Many new real estate investors fall into a trap that limits their success.
They think that just because a property does not have an initial cash flow under their purchase scenario that it is not a good deal.
The first difficulty with this philosophy is that their purchase scenario may be the problem, not the property.
The second quandary may well be that the investor simply does not understand the investment nor the property holding period.
There are four distinct types of benefits (or returns) produced by real estate.
When you limit your analysis to only one of the four, for example Cash Flow, you do yourself a great disservice.
If you try to profit too early you also limit your success.
When considering an investment in real estate, it would be well to remember that just because a property has negative cash flow doesn't mean it's not a good deal.
Remember, Cash Flow is only one of the four kinds of benefits or returns.
It may well be possible that another of the four benefits will more than make up for the negative cash flow.
In many cases the tax savings produced by a property will exceed the negative cash outlay.
If this is the case, an investor could let the tax savings produced by the property pay the negative cash flow.
After all, the tax savings used will be found money.
You wouldn't have them if you didn't buy the property.
So the property is in fact paying for itself.
In this case an investor would be letting the investment pay for itself with the new tax savings it produced.
The investor is not financially damaged by the negative cash flow and the property now has the time to improve sufficiently to maximize the profit potential.
This scenario would allow for time to increase rents, reduce expenses and let appreciation do its magic.
Any real estate investment that can pay for itself will ultimately produce significant profits for its owner(s).
These types of investments need to be held for a sufficient time period to overcome the negative cash flow and build the equity desired.
Just because an investment property starts out negative, doesn't mean it's not a good deal.
Do your homework and project the ownership over a variety of holding periods to see if your ultimate profit will meet your goals.
It's not hard to do, and it may mean that you, with your understanding, can now reap the rewards that other less savvy investors pass by.
Good luck in your career.