Considering a negative-cash flowing investment

[Ethan M.]

I am considering the possibility of buying a property through unlisted channels that would cash-flow negative. To be precise, my analyses show that it would cost somewhere between $20-25K per year while renting. So that's not great. 

But here are the reasons I'm considering it:

1. My hope would be to rent this property part of the year and occupy it during the summer. It can be a place to enjoy. It also has meaning for my family. I.e. it's a place we would use and that we want to own for non-commercial reasons.

2. My goal would be to make improvements to the property. It's a property with a great view, but with a house that could be improved. So I think there's room for forced appreciation. 

3. In about five years, my hope is to be able to do some kind of cash-out refinance to buy another property, holding onto this one. 

What I wanted to ask here is related to the negative cash flow. That level of negative cash flow makes me a bit nervous. It does mean that if things turned bad in the market in ways that affected me I might be forced to sell. I'm aware of this risk. I know that the purely safe play would be to buy in some out-of-state market, but like I said this is a property in which I have interest and I'm trying to gauge whether it's a reasonable risk to take.

So what I want to ask here is: what kind of questions do people here ask themselves when considering deals that have elevated risk like this. (I imagine that this question might be more generally interesting to people here given that so many people are likely in an environment in which it's no longer realistic to break even or cash-flow positive in so many markets). 

I thank you in advance for any thoughtful answers. Also happy to provide some more detail if needed.