Does it make sense to get a rental that won't cashflow?

[Ryan Blake]

I have been investing for awhile but have only recently started picking up properties that I know will not cashflow because of the prices in the area I invest (Dallas/Fort Worth) and the higher rates.

I am still picking them up because it will still pay down debt and provide me with depreciation that I can use to offset my flipping and lending income. It is also a little bit of speculation on my part that 1) home values will continue to appreciate at or above the inflation rate and 2) that eventually rates may drop 1 - 2% (I am at 7.5% on my most recent refinance) and will be able to do a cashout refi in 2 - 5 years.

What are other's thoughts on this? The first 10 years of my investing I would have completely suggested against doing what I am doing now. I thought of banking on appreciation and rate drops as pure speculation and akin to gambling. The only thing I can do to help justify it is that now with income in the highest tax bracket, I am saving 37% on any depreciation I can get.

Will someone either wake me up to my new found delusions or encourage me that I am still on the right track.