Appreciation or Cash flow

[Santosh Bobbili]

Hi,

I live in Southern California (LA). Market here is very hot and it is almost impossible to find any property with positive cash flow. But there are few townhomes/condos (new) under my budget which almost breaks even with monthly expenses on it (taxes, interest, principal, HOA, etc).

Is it a good idea to bet on these properties to appreciate over time? Though I am having slightly negative to no cash flow.

Thanks!!

[Joe Splitrock]

I don't like townhouses or condos where you have an HOA. These are the first properties to lose value when the market turns. An HOA can make it hard to use as a rental and funds mismanagement can leave you with added expenses. Buying with appreciation in mind is find in certain markets, but I would stay out of this asset class. It is really better to have cash flow, even if minimal, so you are not subsidizing the investment day one. That is risky and not scalable.