San Diego Multi Family - Investing in neg cashflow property?!

[Schuyler G.]

For those who have invested in a market where home values exceed your rental income at the typical 20-35% down.. 

How do you analyze it? Whats your rationale?

I'm looking at a duplex where I would live in one unit and rent out the other. My monthly payment would be cheaper then anything I would rent in the area but it is still a negative cashflow property if I rented out both units. This will be a long term hold for me and eventually rents will catch up to my payment and turn positive. I also think there is opportunity to raise the rents if I put a bit of money into it. 

Are you staying away from any/all properties with neg cashflow? Or are you still buying and why? 

[Jon Schwartz]

Originally posted by @Schuyler G.:

For those who have invested in a market where home values exceed your rental income at the typical 20-35% down.. 

How do you analyze it? Whats your rationale?

I'm looking at a duplex where I would live in one unit and rent out the other. My monthly payment would be cheaper then anything I would rent in the area but it is still a negative cashflow property if I rented out both units. This will be a long term hold for me and eventually rents will catch up to my payment and turn positive. I also think there is opportunity to raise the rents if I put a bit of money into it. 

Are you staying away from any/all properties with neg cashflow? Or are you still buying and why? 

Schuyler, as my CA colleagues above have eloquently pointed out, a negative-cashflow househack is not a bad thing in CA. It's about the only way to househack here!

I'm househacking a duplex in a great neighborhood in Los Angeles. It's cashflow negative while I live here, but I'm paying much less to live in my 3-bed/3-bath unit than it would it cost to own or rent a comparable home, I'm getting principal paydown every month, and I'm benefit from the appreciation on a large asset.

As I see it, your goal should be to buy a duplex that will cashflow when you move out. Find a duplex with a unit that needs work. Move into that unit and fix it up on your own schedule. In a year or two, move out and rent the newly renovated unit at top dollar. If you're ambitious enough, refinance and repeat!

All the best,

Jon