Property allows access to equity, minimal cash flow. Unique situation, Guidance?

Question

Hello everyone,

I am asking for all opinions of the following deal. It's a bit different than a standard deal and I am having trouble figuring out if I want to take it or not.

The home is in Charlotte, NC and is a 3 bed, 2.5 bath, 1450 SQFT single car garage built in 1996. It was purchased for $318,000, $47,000 down at 7.125%. Located in the vicinity of University of North Carolina at Charlotte.

Improvements:

- Roof (2016), Gutters (2023), dishwasher (2024), new toilets' (2024), outdoor lighting (2024), new carpets (2024), two bathrooms remolded (2023).

No outstanding issues with the property that we are aware of. The house is up for sale for $320,000 but has not sold in 4 months. We attribute this due to slow market and interest rates.

Charlotte is a growing city year over year.

Unique situation: The home was purchased by my mother/father in-law in 2022. It was lived in by my brother in law and wife for 2.5 years. From the start this was going to be a real estate investment. My brother in law would live in it for 5-7 years and conduct home improvement then move out and manage. Long story short, my brother in law's plans shifted and they moved out and no longer have an interest in being landlords. My mother/father in law still own the property and are attempting to sell but see it as a waste.

My wife and I already own one small time rental with the intent to grow before having kids in 4-5 years. It cash flows $400 a month. Our household income is $210,00 and we do not take money from the real estate investment.

We had the idea to reach out to her parents (who own the property) and offer to join and take over management. As it stands, we are looking to place an additional $30,000 down and refinance to 6.5%. This is the lowest rate we've found since we won't be occupying it.

That leaves $232,000 on the mortgage financed at 6.5% with an immediate equity of about $80,000 (between in laws and us). After plugging this property into our spreadsheet, the monthly cash flow is break even until rates can come down.

The interesting part: The in laws view this an an investment into our future and don't particularly need the $50,000 they put into the house back. They would rather us use the equity and grow to more properties in the future. They will also spit all costs 50-50 for this property.

My wife and I have discussed the risk associated with minimal cash flow having to subside this property when issues arise. We are okay with that. We do not currently live in Charlotte but we are both from there. We likely will move back in 5 years. The in laws would be our touch point with the property as they live 15 minutes away. They agreed to this.

My wife and I have discussed the risk associated with minimal cash flow having to subsidize this property when issues arise. We are able to do that.

I would request a new inspection prior to joining them on the house.

The proposition is:

Would you take a break even property and buy in with $30,000 to have access to $80,000?

Nicholas L. · Answer

@Riley Johnson

I don't think I understand what you're proposing. You can't "buy in" to a property someone else owns... if you buy it from them outright, they no longer own it. And if you just give them money... you don't own it.

I know this isn't what you want to hear but I'd either just buy it from them outright on terms that work for you, or move on to the next opportunity. No need to tie yourself in knots just because they own a property they don't want anymore.

Hope this helps

Curtis Waters · Answer

You are taking a family opportunity and fit it into a business decision. With so many other Charlotte metro area opportunities that would cash flow easier...

Laura Shinkle · Answer

@Kevin Poler agreed! @Riley Johnson have you discussed that with the family involved? Are they wanting to exit at a certain timeframe, or hold indefinitely? Is it an inheritance/tax strategy to give you the property at some point? Would you consider refinancing down the road if rates continue to creep lower, and if so at what interest rate?

Like I mentioned initially, make sure everything is talked about, agreed upon and put in writing up front so that everyone is clear on the intentions with the property. Honestly, I'd go for it. Best of luck!

Kevin Poler · Answer

Well said, I agree this isn’t a “problem-solving” deal so much as an optionality decision.

Where I usually see these go wrong isn’t the break-even cash flow itself, it’s when the exit assumptions stay vague. If the plan is appreciation + loan paydown, the real questions become timeline discipline and liquidity planning.

As long as they’re clear on how long they’re willing to subsidize, and what specific event unlocks the equity (refi, sale, partnership unwind), this can be perfectly rational. Without that clarity, it’s easy to drift into a deal that just feels special because it’s available.

Laura Shinkle · Answer

From what he's stated, I don't think it's necessarily a problem he's trying to solve @Kevin Poler.

It sounds like he's trying to figure out if this property is worth investing in only because the opportunity has presented itself. It's a deal that no one else has access to.

From what I understand, the pros of this situation is that you get is instant equity. You'll be partial owners of a long term buy and hold property for less than what it would cost with a traditional route. That's huge for someone who would need typically $100k to buy a similar cash flowing rental in Charlotte. It would also provide some tax benefits and the loan paydown benefits from the tenant paying rent, of course, just like a traditional buy and hold. In addition, any downsides or costs would be spread out among the four owners, not just you and your wife.

The cons appear to be the risk of holding a property that may cost more than it bring in. It's a gamble, and it's more risky since the upside doesn't have cash flow. You're investment is focused on the appreciation over time, assuming that will outweigh the cost of ownership in the short term. There's any number of scenarios that could happen to cost money, AND owning ANY property has those risks (regardless of monthly cashflow). Of course, without cash flow, the risk is slightly higher.

@Riley Johnson I think my main question would be, is this the type of asset that you WANT to own? Is this the type of investing that appeals to you (buy and hold, long term rental, relatively low barrier to entry and you plan to own it for more than 5 years?). Is it your goal to own a portfolio of long term rentals? If so, it might be a good move. Just make sure you get your paperwork signed to protect yourselves.

Kevin Poler · Answer

I think the key question isn’t “is this a bad deal,” it’s what problem is this deal actually solving for you.

If the equity is truly accessible (clear ownership structure, refi eligibility, and lender willingness), then this is effectively a leveraged option on future deals — not a cash-flow asset. That’s fine, but it should be evaluated as such.

Two things I’d want clarity on before proceeding:
• At what point (rates + seasoning) can that equity realistically be tapped without new cash injections?
• What’s the downside scenario if rents soften or a major capex hits while cash flow is near zero?

If those answers are clean and aligned with your timeline, the deal can make sense. If not, the “available equity” may end up being more psychological than practical.

Laura Shinkle · Answer

Hey Riley, sounds like with the refi you would also be adding your names to the deed and adding $30k of your own funds into the equity of the property?

From an agent perspective (for what it's worth), the house hasn't sold because the market has shifted and buyers are putting more emphasis and value to certain areas over others. Unfortunately, the area around UNCC is an area that has seen that shift. At the end of the day, buyers aren't seeing the value in the property at the price it's being offered at (including the condition and assuming it's being well marketed). MOST people who bought in the last 2-3 years aren't seeing much if any appreciation.

As far as the deal itself, if you're ok with the risks and have a clear outline of the maintenance and management costs of the property, I see nothing wrong with taking that deal. Getting into an investment property for only $30k is pretty great as far as cash invested. To buy a similar home as an investor on your own would cost almost triple that and would still likely result in a break even or even negative cash flow. I would recommend get an agreement in writing that states how the equity is divided and how the costs of the property will be divided. Everything is great when people agree, but things can change down the road and it can get messy. Best to put it in writing.

Lastly, if you don't already have a tenant, just FYI, it may take a little longer to find one since DOM for sales and for rent is going up in Charlotte. Overall, though, it's a strong market and I have every confidence the equity will continue to rise over the years of ownership. Good luck!

Property allows access to equity, minimal cash flow. Unique situation, Guidance?

Property allows access to equity, minimal cash flow. Unique situation, Guidance?

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