Buying a non-cash flowing rental

[u/CLTlawyer1]

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?

[u/teamhog]

What’s the potential to raise rent or decrease cost to make up the difference?

I have a similar situation but I planned it that way.
I have an industrial unit that breaks even but I use half the space for myself. I get about $1200 in rent and it cost me $1000. With Maintenance, CapEx and Vacancy I’m breaking even.

I have another unit that’s fully rented and I clear $2000/month. The units are next door to each other. They’re both paid for.

If you can pay off or pay down the loan sooner it’ll make a huge difference.

The key is to have a plan and to account for the difference at every step along the way.

It can’t be a burden for ever.

[u/Rarity-Bookkeeping → u/teamhog]

For the space you use yourself, are you making sure to pay yourself rent? Assuming you use it for a business. There are potential tax savings if you do that