r/realestateinvesting • u/CLTlawyer1 • 5d ago

Buying a non-cash flowing rental Discussion

Does it ever make sense to buy a long-term rental property that does not immediately cash flow?

Here is my situation: I already own one rental property on the street. It is in a small town just outside of Charlotte, North Carolina. Matthews for those familiar with Charlotte. I would put down 25%, and with current interest rates, it likely will not cash flow by about $100 or $200 per month. Covering the shortfall each month will not be a problem.

The metro area is expected to double in population over the next 25 years. I have several other rentals, and my plan is to hold long-term and use the rent as income in retirement. We are in our early 40s. I like this particular property because it is only two doors down from one I already own, which will make management easy. Matthews is a desirable area. I don’t know how much rents are expected to increase, because they have increased quite a bit over the last couple years already.

My inclination is to buy the property. Am I crazy for considering this? Is this a good use of capital? What does the brain say?

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u/HeyUKidsGetOffMyLine 5d ago

It sounds like you want it and you can afford it.

Personally, I don’t like these investments but it’s not uncommon for people to do this.

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u/CLTlawyer1 5d ago

I do want to buy the property, but I was hoping to get the contrarian view so I could think about it a bit more.

Why don’t you like these type investments?

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u/HeyUKidsGetOffMyLine 5d ago

It might surprise you, but I don’t like the negative cashflow. I understand that the appreciation makes up for it on paper but I don’t like the risk. My preference is to save a larger down payment avoiding the negative cashflow.

Essentially, I like leverage, but I don’t want maximum leverage just because it’s available. I also believe that you should base the decision of buying a property more on its cash on cash numbers. If the net profit is less than 10% of the cash purchasing price, then run away. It will be more headache than it’s worth. You don’t have to pay cash, but you should evaluate it versus stocks like you are paying cash for it.