No Positive Cash Flow?
I am in the process of purchasing a home that will be a rental property. The mortgage on the home will be $1540. The property is currently rented out for $1300 and I wont be able to rent it out for much more. Because I put no money down to purchase this property my mortgage payment is higher and I will not have any positive cash flow at this time. I will actually be paying $200 a month of the mortgage. The area the home is in is going up on an average of 8% a year so I am looking at the long term on this. Even though I am not getting positive cash flow on this property right now is ok to take an initial loss in order to grow my net worth and hold this property for 2-3 years. By doing that the value should have risen at least 15-20% by the time I want to sell. That should off set the $200 I will be losing now. Or should I never purchases a property were I have negative cash flow? Any input or suggestions would be really appreciated.
You did not give the value of the property. Also, your expenses will be more than $200/mo. You did not add amounts to cover taxes, insurance and maintenance (utilities?). You might be able to refinance when the property increases in value, but you still need to figure in other costs.