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Updated over 11 years ago on . Most recent reply

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Nick Frankus
  • Investor
  • Molalla, OR
0
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7
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Negative cash flow in lieu of principle only payments?

Nick Frankus
  • Investor
  • Molalla, OR
Posted

I have a seller willing to carry owner financing with no money down, principle only payments with a 2 year balloon. The payments she is willing to take would result in a negative cash flow when rented for the 2 year period until the balloon.

The purchase price is pretty much right at current market value. I'm wondering if it is worth paying market price now and negative cash flow for two years, then could refi then, potentially being at a 20% equity position. I would then be in a cash flow position without having to put the 20% down all in one chunk.

Does this make any sense or am I just being silly?

Most Popular Reply

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3,405
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Mehran K.
  • Investor
  • Wichita Falls, TX
603
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3,405
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Mehran K.
  • Investor
  • Wichita Falls, TX
Replied

@Nick Frankus What makes you think that the property will be at 20%equity in 2 years? What happens if cannot refinance? Do you have the income to support the negative cash flow? Why pay full price to lose money every month?

Some rules I follow (doesn't mean everyone has to)

  1. Never a loan with less than 5 year balloon
  2. Never a property that doesn't cash flow
  3. Never betting on appreciation (speculating)
No deal for me!

Hope that helps Nick.

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