Negative cash flow with AFR loan?
First time posting here. Super impressed by the wealth of information.
I used to work for a wealthy family, and I'm considering asking for a mid-term AFR loan from them. Using current rates, it would be possible to get a $200,000 loan at 1.47% over 9 years. My goal would be to use this loan to buy a SFH for ~$175,000, leaving me with a $25,000 cushion for unexpected repairs/maintenance/etc.
Let's take a hypothetical example. Obviously, everyone's goal is to have positive cash flow, in which case this deal would be a no-brainer, right? But what if there is negative cash flow? Let's say that on average I would lose $700/month after property taxes, maintenance, vacancies, insurance, etc.
AFR loan: $1980/month
Rent: $1700/month
Total interest paid over 9 years: $13,600
Wouldn't it still be quite profitable to do this? After 9 years, the property would be paid for, throwing off something like $1200/month. Along the way, I'd be building serious equity each month. Wouldn't I be paying $700/month for ~$1850 of equity?
I have enough money saved up to make the payments, even if there were a lengthy vacancy period. Ideally, I would find a great deal with better cash flow, but I'd like to get everyone's thoughts on the above scenario.
Thanks!