Is a negative cash flow property NOT an asset?

[Maxwell Milholland]

Hello Bigger Pockets community! I've read enough books at this point to have a pretty basic grasp on the fundamentals of real estate. One principle that comes up time and time again is cash flow. There seems to be a consensus that a positive cash flow is what an investor should strive for, and a negative cash flow is bad. I'd like to hear your opinion on this matter. I think that this is perhaps too black and white. Take for example a duplex that cash flows 200 a month. Decent investment right? It's certainly better than one that has a negative 200 cash flow. But is the negative cash flow property BAD? I don't think it is. The only difference between the two is 400 dollars a month. 4800 a year. Sure, that's a good amount of money. But, the reason why the positive cash flow property is an asset, at least in my mind, is due to more than just the income it produces. Tax benefits, loan paydown, and potential appreciation all are factors that make this a valuable asset. These same factors also make the negative cash flow property an asset, just one that doesn't pay for itself. I don't think that's bad, so long as you have prepared for that and have other income to offset that. Essentially, I see it as paying a monthly fee for an asset that will make you far more money in the long run than what you pay for it monthly. Again, a positive cash flow property is better, but I think a negative one CAN be okay. What do you think? I'm open to being completely wrong here.

[Joe Villeneuve]

The cost of any hold property, is what comes out of your pocket...that's it.  

If you buy a property for 100k, put 20% down, and have positive cash flow, that property cost your $20k.  If that same property had a negative cash flow of $100/month (1200/y), that property cost you $21,200 after year 1, $22,400 after yr 1, $23,600 after 3, and so on...until you fix the cash flow.  Then, you have to generate positive cash flow equal to your total cost before you can make a profit.

The goal in REI is not to own, but to control RE. Another way to look at this is what comes out of your pocket is what your cost is to control a property. Once you recover your "cost to control", you are making a profit from that point forward (as long as you keep the positive CF), and now it cost you nothing to control it.

Who pays the rest of the sale price?  As long as you have positive CF...the tenant(s) do.  That's their job.