From all the reading I’ve done on this forum, I’ve read that most advocating buying a rental property only if you can get positive cash flow from day one. My question is would any of your do the following (or see doing it in my circumstances as outlined below) Note that it does not provide postive cash flow:
New construction home purchase in Texas: $145,000, will rent for $1100-$1200/month. With 5% down and Texas taxes, will have negative cash flow of about -$300.
Here’s why I am considering:
Appreciation: assuming only 5% per year, between appreciation and principal paydown, equity is increasing about $700 per month.
Tax deduction: Since I’m in a high tax bracket, tax savings will be about $5,000 annually - that’s over $400 per month (more than offsetting negative cash flow).
New construction: it will carry a builders warranty and should have far fewer repairs needed, etc. vs the typical older rental property.
Rent increase over time - after a few years, the rent should increase to the point where it is back to cash flow positive. In the meantime, I can afford to be -$300 negative per month (before tax benefits) due to strong monthly income and savings.
OK, that’s it - flame shield is up and thick skin is in place. Tell me why this is or isn’t a good idea!
Thanks, Corey