I was recently asked the following question: Tom, in your Tax Strategy CD/DVD example of real estate investments, you used sale prices of $200,000. I live in S. Calif. This wealth building example doesn't quite come close to home prices here. In fact, I can't really think of anywhere. Can you please speak to this. Thanks.
Let's begin by examining some of the principles of real estate investing. Robert Kiyosaki has pointed out to me several times in our discussions about real estate that there are four ways to make money for a real estate investor.
First, there is the appreciation from the real estate. This is more available than ever right now with the high number of foreclosures. Second are the tax benefits from real estate. Third, there is the principal paydown on the loan. This is an area that is frequently ignored by the speculators who like to use negative amortization loans. And fourth, there is the cash flow from the real estate.
This last one is almost always ignored by the speculators who have been promoting real estate that only makes money if it goes up in value. These people are the ones currently losing their properties to foreclosure. They forgot these 4 basic Rich Dad principles for real estate investing. But, where do you find properties that positively cash flow? Essentially, this is at the heart of the question. It's not a matter of finding a $200,000 property, but rather a matter of finding a property that cash flows.
There are many parts of the country where you can find a single family home that produces positive cash flow. Many areas in the midwest, the south and the rust belt have properties that positively cash flow.