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Old 05-01-2004, 12:11 AM   #8 (permalink)
Rodney
Observant Ruminant
 
Location: Rich Wannabe Hippie Town
I have to say that in large areas of this country -- often in the areas where houses have appreciated most quickly -- it is pretty difficult to have a positive cash flow from day 1 unless you put down a great deal of money, much more than 20 percent. This is especially true in most parts of California; here, you expect to lose at least some money for a few years, but rentals are still attractive to high-income investors who like the tax benefits (actual losses plus depreciation) while they wait for the housing and/or rental prices to rise.

I owned a couple of pieces of income property for a few years when I was at peak wages (I'll probably never make that much again), and although I "lost" nearly every year when depreciation was figured in, I was a happy boy come tax time. And while I didn't make huge profits when selling them -- I bought in a low-cost area that was not especially desirable, my mistake -- I made enough from the first sale to make a big down on the house I live in now, and the proceeds from the second are helping to support me while I retain for a new career. So, no regrets whatsoever.
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