Is break even or less on rental ever ok?

[Dennis O'Banion]

Looking toward retirement which I would like to begin in 10-12 years, I am two years into my first rental in Denton TX which is returning around 11.5 ROI% and $360 per month cash flow after expenses on a 30 year note. I am applying extra principle to pay the loan off in 11 years.

I have an opportunity to buy another rental in Denton that I perceive as a good deal (about $15,000 below market at around $150,000) but to pay off in 15 years would take the home into negative cashflow of $150 per month. On a 30 year note the home would return 4.04% ROI with $137 in cash flow. If I am looking for cashflow for retirement does this second home make sense?

[Dewain J.]

Usually I hear the debate come from two sides. People like me who think you aren't making at least 300-500 cash flow per property vs those who say if it cash flows a dollar it's a good investment. But I haven't heard too many people argue that a negative cash flow property is a good investment. Especially if you are looking for cash flow.

Maybe you aren't buying at the right price? But in any case too many deals are out there to settle for a loss maker.