Real estate is the number one way to build wealth. But if you don’t know what you’re doing, investing in real estate can be a quick way to lose money as well. One of the fastest ways to destroy your investing experience and deplete your resources is by purchasing a cash flow negative rental property.
On this episode of Investing in Real Estate, I’m sharing the major risks of buying a cash flow negative rental property and what to consider when you’re running the numbers on a rental property. You’ll learn about cash flow, what to look for in a deal, and how to avoid falling into a negative cash flow trap.
On this episode you’ll learn:
- What a cash flow negative rental property is.
- The dangers of buying a cash flow negative rental property.
- And much more!
What Is a Cash Flow Negative Rental Property?
A cash flow negative rental property is an investment that generates less cash than it costs every month. For example, if your mortgage and other expenses cost more than the rent you receive from your tenant, your property would be classified as cash flow negative. I don’t recommend buying investment properties this way. The bare minimum would be cash flowing $100 every month, but of course more is better.
The Dangers of Buying a Cash Flow Negative Property
- A cash flow negative property is a losing game. You’ll never build wealth this way, and you’ll be caught in a cycle of paying off debt.
- Buying a cash flow negative property is risky. If a situation arose in which you needed to sell your property, you’d likely have to do so at a loss.
- It’s stressful. While certain aspects of investing can be stressful, it’s likely that you became an investor to increase your financial freedom. A cash flow negative property is not going to help you reach your goals and will leave you stressed month after month trying to make ends meet.
Episode Resources
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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