | 0.89% | Graduated, top rate 4.7% | None |
| Ohio | 3 days | About 4 to 8 weeks | No cap; return within 30 days | Preempted statewide (2022) | No statutory cap | 1.36% | Flat 2.75% above $26,050, plus municipal income tax on net rental profit (Cleveland and Toledo, 2.5%) | County conveyance fee, $1 to $4 per $1,000 |
| Alabama | 7 days | About 3 to 6 weeks | Capped at 1 month's rent; return within 60 days | Preempted statewide | No statutory cap | 0.37% | Graduated, top rate 5% | $1 per $1,000 deed tax, plus mortgage tax |
| Indiana | 10 days | About 3 to 6 weeks | No cap; return within 45 days | Preempted statewide | No statutory cap | 0.76% | Flat 2.95% | None |
| Tennessee | 14 days | About 4 to 8 weeks | No cap; itemized return within 30 days | Preempted statewide | Capped at 10% of rent after a 5-day grace period | 0.58% | None | $3.70 per $1,000, paid by the buyer |
Notice periods and deposit rules are the state statutes as I read them in 2026. Typical timelines are what my property managers see in practice, not a guarantee. A contested case takes longer anywhere. This is where you might find 'professional tenants' using the rules to delay the case for as long as possible, and/or attempting to justify their position by making certain claims against the landlord.
Property tax rates are the Tax Foundation's owner-occupied averages. My verified bills above matter more than this column because they related to investor-owned properties which often have no exemptions that apply to homeowners.
Local income taxes vary by city, so check with a cross-border CPA before you buy.
One more thing the statute won't tell you. A judgment isn't possession. Once the court grants you a writ, the sheriff has to visit the property and put you back in, and that queue moves at the speed of the sheriff's office. My Cleveland manager told me last week that the wait from writ to sheriff is running about two months right now in Cuyahoga County, because the office is under-resourced and the workload is up. But only about half of filed evictions get that far; most tenants leave before the sheriff is involved. But if yours doesn't, the timeline in the table stretches by however long the county's queue is that month. It moves with the season and the market, so ask your manager for the current wait before you underwrite the risk, not after.
Is the metro growing, working and earning?
| Metro (MSA) | Population, July 2025 | Change since 2020 | Median household income | Poverty rate | Unemployment, July 2026 | Jobs, 12-month change | Average weekly wage, Q1 2026 |
|---|
| Kansas City, MO-KS | 2,270,682 | +3.6% | $83,785 | 10.1% | 3.8% | +0.7% | $1,464 |
| Cleveland, OH | 2,165,775 | -0.9% | $72,532 | 12.0% | 3.1% | +0.5% | $1,482 |
| Birmingham, AL | 1,197,766 | +1.5% | $74,954 | 12.3% | 3.5% | +0.7% | $1,493 |
| Indianapolis, IN | 2,205,695 | +5.6% | $80,239 | 10.9% | 3.4% | -1.2% | $1,556 |
| Toledo, OH | 599,376 | -1.1% | $66,095 | 15.1% | 4.0% | +0.5% | $1,260 |
| Memphis, TN-MS-AR | 1,341,412 | -0.3% | $68,124 | 17.4% | 4.7% | +0.1% | $1,361 |
| United States | 341,784,857 | +3.1% | $81,604 | 12.2% | 4.4% | | $1,654 |
Population and growth are Census Bureau estimates for July 1, 2025 against the 2020 Census.
Income and poverty are the 2024 American Community Survey.
Unemployment is the July 2026 BLS figure, not seasonally adjusted.
The jobs column is nonfarm payrolls, July 2025 to July 2026.
Wages are the BLS county wage census for the first quarter of 2026.
A caveat on Cleveland. The five-year figure shows population decline, but the direction has turned in recent years. The metro grew in each of the last three years, with about 2,500 people added from July 2024 to July 2025, after losing population in 2020, 2021 and 2022. The growth is coming from people arriving from abroad rather than from other states, and it's small. With everything happening in the US with immigration right now, we might see that trend reverse when the next data are published, but for now it's still the right sign for a market where I'm buying the neighborhood rather than the metro.
Read that table the way I do. Five of the six metros have unemployment below the national rate. Memphis is a little above it.
The growth column is the direction. Indianapolis and Kansas City are pulling people in. Birmingham is steady. Cleveland, Toledo and Memphis are flat to slipping. A flat metro can still hold an improving neighborhood, which is why Cleveland is second on my list. But it raises the bar for the street you pick.
What does the housing market look like on the ground?
| City | Typical home value, June 2026 | 1-year change | Typical asking rent | 1-year rent change | Days to pending | Gross yield on citywide figures | Price to income (metro) |
|---|
| Kansas City, MO | $257,356 | +1.2% | $1,444 | +3.9% | 7 | 6.7% | 3.8 |
| Cleveland, OH | $121,435 | -2.0% | $1,430 | +4.2% | 13 | 14.1% | 3.2 |
| Birmingham, AL | $139,502 | -2.2% | $1,359 | +0.5% | 24 | 11.7% | 3.5 |
| Indianapolis, IN | $233,826 | -0.5% | $1,411 | +2.2% | 14 | 7.2% | 3.6 |
| Toledo, OH | $135,476 | +5.3% | $1,125 | +4.7% | 7 | 10.0% | 2.9 |
| Memphis, TN | $146,746 | -3.0% | $1,280 | +0.8% | 32 | 10.5% | 4.2 |
Home values, rents and days to pending are Zillow's city-level indexes, data through June 2026.
Gross yield is twelve months of that rent divided by that value, with nothing taken off.
Price to income is the metro's median owner-occupied home value divided by its median household income. Both come from the 2024 American Community Survey.
All of these are citywide statistics. Prices, time on market and price growth vary a great deal from one neighborhood to the next, and in these markets they can vary from one block to the next. A citywide figure tells you the tide. It doesn't tell you what's happening on any particular street.
Look at the gross yield column, then look back at the reality table above. Citywide, Cleveland comes in at 14% and Memphis at over 10%. The real houses in my analysis earlier in this article, priced honestly based on actual operational reality, returned 6.7% and 4.3%. That gap is my whole thesis. A citywide average is pulled down by the cheapest, most run-down housing in the city. That housing produces the yield on paper and the losses in practice. That's exactly what I experienced with my own portfolio in 2023.
Days to pending tells you something too. Kansas City and Toledo houses go under contract in a week. Memphis takes a month. When you need to sell, that's the difference between a market and a wait. But also a word of caution. You have to look at who is buying and why. In Toledo for example, many of the homes are being purchased by investors looking for that yield. That's not necessarily a healthy balanced housing market with organic demand for housing from the local population.
1. Kansas City, Missouri
A diversified economy across healthcare, logistics, technology and animal health, in a landlord-friendly state.
The metro has added about 79,000 people since 2020. Unemployment sits below the national rate, and rents are still rising close to 4% a year.
The house in the table above sits in Marlborough, on the affordable side of the city's south side, where prices step down block by block. That's exactly why I've graded it a C and a cash-flow buy rather than a B. But the trend is what I really like: crime falling, infill building, first-time buyers moving in. By my reckoning, that's a Phase 2 neighborhood, revitalizing.
The house appraised at $208,000 against my $185,000 offer, and the $5,000 seller credit goes to closing costs and buying down the rate. That's how I use credits in this market: cash to close, not price. So, in this case, we get a nice slice of equity, and the numbers work pretty well.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| Hyde Park | B | Phase 3, established | The Midtown benchmark. Priced for owners, thin yield, safe resale. |
| Troostwood | B | Phase 2 to 3, steady | Small and stable, a few blocks from the C side. Shows how close the two grades sit. |
| Oak Meyer Gardens | B | Phase 3, steady | The south-side B nearest the deal. Renovated houses sell to owners here. |
| Marlborough Heights | C | Phase 2, improving | The deal in this article. Infill building, falling crime, first-time buyers arriving. |
| Blue Hills | C | Phase 2, improving | The C every Kansas City investor has heard of. Better on the university edge than the map suggests. |
| Manheim Park | C | Phase 2, improving | New houses going up on vacant lots. The trajectory story in one neighborhood. |
Watch out for: the abated tax bill that expires, weak public transport, and tornado risk that pushes insurance up. One of my clients, Ronald from Ottawa, owns one Kansas City house and is considering another, and the full picture is in my guide to investing in Kansas City real estate.
2. Cleveland, Ohio
Cleveland is one of the most talked about markets for cash flow investors. Highly affordable housing, and a healthcare anchor in the Cleveland Clinic that doesn't leave in a recession.
The metro population has reversed its long-term negative trend and is now growing again. Unemployment at 3.1% is the lowest of the six. The duplex in the table is in West Boulevard, 44102. The ZIP as a whole grades badly, but West Boulevard is the higher owner-occupancy pocket on the southwest side, and it's improving block by block. C+ today, Phase 2, and my sweet spot.
Rent-to-price of 1.2% on my offer. Note the citywide numbers. A typical Cleveland house is worth $121,000, and values fell 2% last year. That average is dragged down by thousands of houses I'd never buy. The renovated duplexes and single-family homes I'm interested in sit well above it. That's the point. The more broad the statistic, the less relevant it is to any one particular property or street.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| West Boulevard | C+ | Phase 2, improving | The deal in this article. Higher owner-occupancy than the ZIP suggests. |
| Old Brooklyn | B- | Phase 2 to 3, steady | Owner-occupied, stable, priced above the city average. Where a C buyer trades yield for sleep. |
| Clark Fulton | C | Phase 2, improving | Hospital investment on its doorstep. Street by street, and worth the legwork. |
Watch out for: crime that varies street to street, a six-year reassessment cycle on property tax, Cleveland's 2.5% municipal income tax on your net rental profit, and very old housing stock.
Cleveland rewards local knowledge more than any market here, which is why investing in Cleveland real estate has its own guide. One of my clients bought two Cleveland duplexes on a DSCR loan with the $125,000 he'd planned to spend on one house for cash. That's the beauty of using leverage instead of paying cash.
3. Birmingham, Alabama
The most suburban deal on the list, in the state with the lowest property tax of the six.
East Pinson Valley and Chalkville sit in unincorporated Jefferson County, with higher owner-occupancy and lower crime than the ZIP average suggests. B-, Phase 2 to 3, steady.
The metro is growing slowly and unemployment is low. But rents have barely moved in a year, and the trade-off is yield. Rent-to-price of 0.73% is the weakest here. The reality figure is pending a real insurance quote, so I've left it blank rather than guess. I'd look for a $5,000 seller credit on this one too, for the same reason as Kansas City. For me, this looks like a pretty safe fire-and-forget investment. It might not generate a lot of free cash flow, but it's a great area with a solid tenant base that makes for a good long-term hold to capture future appreciation and mortgage paydown without a ton of management issues.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| East Pinson Valley | B- | Phase 2 to 3, steady | The deal in this article. Suburban, stable, thinner yield. |
| Hueytown | B- | Phase 3, steady | Established suburb, owner-heavy, slow and predictable. |
| Forestdale | C+ | Phase 2, steady | Unincorporated, affordable, a step below Hueytown on condition and price. |
Watch out for: the reassessment risk on the tax bill, a 60-day deposit return window that tenants know about, hot humid summers that punish HVAC and invite mold, and weather-driven insurance.
4. Indianapolis, Indiana
This is another popular market that often makes the internet's top lists of cash flow markets.
In terms of population, it's the fastest-growing metro on this list, up 5.6% since 2020, with the highest wages of the six and the best ZIP-level crime grade.
The one flag in the data is jobs. Payrolls fell 1.2% in the year to July 2026. I'd watch that rather than worry about it yet. The house in the table is a competitor's listing in Mars Hill, the weaker southwest pocket. For me, this is an honest C. The pro forma understated insurance by 23% and the yield fell from 7.1% to 4.6% on real assumptions.
I spoke to a Canadian investor a few months ago with around 60 rental properties in Indianapolis. He and his brother bought in cheaper neighborhoods for the yield (because those deals looked great on paper). But the reality today is that he just about breaks even each month after repairs, capex, delinquencies, vacancies, evictions, and turnovers. That's not an Indianapolis thing, that's just further evidence that the neighborhood matters more than the on-paper returns, and that those high yields often mean higher risk.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| Mars Hill | C | Phase 2, mixed | The competitor listing in this article. The ZIP flatters the pocket. |
| Fountain Square | B | Phase 3, established | Already improved, and priced that way. Appreciation more than cash flow. |
| Broad Ripple | B+ | Phase 3, established | Popular, walkable, expensive for what it rents at. Outside the cash-flow buy box. |
Watch out for: headline yields below the cheapest markets, and a shortage of affordable housing that keeps the tenant pool competitive.
5. Toledo, Ohio
With some of the lowest entry prices in the country and consistent rental demand, Toledo has to make the list. Although personally, I wouldn't buy there. I just don't have as much faith as others seem to about its future prospects. And it's the future prospects we're betting on.
Citywide values rose 5.3% in the year to June 2026, and houses go pending in a week. Investors have found it. The duplex in the table above shows both sides of it: the best yield on the page and the neighborhood I wouldn't own. C-, Phase 1 to 2 borderline. Some blocks are improving. But poverty runs at 15% metro-wide, and higher in the pockets that produce the headline yields. Toledo might be worth your time if you stay in the better pockets and refuse the streets that look best on a spreadsheet. For me, I can find more stability elsewhere.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| Ottawa | C- | Phase 1 to 2, borderline | The deal I passed on. Best yield on the page, worst street to own. |
| Old West End | C+ | Phase 2, improving | Historic houses being restored one at a time. Buy the finished ones. |
| West Toledo | B- | Phase 3, steady | Owner-occupied and quiet. Lower yield, far fewer surprises. |
Watch out for: heavy investor competition, many undermaintained homes (inspect and scope the sewer, always), Toledo's 2.5% municipal income tax, and tenant risk that rises fast as the price falls.
6. Memphis, Tennessee
I see Memphis being talked about a lot on real estate forums, social media, and podcasts. Again, I think that's mostly because the numbers look pretty good on face value.
Low prices, no state income tax, real job anchors around the FedEx hub, and more turnkey sellers than any market I know. That last point is the risk. The metro is flat. Poverty is the highest of the six at 17.4%. Values fell 3% in the year to June, and a house takes a month to go pending.
Whitehaven, Frayser and Orange Mound are where the inventory concentrates, and the people selling it grade it generously. C- on the house above, with crime the deciding factor. Memphis is here as the cautionary case, not a recommendation. I don't own there.
| Neighborhood | My grade | Direction | One-line verdict |
|---|
| Whitehaven | C- | Phase 1 to 2, flat | The cautionary case. Seller grades it B. Crime decides it. |
| Frayser | D | Phase 1, flat | The cheapest turnkey inventory in the city, and priced that way for a reason. |
| Orange Mound | C- | Phase 1, mixed | Heavy investor ownership, thin owner demand. Grade the block, not the name. |
Watch out for: inventory quality that varies wildly, seller grades that omit crime and collection risk, and a resale market where the county values houses below the turnkey price. If you buy here, read the appraisal before the pro forma. How to read a rental property appraisal shows you the boxes that carry the neighborhood data.
There's no universal standard for the gradings I've applied here. They're my opinion. I build them from the police data within half a mile, the census tract's incomes and owner-occupancy, and what a manager who works the street tells me (with my own personal experience baked in).
For the foreign-investor view of these same markets, tax and financing included, see my guide to the best US markets for foreign investors. British readers comparing against home will find five real US buy-to-let properties reviewed closer to how they think.
Which cities give the best rental yield in 2026?
On honest numbers, Cleveland and Kansas City, at 6.7% and 6.4% net before financing. Again, that's not what turnkey sellers are marketing, it's what I believe is closer to operational reality in those markets. Toledo is higher at 7.1%, but I've explained why I wouldn't own the house that produced it. Indianapolis and Memphis fall to 4.6% and 4.3% once the real costs go in.
Notice what happened to the order. On the sellers' pro formas Toledo led the pack by some margin, Cleveland was second and Kansas City third. On reality Kansas City and Cleveland are almost level and both are houses I'd buy. The yield that survives an honest insurance quote and honest reserves is the only one worth ranking by.
Which cities work when insurance costs matter?
The Midwest ones, and the numbers say so quite clearly.
Across five full-replacement quotes in 2026, insurance ran from $1,375 in Kansas City to $2,661 for the Toledo duplex. Cleveland came in at $1,878 for two units, Memphis at $1,480 and Indianapolis at $1,962. On a $1,800 rent that's roughly one month of income a year, which is manageable. In Florida the same coverage on a similar house runs several times that, and it's the single biggest reason Florida rarely cash flows.
Two rules. Get the quote before you make the offer, not after. And get it for full replacement cost with water backup and loss of rent, because the cheap policy in the pro forma is the one that leaves you paying for a new roof yourself. Landlord insurance for foreign owners shows five real quotes side by side and what each coverage does.
Insurance, reserves and the tax bill you'll actually pay.
Two of the six pro formas on this page budgeted nothing for insurance. The rest understated it, by 23% to 60% where a real quote is in. All six used 5% for vacancy and 5% for maintenance with nothing for capex, which is the line that pays for a roof, a furnace or a sewer line.
On my own houses I run a maintenance and capex schedule that budgets for those, and it's why I pay more for a house with brand-new systems: I'm pushing the big costs further into the future. In fact, I don't touch my free cash flow for at least 5 years. I let it accumulate in the operating account so it's there when I need it. So you might say my vacancy, maintenance and capex reserve is 100% of free cash flow, not 5% of gross rents.
The tax line is the quiet one. A listing shows this year's bill. It doesn't show the abatement expiring, or the reassessment when the sale price hits the county's records. Both are on this page, and both would have caught a buyer who trusted the printout.
Why does this list skip the hot markets?
Because the hot markets are appreciation bets with thin or negative cash flow, and a leveraged foreign owner carries more downside on them than a local does.
Austin, Phoenix, Tampa, Nashville and the rest can work for someone with income to cover the shortfall. They fail the self-sustaining test above on real insurance and real taxes.
Florida's insurance and Texas's property tax are the two costs that decide it. I'll make the full case for cash flow over appreciation in its own article; here the short version is that I want the house to pay for itself first, and grow second.
How do I grade a market from overseas?
The same way I grade a neighborhood: level plus direction, on the smallest possible area with reliable data. A county eviction rate or a ZIP-wide rent tells you almost nothing about one street.
I use the police open data within half a mile, the census tract for incomes and owner-occupancy, and a property manager who works that neighborhood to tell me what the data can't. Then I check the appraisal, because the appraiser's neighborhood section is an outside check on what I think I'm seeing. It's a game of probabilities, and that's how I shift them.
How do you make a good market work from 4,000 miles away?
Choosing the city is the smallest part. The house has to be renovated to the studs, not painted over old systems. The property manager has to be managed, and how I manage the manager from overseas is its own article. Screening has to be strict: three times the rent in income, bank statements, references, background and credit.
Financing follows the property. A foreign national DSCR loan qualifies the house on its rent rather than you on your income, which is how I've bought most of mine. You find the property first and get terms second, and DSCR loans explained covers what lenders want to see. New to the process? Start with the step-by-step buying guide.
If you want the vetted deals themselves, priced the way this page prices them, that's what my sourcing service does. All you need to do it yourself, from entity setup to the buy box, is in my Foreign Investor Starter Kit.
The bottom line
If I had to buy one house off this page tomorrow, it would be the Kansas City one. Not because it has the highest yield, it doesn't. Because it's the best balance of a deep renovation, a real net yield after honest costs, and a neighborhood that's clearly getting better. That balance is the whole strategy. I feel it gives me the best chance of a desirable outcome over a 10- or 20-year hold.
I'd skip the Toledo duplex, and I did. I'd never buy the Memphis house at the seller's B-class neighborhood rating. And I'd treat each pro forma I'm sent, including the ones on my own deals, as the optimistic column until a real insurance quote and a real tax bill say otherwise, and until I've spoken with a couple of property managers with precise local knowledge and experience.
In my experience, boring wins. Buy the improving C-quality street over the cheapest house on a declining one, expect the cash flow to stay in the property, and let appreciation and paydown do the work over ten years. Investing isn't about certainties. The decisions that matter are the ones that raise the probability of it going right and lower the probability of it going badly wrong.
This article is general information, not legal, tax or financial advice. David Garner is a property investor and is not a lawyer, tax adviser, accountant or investment adviser. Cashflow Rentals is a real estate consultancy, not a real estate broker, and is not a lender or investment adviser. Cashflow Rentals is paid an advisory fee, charged to the renovating contractor, on the turnkey properties it introduces to clients, and three of the six houses on this page are properties it has vetted and offers, so I have a commercial interest in the decision this article discusses. Every figure is for one real house priced in 2026 and is not a market average. The pro forma scenario uses 5% vacancy, 5% maintenance, 0% capital replacement and 8% management; the reality scenario uses 10% vacancy, 20% maintenance plus capital replacement and 8% management. Property tax is the verified current bill. Insurance is a 2026 full-replacement quote. The Memphis cost of sale of 7.5% is an assumption built from 2026 Tennessee commission, title and concession data, and the Memphis sale history is taken from public record data and MLS listing history. Neighborhood grades are my opinion; there is no universal grading standard. Always take advice from a qualified professional before buying.
