Definition
Negative cash flow means property expenses exceed rental income. Long-term negative cash flow requires investor capital and is unsustainable without appreciation.
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Negative cash flow is problematic long-term unless offset by appreciation or tax benefits. Negative cash flow requires capital reserves; unsustainable without external income. Most investors avoid negative cash flow except in appreciation-focused strategies.
Pro Tip
Avoid negative cash flow unless strong appreciation justifies it.
Example
Property with $3,000 monthly rent and $3,500 expenses has -$500 monthly negative cash flow requiring investor contribution