Investment in a Tight Market: Navigating Negative Cash Flow for Long-Term Gain

[Phil Avery]

Hello everyone,

I'm navigating the challenging waters of finding cash-flowing properties in my market and came across a deal that's got me pondering. This property shows a negative cash flow and cash-on-cash ROI from the get-go. However, the future looks bright with a promising pro forma cap rate and the potential for significant equity growth and improved returns down the line. I'm considering this with only a 5% initial investment.

Given the tight market, I'm leaning towards a strategy where I aim to break even (or close to it) for the first year or so, with hopes of refinancing when the market conditions improve. I've heard the golden rule: 'Never invest in a property that starts off losing money.' Yet, I also believe in adapting strategies to fit the current market dynamics.

What's your take on this approach? Is it too risky, or could it be a viable strategy considering the market's state? Would love to hear your insights and any personal experiences you might have with similar situations.

On a side note, I'm currently renting a house for $1425. I could not see an obvious benefit to House hacking this property as opposed to renting both units out? What I am missing here? Seems more like a preference rather than a way to lower expenses. I'd own the property either way, its more inconvenient for me to House hack, and I'm not seeing the primary benefit. If anyone can clear that up for me too it would be appreciated! 

Thanks again!