I ran a few scenarios to see what drives a non-cash flow property at fully leveraged to perform better than a positive cash flow property that required a down payment. These scenarios assume that you have cash available for a 20% down payment.
Assumptions:
$260,000 purchase price
5% / 30 year fixed rate mortgage
$2000 rent
Expenses are equal to the net cash available from rent less mortgage payment (0% down). Expenses are fully inclusive of vacancy, operating expenses, repairs and maintenance, capital improvements.
What I found is that the investment return and the desired exit year are the two factors that drive the decision of making a down payment or not.
As an example, if your exit year is year 30 of the mortgage, a 2.198% return on investments will yield the same net worth if you put 0%, 20% or 100% down, but ONLY at year 30. If you're exit year is before year 30, it's better to put down as much as possible.
If the investment return on spare cash is more than 2.198% (let's say 4%), your net worth is greater at any point before 9 years with 20% down. After 9 years, your net worth is greater if you put no money down.
Any investment return less than 2.198%, you'll have the greatest net worth at any point by putting the most down you can.
Remember that this is dependent upon the other assumptions. What I'm trying to show that if you take out the mantra that "positive cash flow is required" and you're measuring your success on your net worth, it's possible to have no cash flow yet end up better than if you put money down just to get your positive cash flow. But keep in mind that it depends on your investment return and your desired exit point.
Just food for thought. If anyone would like the spreadsheet I used to determine this, please ask and I'd be glad to share.