Negative cash flow with AFR loan?

[Trevor Crowell]

First time posting here.  Super impressed by the wealth of information.

I used to work for a wealthy family, and I'm considering asking for a mid-term AFR loan from them. Using current rates, it would be possible to get a $200,000 loan at 1.47% over 9 years. My goal would be to use this loan to buy a SFH for ~$175,000, leaving me with a $25,000 cushion for unexpected repairs/maintenance/etc.

Let's take a hypothetical example.  Obviously, everyone's goal is to have positive cash flow, in which case this deal would be a no-brainer, right?  But what if there is negative cash flow?  Let's say that on average I would lose $700/month after property taxes, maintenance, vacancies, insurance, etc.

AFR loan: $1980/month

Rent: $1700/month

Total interest paid over 9 years: $13,600

Wouldn't it still be quite profitable to do this?  After 9 years, the property would be paid for, throwing off something like $1200/month.  Along the way, I'd be building serious equity each month.  Wouldn't I be paying $700/month for ~$1850 of equity?

I have enough money saved up to make the payments, even if there were a lengthy vacancy period. Ideally, I would find a great deal with better cash flow, but I'd like to get everyone's thoughts on the above scenario.

Thanks!