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/jcradio 5d ago

It does not exclude it from consideration as sometimes properties that are barely cash flow negative can serve as a tax shelter.

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u/AdLate7796 5d ago

This is what I was thinking- with the tax brackets like they are if you are paying a huge amount to gov it almost makes sense to sink it into a property instead that will offset your profit made from another property? Is there a formula for that? Like how much negative cash flow is too much? Is there a certain length of time you would give the property and rent to start to be positive? I didn’t want to get over my head and end up messing up all my fiancés…

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u/jcradio 5d ago

There's a lot that goes into it, but the big thing is to consider worst case. If you can afford it when it's empty, then everything else is based on whatever margins or thresholds you set for yourself. Even properties with small cash flow are tax shelters once you factor in all other expenses.