Buying cashflow properties

[Rami Sobhani]

What would the reason be to buy a negative cash flowing property (lets say negative 400 a month) ? Does it make sense to do that as a first time investor and home buyer?

[Abby Shemesh]

@Rami Sobhani

There are several reasons that someone would take on a negative cash flowing property. 

1. You require a tax write off 

2. You will add renovations that will make a positively cash flowing property in the near future (make sure if this is your strategy that you do you market research and do not take the "ready, fire, aim" approach!)

3. You are buying the property way under market value and immediately step into equity that outweighs the negative cash flow (although this is a short term strategy as negative cash flow and all of the headaches that come with it gets old real quick!).

4. You are buying the property on seller-carry terms that are so attractive that the positives outweigh the negatives (this is a rare situation but nevertheless, we see it at least 4 to 5 times a year for sure). This may give you the breathing room and runway to engage in renovations that would increase rents and the value of the property down the road. This is a a narrow strategy and does not work in every market so do your research before diving in. 

I hope this helps.