Are there Cashflow Positive Investment Properties in the USA?
"Americans are snapping, like crazy. And not only Americans, I know a lot of people from out of country are snapping as well, similarly to your Australian friend. The market is crazy hot. I'm not familiar with Cleveland, but I am familiar with Phoenix - the prices are up at least 20-30% from what they were a couple of years ago, and the trend is not changing. However, these are not something ""everyone"" can buy. It is very hard to get these properties financed. I found it impossible (as mentioned, I bought in Phoenix). That means you have to pay cash. Not everyone has tens or hundreds of thousands of dollars in cash available for a real estate investment. For many Americans, 30-60K needed to buy a property in these markets is an amount they cannot afford to invest, even if they have it at hand. Also, keep in mind that investing in rental property requires being able to support it - pay taxes and expenses even if it is not rented, pay to property managers, utility bills, gardeners and plumbers, insurance and property taxes - all these can amount to quite a lot. So its not just the initial investment. Many times ""advertised"" rents are not the actual rents paid. If he indeed has it rented at $900 - then its good. But if he was told ""hey, buy it and you'll be able to rent it out at $900"" - wouldn't count on that. I know many foreigners who fell in these traps. Do your market research and see what the costs are at these neighborhoods. Keep in mind, that these are distressed neighborhoods, with a lot of foreclosed houses and a lot of unemployment. It is likely that there are houses empty as people are moving out being out of job. It may be tough to find a renter, and the renters you find may not be able to pay the rent. But all that said - yes, those who can - are snapping." I'm an Aussie and I purchased 5 of these properties from 2008 to 2010. I was looking for positive cash flow on properties for not too much upfront investment. The USA property market made sense because of the high Aussie $$ at the time, the depressed property market in the US and the expensive market here.  I used an investment web-site that allowed me to screen properties by yield and after eliminating outliers, went for the city with the highest consistent yield performance. I settled on Toledo, Ohio as it had the highest yields and was severely impacted by the housing crisis. I bought my first property for $18K US which was a little over $17K AUD.  The property was a duplex in great condition in a reasonable location.  Monthly rentals $US900 and rents guaranteed and direct deposited into my bank account every month by section 8.  Taxes $900 a year and $450 a year for water. Total return around $US8,000.   My second property was a short sale in a reasonable area. The asking was $US8K and was a single family in good condition already tenanted.  I went through the steps with the bank and after a few months, was the proud owner of another tenanted, positive cash flow property returning $600 a month gross. Taxes of $600 a year and water about the same.  $US6K NET a year on a property that cost $AUD8K Third and fourth were two single family dwellings in good areas.  These both cost $US14K each and returned $US700 a month each.  $US28K for two properties that gross around $US15K a year.   My fifth property was a tax foreclosure of a guy with 2 kids whose wife had left him and whose friend had stolen the money to repay the property taxes.  He was basically on the bones of his butt and was staring down the barrel of being homeless with two kids.  The property was in great condition in a reasonable part of town.  The property cost me $4K.  I signed up the previous owner in a land contract to buy his house back for $US30K. Payments over 10 years at 7% came out to around $US333 per month.  I made him an offer whereby if he acted as my property manager, i would forgo the land contract payments and pay him a percentage of the rents in exchange for his services. I would also pay for any work he did on the properties.  He jumped at it.  Seven years later, we're still working together and he keeps the properties humming.  Right now the AUD is around 80c US and looks like falling to around 65c by June 2015.  Rental income in Aussie $$ is around $2750 every month. This month (Jan 2015) I have transferred my property manager's house back to him with a quit claim deed and sold the remaining houses for $US100K  After taxes and commission I expect to receive in the vicinity of AUD$120K  Which is pretty good for a $AUD53K investment.  I've also received around $30K in rent a year. I'm of the belief I should be buying when everybody else is selling and selling when everybody else is buying.   I'm on the look-out for my next positive cash flow investment and I'm thinking maybe an emerging market smashed by the oil shock.   I wish you all happiness and success in your investment. Take care. VR
With student loans at 2%, I wouldn't pay a dime over minimum on that, and I certainly wouldn't sell an investment property to pay them off, you can get CD's that beat 2% interest. With the rentals, you could sell the one that isn't performing as well and pay no capital gains tax if you lived in it 2 of the last 5 years (counting 5 years back from sale date). That'd be a nice chunk of money for your down-payment. The risk of using proceeds to buy a different rental property is that you may find you don't like being a distance landlord, and then you'd lose money selling or be stuck doing something you don't enjoy for a while until you can sell without a loss. Like you mentioned, the risk of selling either/both rental properties is that if the Arizona housing/rental markets do well you'd have given up your position and missed out. Ultimately, I think it's about your desired timeline, if you are content to wait a while to buy in San Diego, you could have a handsome down payment, will know whether or not you like being a distance landlord, and can sell/keep the rentals accordingly. Alternatively, if you want to get a house in San Diego sooner, then selling one or both rentals gets you there faster. If I was in your position, I'd probably sell the rental that I lived in and put that toward a down-payment on a primary residence, keeping the other rental for now and trying my hand at being a distance landlord. "&gt; First, you give this gray topic of Medicare Part-D where Trump promised to act upon, but has yet do anything. Am I right?  If you think the topic is ""gray"" and the issue is Trump ""has yet do anything"" then you haven't put in the time to understand why I think this is an issue.  &gt; Global Warming? It's Trump fault?  It appears you didn't put in the time to understand my issue with President Trump and global warming either.  &gt; Because the Paris Accords, like the TPP, and like NAFTA, and the Iran Deal, etc, etc, etc, are scams to hurt the USA and make the USA pay more. Nothing else.  Oh wow, you have drunk deeply from the Republican cool-aid.  For what it is worth, you are being lied to and manipulated.  There is a lot more (or less in a few cases) to these deals than you have been told.  FYI, when you think the only reason people would be championing a policy you disagree with is that those people are evil, you might want to dig a little deeper.  &gt; Since you are an expert with Global Warming...  All right.  &gt; Who has bigger air pollution, coal power plants, cutting trees, environmental disasters, etc? The USA or China?  Currently?  China, China, USA, USA  Historically?  USA, USA, USA, USA  &gt; ...is it true that deserts are now becoming green?  No, [deserts are growing](http://www.dw.com/en/holding-back-the-growing-desert/a-18620447).  A few spots where plants are now growing in the desert does not change the global trend.  &gt; Most trees in the world, which are in Russia and not the Amazon, are green longer?  It is thought that the warmer temperatures will delay them losing their leaves in fall.  [The warmer temperatures will also kill many of them](http://www.rollingstone.com/politics/news/the-fate-of-trees-how-climate-change-may-alter-forests-worldwide-20150312).  &gt; Global warming happened before, many times in earth history before the industrial revolution?  Yes, due to [Milankovitch cycles](https://en.wikipedia.org/wiki/Milankovitch_cycles) and the Earth releasing methane and CO2.  &gt; Also ice ages?  Yes, again caused by [Milankovitch cycles](https://en.wikipedia.org/wiki/Milankovitch_cycles).  We don't expect another ice age for about 40,000 years.  &gt; Oceans did not rise?  Oceans and continents have risen and fallen a lot in the history of the world.  Usually these kinds of changes come with huge extinction events.  &gt; I am not worried about Global Warming. It has negative things, and positive things.  That is too bad because it will will come with about a hundred negative things for every positive.  &gt; Do you have any idea what will happen in the world, 20-30 years from now, when we stop raising cows, pigs, goats and sheep?  That would be great but that won't be enough to stop global warming.  It is also may never come to pass so it is a bad idea to do nothing today expecting technology to fix our problem tomorrow.  &gt; You should be more worried about China and what this country and all its people do the earth.  Maybe so, but then President Trump should be implementing a plan and taking steps to minimize the damage in the future.  Instead he is ignoring the problem and rolling back what few preparations Obama made." Depends upon the debt cost. Assuming it is consumer debt or credit card debt, it is better to pay that off first, it is the best investment you can make. Let's say it is credit card debt. If you pay 18% interst and have for example a $1,000 amount. If you pay it off you save $180 in interest ($1,000 times 18%). You would have to earn 18% on 1,000 to generate $180  if it was in aninvestment. Here is a link discussing ways of reducing debt Once you have debt paid off you have the cashflow to begin building wealth. The key is in the cashflow. "&gt;&gt; Ok!!!! Please find me something significant that Trump did that you don't like.  &gt; All right, another one of my pet issues is global warming.  Wow!   I asked you twice for significant issues that Trump did, and you don't like.  First, you give this gray topic of Medicare Part-D where Trump promised to act upon, but has yet do anything. Am I right? Did Trump do anything against or for drug prices? Isn't trump trying to replace the healthcare act? Yes or no?  **And now, given a second chance, you come up with ""Global Warming""?**  Are you serious? Global Warming? It's Trump fault? Is Trump against solar panels and wind power?  Do you have any idea why Trump called it Chinese Hoax?   Because the Paris Accords, like the TPP, and like NAFTA, and the Iran Deal, etc, etc, etc, are scams to hurt the USA and make the USA pay more. Nothing else.  Who has bigger air pollution, coal power plants, cutting trees, environmental disasters, etc? The USA or China? USA or 3rd world?  So why does the USA has to do most of the cuts and costs?  Global Warming is another form of tribalism and ""religion"" used to manipulate people.  Since you are an expert with Global Warming, is it true that deserts are now becoming green? Most trees in the world, which are in Russia and not the Amazon, are green longer? Global warming happened before, many times in earth history before the industrial revolution? Also ice ages? Oceans did not rise?   I am not worried about Global Warming. It has negative things, and positive things.   My nieces is working on growing meat in labs for consumption by humans. It will be safer, cheaper, better, and more tasty. **Do you have any idea what will happen in the world, 20-30 years from now, when we stop raising cows, pigs, goats and sheep? Any idea how damaging is current agriculture to the climate? What would happen in the world in 20-30 years from now when robots plant trees everywhere?**  No need for the hysterical and paranoia about ""Global Warming"" and the USA. You should be more worried about China and what this country and all its people do the earth." I'll write this up as a more formal answer, here. I'd suggest looking into a Home Equity Line of Credit, or HELOC. You didn't mention in your question how much equity you have in the home, but assuming at least 20%, you might be able to open a HELOC with a line of $40,000. My experience is that you can do 50% of your equity, but depends on the bank. Here are a few notes that are generally in play with HELOC's (YMMV, so be sure to know the specifics before signing on the line) Doing this, at least when we did 8 years ago, did not subject us to PMI. There are certainly plenty of things to research, but it sounds like you're pretty astute based on how you're evaluating the financial side of this endeavor. There are no guarantees in real estate. Houses could be selling like crazy now, but in 6 months they might not. It certainly sounds like that's a lower risk in your area, but you never know what might happen. If you're taking on this extra line of credit, make sure that it's something you could afford should the worst case scenario happen.  Equity loans are also available. This is a more traditional fixed-rate loan rather than line of credit, so you'd be looking at set monthly payments rather than the flexibility of paying interest only when you need to. There's a brief write-up on the differences here. I have also heard of a construction loan, which falls into the same category as the aforementioned options, but I can't speak to today's market on those. You will make very little cash in real estate. Don't think of it like a money farm, unless if you have the capital to forgo the loan. The rent will pay the equity towards owning the place which at any point you can sell into cash. But you won't get lots of spending cash upfront, it takes a while to build.    Source: have a good friend who does this- the second he gets any capital he instantly buys and manages a new property. Poorest rich guy I know Cash flow is needed for expansion, either to increase manufacturing capacity or to expand the workforce. Other times companies use it to purchase other companies. Microsoft and Google have both used their cash or stocks to purchase companies. Examples by Google include YouTube, Keyhole (Google Earth), and now part of Motorola to expand into Phones. If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year. Some investors do like dividends, but they are looking for their investments to generate cash. Who would require it? Would it be an SEC requirement? Even more government paperwork for companies. "An answer can be found in my book, ""A Modern Approach to Graham and Dodd Investing,"" p. 89 http://www.amazon.com/Modern-Approach-Graham-Investing-Finance/dp/0471584150/ref=sr_1_1?s=books&ie=UTF8&qid=1321628992&sr=1-1 ""If a company has no sustained cash flow over time, it has no value...If a company has positive cash flow but economic earnings are zero or less, it has a value less than book value and is a wasting asset. There is enough cash to pay interim dividends, bu the net present value of the dividend stream is less than book value."" A company with a stock trading below book value is believed to be ""impaired,"" perhaps because assets are overstated. Depending on the situation, it may or may not be a bankruptcy candidate."