1. Akron, OH — 7.8% cap rate $145K median price, $980/month rent. High property taxes (1.58%) are the tradeoff, but the entry price is so low it doesn't kill the deal. Healthcare and university provide stable tenant demand.
2. Toledo, OH — 7.7% cap rate $135K median, $920/month rent. Similar story to Akron — rust belt affordability with real cash flow. Population is flat, so you're buying for income, not appreciation.
3. Jackson, MS — 7.5% cap rate $140K median, $920/month rent. Property taxes are only 0.65% — one of the lowest in the country. That alone adds $100+/month to your cash flow vs a high-tax state. Vacancy runs higher at 8%, so budget conservatively.
4. Peoria, IL — 7.3% cap rate $125K median, $880/month rent. Lowest entry price on this list. The 2.1% property tax rate hurts, but at $125K the dollar amount is still manageable. Caterpillar HQ keeps the economy anchored.
5. Reading, PA — 7.0% cap rate $145K median, $1,020/month rent. Best rent-to-price ratio of the bunch at 0.70%. Only 90 minutes from Philadelphia, which creates commuter rental demand. Vacancy is the lowest on this list at 6.5%.
The 5 everyone thinks are good but aren't:
Austin, TX — 4.1% cap rate. Prices ran way ahead of rents. Great city, bad cash flow math.
Nashville, TN — 3.8% cap rate. Same problem. You're buying appreciation hope, not income.
Boise, ID — 3.5% cap rate. The pandemic darling has priced out cash flow investors entirely.
Phoenix, AZ — 3.9% cap rate. Rents are strong but prices caught up. Barely breaks even with financing.
Tampa, FL — 4.0% cap rate. Insurance costs ($4,200/year) eat your margins alive. Florida insurance is the hidden killer.
The pattern: Cash flow lives where nobody wants to vacation. Boring Midwest and Southeast cities with stable employers, low prices, and landlord-friendly laws.
Want to run the numbers on any of these? Every city has a free pre-filled calculator:
And if you're comparing states for tax impact on your rental income:
Next week: How much cash do you actually need to close on a rental property? The real number surprises most first-time investors.
— The Numbers Letter