Based on my research, you would look for areas that have a strong work environment, geographical limitations that help (a river restricting how many units there are or can be), and so on.
But based on my experience, I would recommend you just keep looking. We have a fourplex in California, it cashflows about $200 per unit, but part of that is due to the healthy down payment we put up. And this is in an economically depressed county, the work environment is so-so, _contrary_ to my research mentioned above.
Due diligence is the key for us. I optimized on "most income potential for the down payment," then ended up paying extra because the previous owner had a firm line in the sand and someone else was also interested in the same property.
Thanks to phantom cashflow (depreciation) and the repairs we make here or there, we put money in our pockets but are able to show the IRS a loss during _some_ years, based on the US tax code (conservatively legal).
I have been corrected before on HN about "too good to be true" numbers, so I do need to point out YMMV. We were beneficiaries of being in the right place at the right time, but we also spent the previous years getting ready: reading books on residential rental real estate investing (note the specific angle there - many ways to make - and lose - money on real estate, be specific), cleaning up our credit reports, building up a down payment, learning the local markets so we could buy something local and keep an eye on our first property, learning about property management and being landlords, meeting and interviewing prospective property managers, meeting and interviewing prospective real estate agents, and then setting up the correct legal entity to hold the property in. We hired a coach after the first purchase, and had much of the same learning material, but far more compressed - We went over in 6 months what it took me 3 years of research to get on my own. And that does not include the invaluable tips one can get from someone who already walks the talk.
We also evaluated at least 10 properties in person that did not pass muster, and that was after weeding out scores of properties that we did not even bother to visit.
We had a few deals fall through, but usually because something was not good enough, usually not enough return on investment, or too much deferred maintenance (requires deeper pockets to get in, but can be more profitable in the end - IF you know what you are doing. And have a good team.).
This specific deal earned us %13 - Not great, but definitely better than other deals. I have a friend who would not look at deals unless they had %28 ROI or more in them, but then he also talks a big game :)
But it IS possible. In fact, thanks to the elastic property of real estate negotiations, it is a place where you can still get in with nothing down every once in awhile, but one really has to be prepared for those deals when they come through.
Besides location, location, location, I think the bigger catchphrase should be financing, financing, financing. There is a lot to be said about the art of negotiation, when it comes to a buy/sell agreement.
But again, YMMV, and I only got out of it what I put into it in sweat equity, as well as capital.
And, we are still learning...
We also own a rental in Florida, but that is a whole other story...
