New Rental property in Charlotte, NC area

[Waqar Yakoob]

Hi Everyone - Hope this weekend treats everyone well. I recently got into a real estate deal. It is a town home located in top school district in Charlotte area. I put 20% percent down with 80 financed on 15 year mortgage. The rental income on this property will be able to cover property taxes, HOE (monthly association fee), maintenance cost and P&I on 15 year mortgage. I am not expecting any positive cash flows as my cash flow will be to build more equity as principal is paid down aggressively from rental income on 15 year mortgage. 

Question - is this a good business model to finance rental properties given there are no cash flows but produce long term wealth. Will appreciate insight from professional who have already been doing real estate investment business. Thanks again!!

[Mike Dymski]

Just make sure to set aside larger reserves (and have alternative sources of income) for vacancy, cap ex and other repairs.  If things are tight and you need a roof, HVAC system, economy takes or turn, and/or you have a couple of months of vacancy, you can get upside down quick and not be able to afford mortgage payments.  Some investors get 30 year mortgages and pay them down faster instead to mitigate risk.  It's also easier to scale up your investing with longer term loans.  And then there is the whole separate debate on paying down debt versus staying more leveraged...heated topic for different post.