Would you buy a rental property with negative cash flow?

[Patricia Luna]

Would you buy a property with negative cash flow?

My husband and I want to invest in a townhouse that we plan on selling once the mortgage is paid in full. We could have the mortgage for 30 years, but we are choosing on having a 15 year fixed mortgage instead, to save on interest and to be able to re sale it once we retire. The price is $175,000. We have the down payment and closing costs covered. Our interest rate would be 4.5% (investment property) 

Our  plan is to pay the mortgage with the rental income which is estimated in $1200 currently, I do not doubt this could be increased with time. 

After adding all expenses we will be short $250 each month, that includes interest, taxes, insurance, HOA, and vacancy/repairs expenses. The property was built in 2006 and is in good shape. We will be able to rent it as soon as we get the keys.

The property is located in a nice area with constant rentals demand, so we count on having it rented with no problems most of the time. Also we believe it will appreciate over time.

This will not affect our finances since we have other income sources, we are looking at it as a long term investment.

TIA for your kindness.

[Mike Dymski]

You can get a 30 year mortgage and make extra principal payments rather than getting a 15 year mortgage and having negative cash flow...provides more flexibility.

I can argue against accelerating the debt pay down but that's a topic for a different post.