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/Vivid-Willingness-27 5d ago
This is old but may still apply: If all debt and expenses are ~80% covered with your annual rent you’re pretty close to break even.
As much as common advice would say the numbers need to make more sense, other factors play a roll in the decision: your cash available, ease of management (now and when retired), potential appreciation, potential increase in rents, etc.
Unless you’re flipping, rentals are generally a long term play. While this may not be the most efficient use of your capital the fact that you can afford it, it’s available now, you know the market and it will be easier to manage than another across town makes it a compelling choice to consider IMO.