The B-Tier City Property Ladder
Never buy the A-city. Buy the outskirts of the B-city next to it — the gravy train has already left the A.
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 82%
Zhu's property method starts with a hard rule: real estate is an investment, not a way to shirk rental cost. If you're going to live in it, the only case that works is when the rooms you rent out cover the mortgage and drive your living cost toward zero — which in a major metropolitan city is essentially impossible because the mortgage is far above the rent roll. From there it's tiering. Manhattan is A-tier; Jersey City is the adjacent B-tier; and within Jersey City the real opportunity was at the outskirts, the last stop at Journal Square on the path train. She buys condos there because multis are too expensive, and takes the multis and single-family homes in C and D-tier cities — places nobody wants to live, with local populations and no incoming yuppies — where the price still supports the deal. All of it funded traditionally: 30-year fixed, 20% down, buy each time a down payment accumulates.
Origin
Zhu grew up around a wealthy family as the daughter of Chinese immigrants and says real estate was always her goal — 'Chinese people, immigrants, we love real estate.' She started the way most do, in her own neighborhood, buying a Brooklyn condo in 2013, and built the tiering method across the properties that followed.
Core principles
- 01Buy property as an investment, never to save on your own rent.
- 02Valuation = average rental price of like-kind property minus the potential mortgage cost.
- 03A-tier cities have already spent their appreciation; the upside sits one tier down.
- 04Ride the tiers: condos in B-tier outskirts, then multis in C and D-tier cities.
- 05Start where you understand the market — usually your own neighborhood.
How to run it
- 1
Decide it's an investment, not a residence
Look at the property from a third-party perspective. The moment you evaluate it as somewhere you'll live, it stops being an investment and becomes a personal decision.
Watch out Zhu's answer on buying for primary residence is 'absolutely hell no.' Personal decisions are not good investment philosophies.
- 2
Run the valuation test
Valuation is the average price of rentals minus the potential mortgage cost of a like-kind property. If rents don't cover the mortgage, the deal doesn't work.
Pro tip The only live-in case that passes: you buy, rent the rooms out, and the rental value of those rooms covers your mortgage — driving your living cost to roughly zero.
Watch out In major metropolitan cities the mortgage value is so much higher than the potential rent roll that this is effectively impossible.
- 3
Start in a market you understand
The easiest entry, as most people do it, is to buy in your own neighborhood where you already know the market. Zhu bought in Brooklyn to start.
Watch out Timing matters more than you'd like. Zhu notes she was lucky it was 2013 and that today is obviously a different story.
- 4
Buy the B-tier adjacent to the A-tier
Identify the A-tier city, then the B-tier city close to it. Manhattan is A-tier; Jersey City is the B-tier next door.
Pro tip Push to the outskirts of the B-tier — Zhu names the last stop at Journal Square on the path train as where the remaining opportunity sits.
Watch out Don't chase a B-tier that has already run. Jersey City had already experienced a lot of growth by the time she said this; the gravy train is not going to keep going.
- 5
Drop tiers to afford multis
Condos are what's affordable in B-tier locations because multis are too expensive there. For multis and single-family homes, move to C and D-tier cities — less populous middle-of-the-country markets and quiet coastal pockets.
Pro tip The lack of incoming yuppies is the point — it's why the price still supports the rent roll.
- 6
Fund it traditionally and repeat
Zhu's loans are all 30-year fixed, 20% down. Every time she has enough for a down payment — roughly 30-40 grand — she buys again.
Pro tip Cash-out refinancing on an appreciated property funds the next purchase without a sale.
In the wild
Rather than buy in Manhattan, Zhu's rule sends her to Jersey City — the B-tier adjacent to the A. Jersey City had already grown considerably, so within it she targets the outskirts: the last stop at Journal Square on the path train, where opportunity still remained.
→ She buys condos in those locations, reasoning you'd be much better off there than in the A-city, because appreciation in the A has largely been spent.
Zhu bought her first condo in Brooklyn in 2013 at 25, in her own neighborhood, where she understood the market. She is explicit that she did not buy it to save on rental costs — her rent was already lower than the out-of-pocket mortgage would have been.
→ She sold it in 2016 and parlayed it into three more properties.
Common mistakes
Buying to shirk rent
Real estate is not a way to reduce your rental cost. Zhu's own rent is lower than a mortgage would be, which is exactly why she treats property as an investment instead.
Buying the A-tier city
There's only so much appreciation left in a market that has already run. The gravy train is not going to keep going, so the A-city buyer pays for growth that already happened.
Chasing multis in expensive markets
Multis are too expensive in B-tier locations. Trying to force them there instead of dropping to C and D-tier cities breaks the rent-to-mortgage math.
Is it for you?
Best for
Salaried earners accumulating down payments who want appreciation exposure and can research adjacent markets.
Not ideal for
People buying a home to live in, or anyone who cannot separate a personal preference from an investment thesis.
From the transcript
“Real estate is not to shirk rental cost. That's not the reason why you should be going into real estate. It is an investment. You…”
“Valuation is all about looking at the average price of rentals minus the potential mortgage cost of a like-kind property.”
“My other strategy is to buy in B-tier cities within the A-tier city. So Manhattan is the A-tier city, a B-tier city close to Manhattan…”
From the episode
Dandan Zhu: Becoming a Millionaire Before 30
Dandan Zhu