Negative Cash Flow

2 Replies

Since joining bigger pockets I have run my three properties through the rental calculator and one of my houses is showing a small negative cashflow. IRO 40 euros per month

I'm based in France and bought the property 1 year ago with 100% bank mortgage - no cash down. The tennants more than cover the mortgage, taxes and most other costs. However using bigger pockets calculator I see once I include vacancies at 7,5% and improvements then I'm showing a neg cashflow.

I bought the house for 80000 euros including all fees and if sold now would not cover these costs. In France there are 10 - 15% costs to add to the property price to cover buyers costs. So will be at least  year 3 before I have any equity.

So in this instance I can see the only sensible thing to do will be to hold the property at least till year three and maker a wiser choice next time only choosing a positve cashflow property.

Have read various negative cashflow posts and see a big no no - however where no cash is put down do you feel this is still the case - understand if all my future investments do this then cumlative effect could be a problem however if one or two properties do this in a bigger protfolio they will still produce long term equity so maybe worth holding?

Any thoughts appreciated as very new to this. Bought my first 3 properties with my builders head on and only now finding out about the facts and figures.

One of the considerations you should make is Exit Strategy. If you have 100% leverage and no equity you have no way out of that property, and since it is negative cash flow, holding is not very attractive.

My first property was that way. I have good income so I just paid the extra as needed and over time the rents went higher and the property appreciated. Now it is a fine property in my portfolio. I went with the longer term approach and it worked well. I could have sold it and broke even, but I didn't have time to look for another property.

Welcome to the site :) I was in France last year and the year before (I lived in England for 4 years). Such a beautiful country!

@Jon Boella  negative cash flow house with expected vacancies and cap ex isn't a huge no-no IMO... It just means you have to be very diligent with filling it and keep fingers crossed that there are no repairs.. I have a property that cash flows $5 dollars a month and was in a similar situation... Obviously, we aren't here to loose money but with analysi those are averages and long term expectations. Monitor it very very closely but don't stress about it.

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