Buying a rental property with no cash flow

[Prashant Sharma]

Hi, I have an accepted offer on a duplex in an A+ neighborhood but the current rents will bring negative cash flow with 25% down. Leases expire 2-4 months after i am supposed to close at which point i can raise rents. The market rents will then bring me minimal cash flow ($150 /mo) if I self manage (although I don't have a lot of time to do that) with 10% for prop repairs and NO other allowance as vacancy should be zero. The property needs some minor repair/cosmetics updates.

The market may appreciate in future but would you invest over $100k+ down in a property like that? Am I making a bad decision?

Thanks

[Jason D.]

I'm not always opposed to a break even property (as far as cash flow), but only if you are property reserving for all expenses and there is minimal money out of pocket. The tax advantages and long term appreciation can be enough to keep the property, but with that much out of pocket, you may never see a favorable return.