Updated over 10 years ago on . Most recent reply
Investing for ROI and not COC
Does it ever make sense to invest in an expensive property that has negative cash flow, yet the ROI is very good? If I don't need the cash now, but just plan on selling the house in about 20 years.
I get that everyone is all about cash flow, but again, if you don't need it right now and just looking for a good investment. Ever make sense?
Most Popular Reply
Kyle,
I don't mind having negative cash flow for 3-6 months while I'm stabilizing the building. History has shown that people are willing to accept 3-5 years of negative cash flow in the Bay Area in exchange for its appreciation. That's not my cup of tea. I want build-in equity when I buy. I want my CCR, and I want to be able to get my money back after the building has been stabilized. You can say I want everything. Why not? It's fun.
What I have learned is that most properties will cash flow in any market including the expensive Boston, NY and San Francisco markets if you put the right financing instrument on it. You just have to know how. This is why Master @Bill Gulley has been preaching to everyone that understanding real estate principles and financing are crucial to your success.
Best of luck.