Appreciation vs. Cash Flow? Which one is more important?

Question

Hi everyone!

I'm planning on investing in a pretty expensive market Victoria, BC where the 1% or 2% rule doesn't necessarily apply. I'm really new to investing and just wanted to gain clarity on this topic Appreciation vs. Cash Flow, which one is more important? I would love to hear from ya'll who have experienced a plethora of scenarios. Thank you in advance!

JD Martin · Answer

Neither, but if I had to pick one it would be cash flow. Cash pays the bills. Assuming I wanted/had to hold the property, I'd rather have one upside-down that generated lots of free cash than one that was appreciating and requiring cash input.

Cameron Tope · Answer

Dhruv,

I used to only look at cashflow when purchasing. Then after a few years of analyzing the returns from my rental portfolio, I realized the appreciation and debt paydown far exceeded the cashflow.

Now, I buy assets that cashflow, but I factor appreciation and debt paydown into the returns.

The property must cashflow so you can buy other assets. It's hard to buy more houses if they don't put money in your pocket every month. But don't forget, it's proper leverage and average appreciation, that create substantial wealth over time - not cashflow.

Best of luck!

Jim Pellerin · Answer

You need to look at multi-family and apartments over 5 units. They will cash flow. And their appreciation is based on rents.

Steve Vaughan · Answer

I'm in a pretty expensive market as well with median home price of $340k.

I break even with 10% down on mid-tier, dated, off-market houses at 88% of FMV I can add  value to.  They take a lot of work to acquire and appreciate nicely.

I cash-flow with rural c-class multis.  Not crime c-class, age c-class.  Bought off-market directly from tired landlords.  Nothing retail MLS appreciates reasonably or cash flows here.

May have to shake up your portfolio mix and buy off-market.

Oscar Cardenas · Answer

Both, Appreciation tends to be where the big long term money is but that does not mean ignore cash flow. Cash flow will save you when times are tough. In other words, do a combination of the two.

Justin Thorpe · Answer

@Dhruv Sarang

I’ll take both but given a choice I’ll take appreciation simply because I have other sources of income to pay my bills and support my lifestyle. I’d rather maximize my net worth and cash out in the future via appreciation.

Brian G. · Answer

@Dhruv Sarang the key is to find/employ the strategy/ies that work best in the market you want to invest in. Take what the market gives you! The answer to this question is very often market specific and tailored to your goals as an investor.

Randy Molland · Answer

Hey Dhruv,

We have purchased many cashflowing properties in Victoria. You need to be able to have capital to do so and is a very patient game. In this market cashflow is found in creativity, not the mls listing ad. (@Vincent Baart is very knowledgeable with this)

Their are markets outside of Victoria that have great cashflow And cheaper price points as well.

I run a monthly meet up here and it really helps investors get connected to a great team of service providers and other investors so that you can feel confident in chatting deals!

Lets connect via DM and Im happy to hop on a call to share my knowledge.

Vincent Baart · Answer

@Dhruv Sarang

Wow. We should talk!

I’ve been investing in Victoria BC since 2012 and a full time Realtor since 2018.

Cashflow is very challenging here.

Appreciation is pure speculation.

I think the key is to find a blend of the two.

Rental laws are changing by the year, making it more and more challenging to scrape out profit. But it is still possible.

Have you looked at The areas around Victoria?

Let’s connect this week!

-Vince

Appreciation vs. Cash Flow? Which one is more important?

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