If rental income doesn’t cover expenses

[Zachary T.]

Is it considered bad if the rental income doesn’t cover the expenses? For example paying a certain amount of money per month out of pocket to cover expenses. Or does it not matter because of the appreciation of the house? 

[Nathan Gesner]

It's an unwise choice. Could it work out? Maybe. But the odds are against it.

Your friend is basically investing $300 a month ($3,600 a year) in the hopes the property value will increase over time and provide a good return. Meanwhile, he's carrying all the risk of losses due to bad tenants, necessary repairs, etc.

If he wants to dump money into something every month and hope the market provides a good return, he should invest in mutual funds.