What about Negative Cash Flow?
“Hi Gary, I receive your informative emails and I truly enjoy them. Thanks. My question is this: I have investment properties but some have negative cash flow. In reading real estate books, negative cash flow is discouraged but I strongly believe that a real estate investment is just like a 401(k). One contributes to a 401(k) fund so why not real estate investment? What are your thoughts?”
***ANSWER:
I applaud you. That’s a very intelligent way to look at it. Here are some thoughts on what you said:
Your negative cashflow will at some point turn positive, which you won’t get from a 401(k) until you start to draw money out.
When you do draw funds, your 401(k) investment will start to shrink. But a positive cashflow obviously won’t shrink your real estate investment.
Long-term, I believe most real estate investments will be more profitable than a 401(k).
My bet is that the authors of the books you read live and invest in other areas of the U.S. With the real estate prices in San Diego and many other high-priced markets, it’s hard to get a positive cash flow off the bat unless you’re willing to put 40%+ down.
So keep up the real estate investing and you’ll make a bundle long-term.
