Crippling analysis paralysis. Need some input:

[Account Closed]

I'm looking to purchase my first investment property; however, I'm having trouble deciding where to invest – analysis paralysis is the real deal. One area that I'm looking at is Bozeman, MT (where I live), which is the fastest growing micropolitan city in the US for the last three years and will soon cross over into metropolitan status soon. Home values are pretty high, and the best CoC figure I've been able to find is about 2-3%. But appreciation rates have been incredible over the last decade (conservatively 6-10% depending on the year), and I see no signs of it slowing down, even in a pandemic. I would be able to manage the property myself here but wouldn't be making a lot of cash flow.

The other areas I'm looking at are in Wyoming. Smaller towns (15,000-20,000) with much lower population growth, but also feel like Bozeman before Bozeman was discovered by the rest of the country (Very speculative – I know). Home values are much lower than Bozeman, so I'm able to find CoC returns in the neighborhood of 8-9%. Price-to-rent ratios are not significantly better than Bozeman, but in WY, property taxes are very low allowing for a decent CoC return.

Here’s where I’m at:

Bozeman purchase price: $325,000-$350,000

Rent: $1800-$2000/month

Appreciation: High

Self-managed

Wyoming purchase price: $190,000-$225,000

Rent: $1300-$1500

Appreciation: Medium-Low – in line with inflation to slightly better

Property manager needed, but property taxes are very low

So – looking for input to hopefully shake off this crippling analysis paralysis. We are in a financial position where we can take on some risk, but everything I read says ‘don’t invest for appreciation, consider it the cherry on top’. It just seems to me that of the four wealth creators of real estate, appreciation is where real wealth is created, and not the $200/month in cash flow.

[Joseph Cacciapaglia]

Despite what you read in books and on these forums, there are tons of successful investors that are looking at total returns over cash on cash returns. In fact most of my successful investors follow that model. As long as you have a positive cash flow, so you can hold long term, you can do very well by focusing on rent growth and appreciation. I spent several years working for institutional investors, and for the most part they're looking at total returns over cash flow. 

It sounds like you're in a great market to make money long term, as long as you're able to purchase with a positive cash flow. I'm not sure $2,000/month on a $325K purchase actually gets you into positive cash flow territory, once you consider vacancy and R&M. Maybe if your taxes and insurance are much lower there than what we have here. As long as it does work for you though, I would go for it.