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Updated almost 4 years ago on . Most recent reply

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Yuki K.
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Invest in a negative cash flow property for appreciation?

Yuki K.
Posted

Hi, for the experts who are investing for appreciation, will you invest in a negative cash flow property if the appreciation is almost certain? The property I am thinking about is a ~1.3M purchase, no rehab necessary, at a monthly negative cash flow of ~$1,700, and the conservative appreciation projection is 6-7% per year.  Why or why not?  What else should I factor in other than purely numbers?  This is a SF Bay Area property, B building condition in a A neighborhood of a A town. 

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Russell Brazil
  • Real Estate Agent
  • Washington, D.C.
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Russell Brazil
  • Real Estate Agent
  • Washington, D.C.
ModeratorReplied

Just increase your down payment til you are cash flow neutral.

Change your thinking to view properties as they exist without leverage. All properties cash flow. I'll say it again. All properties cash flow. When they dont, it is because your leverage is too high.  

The risk of the negative cash flow on the property is not due to the property, it is because of your leverage against the property. Drop the leverage amount, til you are break even or cash flow positive. 

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