Is it wise to rent my house out with negative cash flow?

I have a townhouse with about 300K equity. I want to refi and get the equity out to buy another home. After refi, my monthly payment is around 2K plus 200 for HOA and property tax. The area retal is about 2K/month. This put me in the negative cashflow of 200+tax+ maint. Is it wise to do so? If not is there another way?
Thanks for review and forth comming answers.

Negative cash flow is a no-no. Avoid it at all costs.

If you refi your home and buy a another rental where will you live???

Why do you want negative? What if tenant does not pay, you will be negativee $2200 plus fees…

Depends on your overall financial situation and what your plan for cash out on refi. If you plan on using all the equity you have access to for buying another house and have no other cash then i would say no. What does the rest of your financial picture look like?

you could take less cash out, and made it at least break even, but if you do put yourself in a negative cash flow, or low cash flowing situation on a property make sure you lock in your rate for the length of the loan. You don’t want to have it cash flowing -$x, then have the rate increase in a few years and suddenly your negative cash flow is -$3x

Look at this another way. You are paying the mortgage, HOA, and all the maintenance on your current home anyway.

If you did a cash out refinance, would you downsize to a smaller house with a lower monthly housing cost? If so, look at this as a total cost of housing calculation and what you are buying for that cost. What would be the total for the two mortage payments – the new payment on your refinanced loan plus the mortage on the second property?

If you subtract your expected rental income from that amount, would you have more money in your pocket at the end of the month or less money than you would have if you did nothing?

If the answer is more money, then would you rather do nothing and pay for one house or would you rather spend a little less money each month and buy two houses?

Thank you for all of the reply.
The town house is worth 500K on the market. I am going to rent this old house out for 2K/month. We are expanding to another bigger house and want to get the most of the equity out for the old house so we can lower our new monthly payment. The new house is in the range of 800K+. Total cost for new and old

Old house =$2000.00+ $200 HOA+200 tax+ maint.
New house= $3000.00+1000 tax+maint.
Monthly payment= $6400 - $2000.00 Rent ~~ $4400.00 plus.

We both still working and have some other money save aside.
My plan is in couple of years I will sell the town home and get another duplex as an investment. I hope at that time the housing market can rebound and the town house may worth more. Is there a better way?


The only thing that crosses my brain is to move to a cheaper area. That’s a lot of scary debt for me.

What is the market there for furnishing that unit? What do hotels rent for per night? Per week? Per month? You may be able to have a deluxe furnished unit that brings in a lot more rent. Then you get to buy new furniture for your new place!

If you search “Furnished Executive Homes” in your area you will know.


That is not a good move. You should always avoid a negative cashflowing situation, when possible.

If you need to move out of your townhome, I would sell it, then roll over your equity to your new property. By the way - I think $200/mo negative cashflow is not realistic. Factoring in vacancy, damage & wear and tear to your property, and other factors you mentioned such as HOA fees and property taxes … I would imagine $1000/mo negative cashflow is more realistic. So I would sell, sell, sell that thing.

If you can’t sell it at a high enough price, just stay there and deal with living there until the market gets better.

If you are just looking for rentals, look in a different area than your own neighborhood - find ones that cashflow better.

Good luck!

If you are doing business never do negative cash flow. But this is a personal residence situation. I don’t know what you want to do. This is not business because you can’t do it again tomorrow. It is a found situation.

Saying that if you want to move sell the house and buy another house.

That is much too expensive a property to use as a rental unit.

I suggest that you sell it and use the equity that you take out to buy something else.

Thanks everybody.

I guess this old town house is a bit too expensive as rental property.
We are working toward real estate investment career in the future and though that this may be a good way to start the investment process. We are amature at this. I guess I will need to borrow less money to make it even. How do people invest? Is that true that most of the mortgage payment is bigger then the rental income? If anybody have any idea I would like to hear them.
Thanks again.

if purchased right your rentals should produce positive cash flow, which is why people don’t like the deal the way you proposed it…today in my area $300 cash flow per unit per month is a good goal, and thats doing the financing in a way so that you are out of pocket very little cash in each deal

Is there a reason why you don’t want to sell it? What city is this in? Appreciation is supposed to be the icing on the cake. Rental income should be why you buy income properties, not future appreciation. Perhaps, your money would be better utilized on tax lien certificates…

You already asked this (in the title) and it was already answered by many.
No, it is not difficult in many areas to find something that will positiveley cash flow. But not all neighborhoods will cashflow, which is why many neighborhoods don’t have rental houses.
Some investors buy something and break even or have negative cash flow with hopes on appreciation and selling later, but this is risky and you need to have DEEP pockets.

Like Motivated CEO said, you will loose alot more than 200 in negative cashflow by renting.
If you could rent it out for 3K/month most people on this site would tell you its still not a good deal.

I don’t know but if you qualify your tenants on 30% of their income you can’t rent it to anybody unless they earn at least $75,000/year. Most of those people are buying here in Houston.

I tend to use census data to determine the median income for the town and make sure I can rent any house I get for that median income. In Houston the median income is $50 so I make sure I and make money if I rent the house out for $1200 or less.