How much ballpark negative cashflow would I be looking at?

[Mike Andrews]

Hi all, I currently rent, but am considering buying a 2 bedroom condo/townhouse.

The main issue: I only plan to live in this property for 1-5 years (unknown, depends on career moves), so long term I'd like to be able to rent it out with at least break-even cashflow.

I think the main problem is though that in any desirable living area, it's pretty tough to do this.  I'm in the DC area where instead of the 1% rule, it's more like 0.5% rule (maybe $2400 rent on a $500k townhome)

Capex is the hardest for me to estimate, but I think I'd see something like this:

Costs

2bedroom townhome purchase:  $475-$500k
Taxes: 1% or so, so figure $5000/yr
HOA fee: $300ish
With a 30yr mortgage, that would put my monthly payment around $2686 @ 2.9%/30yr
+ property management = $2886
+ capex = ???

Equivalent rent I could get for the entire place:  $2500ish

Other notes:

Appreciation: always speculating here, but the DC area is growing fast so I don't think +3% on home value and rent is unreasonable

Given the above numbers, i'm losing at least $300 a month right out the gate, but will have some appreciation. I'm not sure how bad capex would be ($300/month?), and HOA always has a risk of increasing. Am I grossly underestimating capex? In a townhome/condo I would think it would be a bit less than in a SFH.

With capex, I figure $2886+$300-$2500 = ($686 lost cashflow) per month, or around -$8k cashflow per year.  At some point with rent growth that would reduce, but might take around 7 years to reach that point at 3% rent growth.

Is there anyway to better justify a purchase like this?  Plan would be to buy & hold/rent for the next 20-30 years.

Some thoughts that help it:
1.  Rent growth over time
2.  Appreciation over time
3.  Initial years would not have a property management fee while I lived there, so cashflow would be more like -$6k instead of -$8k
4.  Some tax benefits to offset it

Anything else that might help?

[Ron Gallagher]

Are there any rooms in the townhouse that you could turn into an additional bedroom?  Like a separate dining room that never gets used or space in the basement?   If you could turn that 2-bedroom into a 3-bedroom or even 4-bedroom then the additional rents you could get from the extra bedrooms could turn this cash flow loser into a cash flow winner.