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Updated almost 6 years ago on . Most recent reply

User Stats

282
Posts
117
Votes
Andrew S.
  • Rental Property Investor
  • Helena, MT
117
Votes |
282
Posts

What's worse - continue renting or buy a negative cash flow?

Andrew S.
  • Rental Property Investor
  • Helena, MT
Posted

Good afternoon BP,

I have a few friends that are looking to begin their journey into real estate and are having some of the excitement and anticipation I (and many of you) had when we became ready to start. 

If you were in a situation renting your home for $1000 / month and had enough cash to purchase a small multi-family property.


Would you continue renting and purchase a negative cash flowing property ?  Or would it be better to continue saving your income and hold off for a better deal. 

Negative cash flowing property could be a duplex with -$200 monthly cash flow (includes R&M, CapEx, Property Mgmt, Vacancy) assuming both units rented. Or the short term option to house hack and you pay $300 towards your mortgage plus R&M, CapEx, Property Mgmt, Vacancy.

My advice was to continue learning about analyzing deals, estimating rehab costs, gaining confidence with the real estate process, and paying rent.  Avoiding analysis paralysis and taking action is important but I think you want to hold off for a deal.  Curious on feedback from people who have done both options?  I held out and the deal came after 6 - 12 months of looking.

Thanks!

Most Popular Reply

User Stats

94
Posts
98
Votes
Kerry Mertz
  • Appraiser
  • Easton, CT
98
Votes |
94
Posts
Kerry Mertz
  • Appraiser
  • Easton, CT
Replied

I would say look for a multifamily with 3-4 units and live in one unit. If a duplex has negative cash flow, then 3-4 units should cashflow better. You can live in one unit to lower your living expenses while you continue to save for the next property. Just make sure that it will cashflow as a rental property after you move out. 

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