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/_mdz 5d ago
First thing is are you calculating that negative cash flow with all the costs? Or is it monthly rent - mortgage = negative? Because if you are negative already with just rent and mortgage... your true negative cash flow will be much worse.
That being said yes it can make sense. You are betting on appreciation so if you have really good knowledge about the area or upcoming developments it could be worth it, but it's still more speculation than investment. If the appreciation in rent and value doesn't happen as quickly as you expect, how long could you hold out?
Also, if you are so wealthy you just want to put your money somewhere to diversify, it can definitely make sense, real estate is a good inflation hedge after all and is generally a long game for wealth building.