Would you do it??

Question

I heard something interesting on David Greene's podcast the other day. He was making an argument for buying properties even if it didn't cash flow. Now that is accounting for reserves so imagine you were just breaking even on a property. Would you do it??

My thoughts are that true wealth comes from appreciation, cash flow is only a bonus and if I put it into the stock market instead I wouldn't be making cash flow either (besides what's likely very little in dividends).

I agree with David on this one but I'm curious what the BP world thinks!?

Would you buy a property without any cash flow in today's climate?

Nicholas L. · Answer

as always... it depends.

if I did a BRRRR and created $67,500 of equity, got all my cash out, and broke even on the rent, would i do that deal?  yep.

would i put 25-30% down on a random property to break even and hope for appreciation?  no.

and i still don't know that it's possible to just go "invest for appreciation."  appreciation still seems very uncertain.

George Post · Answer

Such a great question @Daniel McDonald! There a so many 401k's out there that are not company matching, yet people still put their 3-5% of their paycheck into it... hope it all will work out and be able to retire in 30 years. LOL! But if you purchased a property that "broke even", that a tenant was paying the loan down, its most likely going to appreciate, and more likely than not will cash flow EVENTUALLY with rent inflation... kind of a no brainer if you have strong other income AND the down payment/reserves were readily available! I think doing this is harder in a high price market, but also the exact reason why it's going to work out in the end (since eventually it will be a HIGHER priced market)!

Cheers ... great question!

Daniel McDonald · Answer

Totally agree! If I am essentially getting a property for free just not making money on it till the resale or later down the road then I'm all for it.