I just got off of the phone with Australian real estate investor and teacher, Nigel Kibel. He's a great guy and has some wonderful insight into international investing. It's been good to talk with him and get to know him better. We've actually become friends, and I'm thankful for the time chatting and learning.

We were discussing the current market and economic situation across the world, but particularly here in the US. He was asking what we and our investors are finding the greatest amount of success with these days. He was concerned about the dynamic of a falling economy and what types of property provide the most stability and possibility through rough economic times.

My answer to him was very simple, "Buy low to low-middle income area properties. Don't even consider anything above that, unless the price is unbelievable (in that case, it's likely the price is truly unbelievable)." BTW, I'm not talking about low-income slum areas.

As small to average-sized investors, you need to reduce your risk in a market where there are so many questions about the volatility of the economy. The best way to accomplish that is to do the following:

• Purchase properties where rents can remain affordable to potential tenants no matter the market swing. If you're buying in the right markets, this should be easily attainable.
• Put enough down to ensure that your rents will cover the mortgage, even if/when the rents must be dropped to match the market conditions. Biting into the equity a little and allowing for more potential cash flow is a must.
• Ensure your property manager is capable of dealing with the challenges and risks involved. They will make or break you.

Tuesday's Tip: Take a realistic approach to the market. It will settle your balance sheets and your stomach.