If you had asked me this in 2016, I would have given you a very different answer, because back then I thought the best markets were simply the cheapest ones. After buying, renovating, financing, and managing more than 120 rental properties across the United States while living overseas, and nearly losing everything in 2023, I learned that cheap property and good investment property are not the same thing. This is not another list of cities ranked by cap rate. It is the markets I actually like today, and the criteria I use to choose them.
Markets
Best U.S. Real Estate Markets for Foreign Investors
This isn't a list of cities ranked by cap rate. After 120+ purchases and a near-wipeout in 2023, here's how I actually evaluate U.S. markets, and the three I like most for foreign investors.
David Garner · Co-Founder
Key takeaways
- The best cash flow markets are not necessarily the cheapest ones.
- Housing affordability is one of the strongest signs of a stable long-term market.
- Neighborhood, and often the street, matters more than the city.
- A high projected return usually comes with higher operational risk.
- Kansas City, Cleveland, and Baltimore are the Midwest markets I focus on.
Why most best-market lists are wrong
Most guru lists follow the same formula: a few cities, some population data, a cap rate, a cash flow projection, and a declaration that Market X beats Market Y. Real estate does not work like that. The lists over-prioritize cash flow and treat all cash flow as equal. In the real world it is not. A property showing $500 a month on paper in a rough neighborhood, with constant vacancy, evictions, and turnover, is not the same investment as one showing $250 a month that actually reaches your bank account, in a stable neighborhood with long-term tenants. When I scaled to more than 120 properties, the ones that looked best on paper were some of the worst I ever owned, while the modest performers quietly delivered year after year.
So before I look at yields or cap rates, I ask one question: can ordinary people afford to live here? In my experience, housing affordability sits at the heart of almost every successful rental market.
What I look for in a market
The best markets share a set of characteristics, but one thing underpins them all: the city or metro matters far less than the neighborhood and the street. Buying on a bad street in a good city is still buying in a bad spot. You see this in places like Cleveland and Detroit, where the metro numbers look great but the variation block to block is staggering.
| Factor | Why it matters |
|---|---|
| Housing affordability | If locals can afford to rent and buy, the market stays stable |
| Economic diversity | Multiple industries mean jobs, and rent, survive one employer leaving |
| Population stability | Neighborhood-level trends matter far more than metro headlines |
| Neighborhood quality | It determines your tenant pool: buy the dirt first, then the box |
| Rent-to-price ratio | The numbers must work, but a very high cap rate signals higher risk |
A word on each. Affordability is about whether local people can afford rents and mortgages on local incomes; where they can, you get stable values, steady demand, and fewer corrections. Economic diversity (healthcare, logistics, manufacturing, education, government) makes a market resilient when one employer leaves. Population should be read at the neighborhood level, not the metro: Cuyahoga County's population declined for decades while values and rents rose. Neighborhood quality determines your tenants, as a mentor of mine puts it, buy the dirt first, then look at the box, because you can renovate a house but not the street it sits on. And on the numbers, a high cap rate is really a measure of risk, not just return.
The highest cash-flowing properties frequently come with the highest operational risk. An $80,000 house is $80,000 for a reason, and you have to ask whether that reason creates risk you are willing to accept.
Real estate is not just local, it is hyper-local. I own a five-bedroom rental on Prospect Avenue in Kansas City that performs extremely well on an improving block, but travel a few minutes either way and you hit blocks still struggling with vacancy and neglect. Same city, same street name, completely different outcome.
Why I focus on the Midwest
I focus much of my activity on the Midwest not mainly because it is cheap, but because it scores well across almost every criterion above: strong affordability, diversified and stable jobs, inward migration, and neighborhoods benefiting from ongoing investment, all while still offering properties that generate meaningful cash flow without excessive risk. While Florida, Texas, Arizona, and parts of California boomed then corrected as prices outran incomes, most Midwestern markets grew slowly and steadily. Boring, maybe, but predictable.
A quick real example: I recently helped a Canadian investor buy a fully renovated four-bedroom, two-bathroom home in Kansas City for $163,000. It rents for about $1,700 a month and produces roughly $500 to $600 in free cash flow after financing, expenses, and reserves. That combination of affordability, cash flow, and renovation quality is very hard to find in coastal markets today. Here is how my three featured markets compare.
| Market | Typical renovated price | Typical rent | Character |
|---|---|---|---|
| Kansas City, MO | $150k to $250k (4-bed) | $1,500 to $2,500 | Stability and a strong local team; street by street |
| Cleveland, OH | around $150k (3-bed) | $1,400 to $1,600 | Strong yields; west side only; watch old systems and taxes |
| Baltimore, MD | $150k to $160k (3-bed row) | $1,500 to $1,700 | Wild card; durable brick; revitalizing; very neighborhood-sensitive |
Kansas City, Missouri
If one market best reflects my philosophy, it is Kansas City. I own multiple properties there and have helped many foreign investors buy, but the biggest reason I like it has less to do with the city than the people: as a foreign investor you rely on others for everything, so I would rather invest in a 7/10 market with a 10/10 team than a 10/10 market with a 5/10 team. My Kansas City team is excellent. The fundamentals fit too: affordable housing, diverse and stable employment, healthcare investment, steady population, and fully renovated four-bedroom homes around $150,000 to $250,000 renting for $1,500 to $2,500, attracting ordinary working families who stay. It is still a street-by-street market with neighborhoods I target and others I avoid, but the probability of long-term success there is high.
Cleveland, Ohio
Cleveland has quietly been one of the best-performing rental markets of the last decade: steady appreciation, strong demand, excellent rent-to-price ratios, and superb affordability. You can still buy a renovated three-bedroom in many neighborhoods around $150,000 and rent it for $1,400 to $1,600. I recently helped a German client buy his first Cleveland rental, a three-bed in Detroit Shoreway, for $150,000 against a $160,000 appraisal, rented at $1,500.
But Cleveland is a tale of two cities. The west side generally offers better neighborhoods, lower vacancy, and a more stable tenant base; the east side is where you find the cheap properties, and also the crime, deterioration, and problem tenants that make those cheap numbers a trap. The housing stock is also old, often built between the 1890s and 1950s, so a full systems update (roof, furnace, HVAC, sewer line, electrics, plumbing) can run upwards of $60,000. On a $100,000 house you would need to buy under $40,000 just to break even, which is why I prefer properties where the major systems are already done. Finally, watch the property tax reassessment: a sale can lift taxes enough to wipe out projected cash flow, so underwrite future taxes, not current ones. Get the neighborhood and systems right, and Cleveland is a great long-term market, and foreign national DSCR loans work well there.
Baltimore, Maryland (my wild card)
If Kansas City is stability and Cleveland is opportunity, Baltimore is my wild card. I do not own there yet, but I know experienced investors who do, and I am seriously considering it. It is probably the most neighborhood-sensitive market I have ever looked at: get the location wrong and you create real problems, get it right and the upside can be significant. After decades of high crime, vacancy, and disinvestment, the last several years have brought meaningful change, with local government, private investors, and community groups renovating vacant homes and reviving neighborhoods, one organization reportedly cutting vacancy by more than 90% in several areas.
What makes Baltimore interesting is the durable brick row homes, which need far less maintenance than wood-framed houses, plus attractive pricing: renovated three-bed row homes around $150,000 to $160,000 renting for $1,500 to $1,700. The real opportunity, though, may be that some improving neighborhoods are still early in their transformation. A caution: Baltimore became a favorite hunting ground for some overseas sellers pushing the cheapest, worst-located, often pre-renovation properties, where the renovation budget sometimes simply vanished. So do thorough due diligence on the seller, neighborhood, and property.
I never claim any of these is the single best market, because I do not think one exists. What matters is understanding the risks and neighborhoods, building a reliable team, and buying quality assets. If you want help doing that, you can book a call, or read my full investment strategy and the buying guide.
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Frequently asked questions
Is the highest cash flow rental market always the best investment?
Not necessarily. In my experience, the highest cash flow properties often carry the highest operational risk, in lower-quality neighborhoods with more vacancy, turnover, maintenance, and a tougher tenant base. I generally prefer a property that produces slightly less cash flow but attracts stable long-term tenants and needs less day-to-day management.
How do I evaluate a neighborhood if I live outside the United States?
Look beyond city-level statistics. Review crime trends, vacancy rates, school quality, property values, owner-occupancy, and recent renovation activity, and ask local property managers where they would and would not invest their own money. Above all, remember real estate is hyper-local: in many cities the difference between a great and a poor investment is just a few streets.
Should foreign investors focus on appreciation or cash flow?
Ideally both. I avoid markets that rely entirely on appreciation, and I avoid properties with extremely high cash flow at the expense of neighborhood quality. My preferred investments produce positive cash flow from day one while sitting in neighborhoods with long-term growth potential. Over time, cash flow, mortgage paydown, and appreciation together are very powerful.
Why do some foreign investors lose money despite buying below market value?
Because the purchase price is only one part of the equation. Many underestimate vacancy, turnover, maintenance, capital expenditure, management challenges, and future property tax increases. A property can look like a bargain and still be a poor investment if the neighborhood, tenant base, or condition creates ongoing problems.
What is the biggest mistake foreign investors make when choosing a market?
Focusing on the city instead of the neighborhood. Many pick a market because it appears on a best-cities list without understanding the local streets. Neighborhood quality has a far greater impact on performance than city-level statistics: a great neighborhood in an average city usually beats a poor neighborhood in a popular one.
Why do you focus on the Midwest for cash flow?
Because Midwestern markets score well across almost every factor I care about: strong housing affordability, diversified and stable employment, steady rather than boom-and-bust growth, and neighborhoods where you can still buy quality renovated homes that produce real cash flow at sensible prices. That balance is increasingly hard to find elsewhere.
Written by
David Garner
David is co-founder of Cashflow Rentals and a British investor who has personally purchased more than 120 U.S. rental properties as a foreign national since 2016. He helps overseas investors build U.S. rental portfolios remotely, from his base in Brazil.
