Buying an Owner Occupied Property with Negative Cash Flow

[Nick Noon]

I have been reading a lot on what makes a deal a "good" deal and also about the 50% general rule.  I do have a general question about this as it relates to owner occupied real estate properties:

I plan on buying a duplex that I myself would occupy with my family and then would rent out the other unit.  For an example, let's say the property I'm buying is worth $200,000, but was able to buy it for $180,000 and I put $6,000 down payment on it, so my loan would be for $174,000.  Lets say this works out to $1,000/month P&I.  

So now let's assume I can get $1,600/month for the second unit property.  Using the 50% rule, $800 is for expenses and then $800 is left over.  This would produce a negative cash flow of ($200.00)/month.  Which is obviously the opposite of what your looking for in a rental property.  

Is this still a good investment?  The way I figure it, I am looking for a house to live so I am obviously expecting to pay a mortgage.  I'll pay the $1,000/month for the mortgage like I would expect, and keep that separate from my investment.  This means I would have $800 cash flow after the 50% rule if I separate the two.  

Does anyone else have any advice when it comes to owner occupied investments of what make a deal a "good" deal?  I think it would be tough for me to afford a triplex or a 4-plex.  Things are expensive here in MA....

[Wayne Brooks]

Look at it as if fully rented, to decide if it's a good deal.  Also the 50% guideline for expenses would be 50% of ALL units rented, as your repairs, taxes, insurance, etc are the same whether you are "paying" rent or not.  You can't expect to occupy half of a property, for free, and still have it cash flow...won't happen.