Is it worth taking on negative cash flow multi family starting out ($-200 a month)?

[Alex Molina]

Hello, 

I'm in the mist of buying a 2 unit multi family in CT (New Britain). The current market in this area is pretty hot due to low inventory levels. I plan on purchasing a property that will break even or produce negative cash flow ($-200) if I move out. This will be my second investment and I plan on housing hacking and living in the upstairs unit. This current property that I have under contract has a new roof (1 year old), new furnace (1 year old), and a remodeled unit w/ new appliances. I'm thinking this would reduce CAPEX in the short term significantly and refinance when rates go down (Current rate 6.9%).

I need some advice on if this would be a decent situation to enter starting out to get some exposure to real estate investing. 

[Chris Seveney]

Quote from @Alex Molina:

Hello, 

I'm in the mist of buying a 2 unit multi family in CT (New Britain). The current market in this area is pretty hot due to low inventory levels. I plan on purchasing a property that will break even or produce negative cash flow ($-200) if I move out. This will be my second investment and I plan on housing hacking and living in the upstairs unit. This current property that I have under contract has a new roof (1 year old), new furnace (1 year old), and a remodeled unit w/ new appliances. I'm thinking this would reduce CAPEX in the short term significantly and refinance when rates go down (Current rate 6.9%).

I need some advice on if this would be a decent situation to enter starting out to get some exposure to real estate investing. 

 As with most answers "it depends" - have you run a proforma with an exit strategy? For exa,ple buying an asset with no money down with $200 negative cash flow is different than buying one  with $50k down and negative cash flow.

Cash flow is just one metric in investing, when a developer buys an asset to upgrade it they are negative cash flow early on then they get to positive and can exit the property. If the property is at its peak value  and you think rents will not go up significantly in the next few years and your only thing that can go right is interest rates come down - you are putting all your eggs in that basket. What if the values go down and you have to contribute more equity to get a loan?

There is a lot to unwind here and the asset needs to be looked at more thoroughly in order for someone to provide a response. Hope this helps