Cash Flow vs Appreciation
Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes
Cash Flow vs Appreciation
Most Popular Reply
Kerlous TadresBusiness Member
Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votesA similar property in a high-appreciation market with tighter cash flow but bigger upside long term.
Kerlous Tadres | Reafco Real Estate539 Reviews
36 Replies
- 7moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 2k+ posts · 843 votes
In the current cycle, I would lean toward A, the strong cash flow market.
Through my co investing club, we evaluate and invest in opportunities across multiple states and asset classes, and the consistent theme right now is risk adjusted return. With higher cost of capital and more constrained debt markets, durable in place cash flow provides margin of safety. Appreciation is valuable, but it’s speculative and largely outside the operator’s control.
We prefer deals that perform on today’s numbers, with appreciation as asymmetric upside rather than the core thesis. In an uncertain environment, resilience tends to outperform optimism.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @G. Brian Davis:
In the current cycle, I would lean toward A, the strong cash flow market.
Through my co investing club, we evaluate and invest in opportunities across multiple states and asset classes, and the consistent theme right now is risk adjusted return. With higher cost of capital and more constrained debt markets, durable in place cash flow provides margin of safety. Appreciation is valuable, but it’s speculative and largely outside the operator’s control.
We prefer deals that perform on today’s numbers, with appreciation as asymmetric upside rather than the core thesis. In an uncertain environment, resilience tends to outperform optimism.
I'm with you 100%. I'm a numbers guy, so doing the math and seeing what is actually going to be coming in, not taking a bet on a hope and a prayer, is my comfort zone. There are always ways to get creative, but I cannot see myself ever betting on appreciation alone. A healthy mix of cash flow and a market with a bright future that may bring appreciation is where you find gold. Thank you for your comment, and I hope you have a great weekend. Cheers.
- MD/DC · Member since 2024 · 1k+ posts · 1k+ votes7mo
What neighborhood classes and what does ease of resale look like? I’m guessing B is in a better neighborhood which in conjunction with appreciation wins over cash flow for me.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Jules Aton:
What neighborhood classes and what does ease of resale look like? I’m guessing B is in a better neighborhood which in conjunction with appreciation wins over cash flow for me.
I'd say you're right about all of the above. Although this is a hypothetical scenario, B is more than likely in a nicer, safer neighborhood. Great response, Jules. Thank you for commenting. Cheers.
- Investor · MI · Member since 2026 · 17 posts · 4 votes7mo
I am cash flow through and through. I can't eat equity
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Joe Loveday:
I am cash flow through and through. I can't eat equity
I love that, Joe! Great response. I hope you're eating well, my friend. Cheers.
- Rental Property Investor · North East · Member since 2026 · 4 posts · 4 votes7mo
I'll take the cash-flow 30-unit right now, not because appreciation is wrong, but because of where we are in the cycle
When there's still uncertainty around where rates settle, I want assets that pay me to wait. Appreciation is great, but it's a gamble.That said, it isn't truly either/or. There are definitely markets that were "cash-flow only" five years ago and are now seeing real population and job growth. The Midwest and parts of the Southeast come to mind. You can get both if you're patient and pick your submarkets carefully.
The real question behind this question is risk tolerance. If you can stomach thin margins for 5-7 years and you have reserves, the appreciation play could be a home run. If you're scaling and need each property to carry its own weight, cash flow is the move
What market are you looking at specifically?
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Temi Og:
I'll take the cash-flow 30-unit right now, not because appreciation is wrong, but because of where we are in the cycle
When there's still uncertainty around where rates settle, I want assets that pay me to wait. Appreciation is great, but it's a gamble.That said, it isn't truly either/or. There are definitely markets that were "cash-flow only" five years ago and are now seeing real population and job growth. The Midwest and parts of the Southeast come to mind. You can get both if you're patient and pick your submarkets carefully.
The real question behind this question is risk tolerance. If you can stomach thin margins for 5-7 years and you have reserves, the appreciation play could be a home run. If you're scaling and need each property to carry its own weight, cash flow is the move
What market are you looking at specifically?
Great response, Temi. I completely agree with you. Cash flow is king, but ensuring you're looking at the right neighborhood that has potential for appreciation is essential as well.
Right now, we're looking at GA and OH. We've found some great opportunities in those markets, but we're doing our homework on the neighborhoods.
What about yourself? Are you actively looking for properties to add to your portfolio? What markets are you looking at?
Cheers.
- Rental Property Investor · North East · Member since 2026 · 4 posts · 4 votes7mo
Quote from @Jamison Remmers:
Quote from @Temi Og:
I'll take the cash-flow 30-unit right now, not because appreciation is wrong, but because of where we are in the cycle
When there's still uncertainty around where rates settle, I want assets that pay me to wait. Appreciation is great, but it's a gamble.That said, it isn't truly either/or. There are definitely markets that were "cash-flow only" five years ago and are now seeing real population and job growth. The Midwest and parts of the Southeast come to mind. You can get both if you're patient and pick your submarkets carefully.
The real question behind this question is risk tolerance. If you can stomach thin margins for 5-7 years and you have reserves, the appreciation play could be a home run. If you're scaling and need each property to carry its own weight, cash flow is the move
What market are you looking at specifically?
Great response, Temi. I completely agree with you. Cash flow is king, but ensuring you're looking at the right neighborhood that has potential for appreciation is essential as well.
Right now, we're looking at GA and OH. We've found some great opportunities in those markets, but we're doing our homework on the neighborhoods.
What about yourself? Are you actively looking for properties to add to your portfolio? What markets are you looking at?
Cheers.
I actually had a duplex in OH previously. Ended up selling since I was out of state, and managing remotely was more trouble than it was worth, even with a PM.
I just focus on places I can drive to now a days. Which end up being around the North Jersey, New York area.
- Rental Property Investor · Member since 2018 · 826 posts · 809 votes7mo
Depends where you are in your real estate journey and how much you understand the fundamentals of investing. High cash flow means higher risk and/or effort. Lower cash flow assets are generally safer investments due to lower risk and effort.
if high cash flow assets are so great, then why isn't all the smart money in the world flowing there? Markets equilibrate.you also can't look at 1-year cash flow and make a well-informed investment decision. You should look at a 10+ year period and evaluate IRR to really compare one investment vs another.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Allan C.:
Depends where you are in your real estate journey and how much you understand the fundamentals of investing. High cash flow means higher risk and/or effort. Lower cash flow assets are generally safer investments due to lower risk and effort.
if high cash flow assets are so great, then why isn't all the smart money in the world flowing there? Markets equilibrate.you also can't look at 1-year cash flow and make a well-informed investment decision. You should look at a 10+ year period and evaluate IRR to really compare one investment vs another.
Well said, my friend. Great points here. It definitely differs case by case, because some of the bigger players want losses to offset their gains for tax purposes. Ensuring you're reinvesting as much as possible and not pulling out the cash when it's flowing is just as important. My focus is definitely on the long-term, and I think your advice on looking at the 10-year IRR instead of the first year's numbers is gold. Too many are just looking for the get-rich-quick, and how can I get my money back as fast as possible methods. We're in this for the long haul. I hope you have a great weekend, Allan. Thank you for your response. Cheers.
- Member since 2024 · 20 posts · 5 votes6mo
Quote from @Allan C.:
Depends where you are in your real estate journey and how much you understand the fundamentals of investing. High cash flow means higher risk and/or effort. Lower cash flow assets are generally safer investments due to lower risk and effort.
if high cash flow assets are so great, then why isn't all the smart money in the world flowing there? Markets equilibrate.you also can't look at 1-year cash flow and make a well-informed investment decision. You should look at a 10+ year period and evaluate IRR to really compare one investment vs another.
What do you mean by this? This is contrary to what other people are saying...How is cash flow in this current market more risky?
- Rental Property Investor · Member since 2018 · 826 posts · 809 votes6mo
higher cash flow in itself is not risky, but buying an asset that appears to have high cash flow on paper is risky.
you have to realize there is a lot of wealth out in the world, and if the smart money is passing up on the "great" cash flowing properties that many newbs are flocking to, that means the great cash flowing properties aren't as great as you think they are.
- 7moDivin KanyamaBusiness MemberAccountant · Seattle, WA · Member since 2025 · 155 posts · 45 votes
That’s an excellent question, @Jamison Remmers. I’ve long appreciated cash flow, particularly for its tax advantages, so I’d choose option A. Still, there are often opportunities to find a hybrid that provides both cash flow and the potential for appreciation.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Divin Kanyama:
That’s an excellent question, @Jamison Remmers. I’ve long appreciated cash flow, particularly for its tax advantages, so I’d choose option A. Still, there are often opportunities to find a hybrid that provides both cash flow and the potential for appreciation.
You hit the nail on the head, my friend, and I'm with you on that one. I focus on cash flow, but ensuring the market has a bright future and room for potential appreciation is key as well. Good call, Divin. I hope you have a great weekend, and thank you for your comment. Cheers.
- 7moKerlous TadresBusiness MemberRealtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
A similar property in a high-appreciation market with tighter cash flow but bigger upside long term.
Kerlous Tadres | Reafco Real Estate539 Reviews - Inland Empire, CA · Member since 2017 · 151 posts · 79 votes7mo
We don’t really choose between the two. We buy at a good basis with cash flow day one. Strong in-place income gives us margin for error, protects downside, and allows us to get in there execute the biz plan and force appreciation. Market appreciation is a bonus. However we’re still looking for the fundamentals to be there in the market.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes7mo
Quote from @Garret Rumbea:
We don’t really choose between the two. We buy at a good basis with cash flow day one. Strong in-place income gives us margin for error, protects downside, and allows us to get in there execute the biz plan and force appreciation. Market appreciation is a bonus. However we’re still looking for the fundamentals to be there in the market.
I completely agree. If you have one without the other, you're more than likely going to have problems. That's a great approach, Garret. Thanks for your response. Talk to you soon, my friend. Cheers.
- 6moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Jamison Remmers:
Would you rather buy:
A) A 30 unit in a cash-flow market that produces strong monthly income but slower appreciation
or
B) A similar property in a high-appreciation market with tighter cash flow but bigger upside long term?What's your strategy right now?
Hey Jamison, if it were me right now I’d lean toward a cash-flowing property in a market that produces strong monthly income, especially if you’re looking for stability and steady returns early on, because cash flow gives you flexibility and a buffer while you build your portfolio; a market like Columbus, Ohio is a perfect example—since I moved from Portland, Oregon in 2020 and now own 10+ rentals here, I’ve seen firsthand how you can still find properties in the $120K–180K range that hit the 1% rule, cash flow from day one, and still have amazing appreciation potential thanks to the massive population growth, job growth, and major companies like Intel, Amazon, Google, Facebook, Microsoft, Honda, and LG moving in and developing here, so you’re not just getting monthly income but long-term equity upside too, making it a solid mix of security and growth for a strategy focused on building wealth over time. Happy to connect and answer any questions you have!
Jimmy Lieu, Red 1 Realty4.9120 Reviews - Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 343 votes6mo
I would generally lean more towards option A. A 30unit building that provides strong monthly income. Cash flow is what allows you to hold the property to allow appreciation to work.
I actually just did this. I bought 12 units in Fayetteville, AR. For the same price I would have bought a 4-plex in Phx, AZ. The AR property is not only going to be a great cash flowing asset but there can be potential to refi and pull-out equity in the next 12-18months to buy another property. If I were to buy in PHX the building would have not just had tight cash flow but probably would have negative cash flow.
I am not buying real estate as a get rich quick plan it's a get rich for sure plan. Monthly CF is what will make a difference in my life. If I am breaking even or losing money monthly but the building is appreciating that does nothing for me. The only way it starts to cash flow is you own it out right or you can 1031 sell it and buy something somewhere that does CF.
Last thought is if it cost me monthly to own the building it is a liability. If for some reason my W2 income gets cut or goes away that could force me to sell at a time I do not want too.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes6moIsn't it a 5 hour flight from Murrieta, California to Fayetteville, AR? (or a day and 20 hours by greyhound bus)
Quote from @Nick Robinson:
I would generally lean more towards option A. A 30unit building that provides strong monthly income. Cash flow is what allows you to hold the property to allow appreciation to work.
I actually just did this. I bought 12 units in Fayetteville, AR. For the same price I would have bought a 4-plex in Phx, AZ. The AR property is not only going to be a great cash flowing asset but there can be potential to refi and pull-out equity in the next 12-18months to buy another property. If I were to buy in PHX the building would have not just had tight cash flow but probably would have negative cash flow.
I am not buying real estate as a get rich quick plan it's a get rich for sure plan. Monthly CF is what will make a difference in my life. If I am breaking even or losing money monthly but the building is appreciating that does nothing for me. The only way it starts to cash flow is you own it out right or you can 1031 sell it and buy something somewhere that does CF.
Last thought is if it cost me monthly to own the building it is a liability. If for some reason my W2 income gets cut or goes away that could force me to sell at a time I do not want too.
Then there is the time it takes to get to the airport, through security, ticketing, boarding, cramped seats, and the same at the other end plus wait in line, rent a car, drive to the site, handle business and repeat the process. Weather delays, and on and on.
Why, you're not an investor, you're an explorer. :-)
If you like that kind of thing, call it vacation and stay a few days.
I did that kind of travel for a fortune 200 company before I started real estate investing, but it gets old and you don't get combat pay for the extra effort.
Try to find something near where you live. You'll appreciate it later. - Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes6mo
Quote from @Nick Robinson:
I would generally lean more towards option A. A 30unit building that provides strong monthly income. Cash flow is what allows you to hold the property to allow appreciation to work.
I actually just did this. I bought 12 units in Fayetteville, AR. For the same price I would have bought a 4-plex in Phx, AZ. The AR property is not only going to be a great cash flowing asset but there can be potential to refi and pull-out equity in the next 12-18months to buy another property. If I were to buy in PHX the building would have not just had tight cash flow but probably would have negative cash flow.
I am not buying real estate as a get rich quick plan it's a get rich for sure plan. Monthly CF is what will make a difference in my life. If I am breaking even or losing money monthly but the building is appreciating that does nothing for me. The only way it starts to cash flow is you own it out right or you can 1031 sell it and buy something somewhere that does CF.
Last thought is if it cost me monthly to own the building it is a liability. If for some reason my W2 income gets cut or goes away that could force me to sell at a time I do not want too.
It looks like a great property, Nick. I'm happy to hear things are going well for you investing out of state. That is our focus as well. I see you just purchased that property in January. Are you guys looking to acquire more this year, or are you waiting until you refinance?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes6mo
I find this question (cash-flow vs appreciation) so nauseating at this point. It's been asked and corrected extensively.
Cash-Flow is NOT a component itself, it's a RESULT.
Look, if I corrected this ask to reframe it as:
(A) Golden Egg, or
(B) Goose who lay's Golden Egg's
Which would you choose? Hopefully the answer is obvious.
If you buy, let's say a $500k property. Put $100k down. And you have a starting monthly net of let's say $1k, NO, that is NOT profit. That is capitol recovery.
You need to recover $100k to get back to $0.
And if your using correct math, it's more then $100k because your doing an inflation adjustment.
AFTER capitol recovery, now your at profit.
Now here is what happens when try to buy a paycheck via sacrificing appreciation. 98% of time, your buying future losses.
Why? How?
Well, because there is this thing called common sense. There is a reason seller was selling a paycheck. At discounted rate.
See you ignored the accrued capex. So now 2 yrs into it, flat rents, increasing expenses, that capex starts landing because it was already long deferred and now you can't avoid it any longer.
So this whole wonderful tailspin begins of dumping more and more invested capitol into the place to cover this capex. So your invested capital went from $100k too $90k too $125k too $150k.
But remember, you sacrificed appreciation, which there is always 100% of the time a reason for flat, low, no or negative appreciation. So now your reaping those why's. Tenancy quality has declined, rents flat, insurance up, taxes up. That "cash-flow" has eroded.
Now you find yourself "stuck" into a property that you keep scratching your head wondering what's going on, how is a "cash-flowing" property so expensive and loosing you money????
You look at selling and have a minor stroke when find it would sell for what bought it at, even though you dumped all that $ into roofs, heating systems, carpets etc etc.. Turns out nobody will pay a premium for expected items to be in expected condition. No, no bonus for a non-leaking roof.
That's reality, that's how these things work out repeatedly.
Quality costs, that's just the reality of it. But quality returns.
Now for those who want it all, sure that's possible but it requires investing in an acquisition strategy that realistically results in such, ie value-add's etc..
Because reality is there is a little thing called competition int he market. This is the singular reason that no, no you won't find quality buy's at huge discounts just laying themselves out on silver platters for the taking. Because others are happy to buy them up. That competition brings us to the market value mark. So when the market is happy to pay a 5 cap for quality, it's a fools errand to expect 12 caps to just sprawl themselves out for you. It simply doesn't work that way.
It's just not complicated. Yet, for some reason this lie that Lambos lay waiting at Pinto prices abounds.
Investing is a math game. It requires duration of time to play out.
Flipping and other active high input actions have ability to hack the curve, but they are just that, anything but passive.
- Member since 2024 · 20 posts · 5 votes6mo
Quote from @James Hamling:
I find this question (cash-flow vs appreciation) so nauseating at this point. It's been asked and corrected extensively.
Cash-Flow is NOT a component itself, it's a RESULT.
Look, if I corrected this ask to reframe it as:
(A) Golden Egg, or
(B) Goose who lay's Golden Egg's
Which would you choose? Hopefully the answer is obvious.
If you buy, let's say a $500k property. Put $100k down. And you have a starting monthly net of let's say $1k, NO, that is NOT profit. That is capitol recovery.
You need to recover $100k to get back to $0.
And if your using correct math, it's more then $100k because your doing an inflation adjustment.
AFTER capitol recovery, now your at profit.
Now here is what happens when try to buy a paycheck via sacrificing appreciation. 98% of time, your buying future losses.
Why? How?
Well, because there is this thing called common sense. There is a reason seller was selling a paycheck. At discounted rate.
See you ignored the accrued capex. So now 2 yrs into it, flat rents, increasing expenses, that capex starts landing because it was already long deferred and now you can't avoid it any longer.
So this whole wonderful tailspin begins of dumping more and more invested capitol into the place to cover this capex. So your invested capital went from $100k too $90k too $125k too $150k.
But remember, you sacrificed appreciation, which there is always 100% of the time a reason for flat, low, no or negative appreciation. So now your reaping those why's. Tenancy quality has declined, rents flat, insurance up, taxes up. That "cash-flow" has eroded.
Now you find yourself "stuck" into a property that you keep scratching your head wondering what's going on, how is a "cash-flowing" property so expensive and loosing you money????
You look at selling and have a minor stroke when find it would sell for what bought it at, even though you dumped all that $ into roofs, heating systems, carpets etc etc.. Turns out nobody will pay a premium for expected items to be in expected condition. No, no bonus for a non-leaking roof.
That's reality, that's how these things work out repeatedly.
Quality costs, that's just the reality of it. But quality returns.
Now for those who want it all, sure that's possible but it requires investing in an acquisition strategy that realistically results in such, ie value-add's etc..
Because reality is there is a little thing called competition int he market. This is the singular reason that no, no you won't find quality buy's at huge discounts just laying themselves out on silver platters for the taking. Because others are happy to buy them up. That competition brings us to the market value mark. So when the market is happy to pay a 5 cap for quality, it's a fools errand to expect 12 caps to just sprawl themselves out for you. It simply doesn't work that way.
It's just not complicated. Yet, for some reason this lie that Lambos lay waiting at Pinto prices abounds.
Investing is a math game. It requires duration of time to play out.
Flipping and other active high input actions have ability to hack the curve, but they are just that, anything but passive.
What does this all mean in context of the OP's question? I am having difficulty understanding what the takeaway is. - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes6mo
Quote from @Mohamed F.:
Quote from @James Hamling:
I find this question (cash-flow vs appreciation) so nauseating at this point. It's been asked and corrected extensively.
Cash-Flow is NOT a component itself, it's a RESULT.
Look, if I corrected this ask to reframe it as:
(A) Golden Egg, or
(B) Goose who lay's Golden Egg's
Which would you choose? Hopefully the answer is obvious.
If you buy, let's say a $500k property. Put $100k down. And you have a starting monthly net of let's say $1k, NO, that is NOT profit. That is capitol recovery.
You need to recover $100k to get back to $0.
And if your using correct math, it's more then $100k because your doing an inflation adjustment.
AFTER capitol recovery, now your at profit.
Now here is what happens when try to buy a paycheck via sacrificing appreciation. 98% of time, your buying future losses.
Why? How?
Well, because there is this thing called common sense. There is a reason seller was selling a paycheck. At discounted rate.
See you ignored the accrued capex. So now 2 yrs into it, flat rents, increasing expenses, that capex starts landing because it was already long deferred and now you can't avoid it any longer.
So this whole wonderful tailspin begins of dumping more and more invested capitol into the place to cover this capex. So your invested capital went from $100k too $90k too $125k too $150k.
But remember, you sacrificed appreciation, which there is always 100% of the time a reason for flat, low, no or negative appreciation. So now your reaping those why's. Tenancy quality has declined, rents flat, insurance up, taxes up. That "cash-flow" has eroded.
Now you find yourself "stuck" into a property that you keep scratching your head wondering what's going on, how is a "cash-flowing" property so expensive and loosing you money????
You look at selling and have a minor stroke when find it would sell for what bought it at, even though you dumped all that $ into roofs, heating systems, carpets etc etc.. Turns out nobody will pay a premium for expected items to be in expected condition. No, no bonus for a non-leaking roof.
That's reality, that's how these things work out repeatedly.
Quality costs, that's just the reality of it. But quality returns.
Now for those who want it all, sure that's possible but it requires investing in an acquisition strategy that realistically results in such, ie value-add's etc..
Because reality is there is a little thing called competition int he market. This is the singular reason that no, no you won't find quality buy's at huge discounts just laying themselves out on silver platters for the taking. Because others are happy to buy them up. That competition brings us to the market value mark. So when the market is happy to pay a 5 cap for quality, it's a fools errand to expect 12 caps to just sprawl themselves out for you. It simply doesn't work that way.
It's just not complicated. Yet, for some reason this lie that Lambos lay waiting at Pinto prices abounds.
Investing is a math game. It requires duration of time to play out.
Flipping and other active high input actions have ability to hack the curve, but they are just that, anything but passive.
What does this all mean in context of the OP's question? I am having difficulty understanding what the takeaway is.Short-short version: The narrative of "Cash-Flow vs Appreciation" is a liar narrative; predominantly constructed to sell some product/service, utilized to dupe naive new/newish/hopeful investors.
The truth: Appreciation CREATES equity. Equity CREATES cash-flow. Lack of appreciation DESTROYS equity because capex is omni-present. Appreciation is a MUST-HAVE, non-optional. Or else all you did was buy yourself a falling-knife.
Equity can be: Purchased, earned, or waited for when appreciation exists.
Since inflation is omni-present, and capex is omni-present, Real Estate DECLINES in value every year on it's own and thus REQUIRES appreciation to at minimum pace net-0, or done wisely, appreciate over time. To understand this you must view your $ in inflation adjusted #'s not just out of context.
A property bought 10yrs ago for $200k, that has had $20k in expenses, and it now market value $260k is net-0 if what you could buy for a dollar 10yrs ago is now $1.20.
And worse yet, those who got into such and now are struggling to sell for just $220k, which is a LOSS. Which happens via chasing the liar narrative of "cash-flow properties" vs the TRUE wealth generator APPRECIATION.
The golden rule has long been location, location, location.
Because it's code for appreciation, appreciation, appreciation.
Cash-flow is a RESULT, not an input. Penalties for getting it wrong are unforgiving. Just go ask those in the Smokies who chased cash-flow. Those who focused on the LT fundamentals are doing just fine as those chasing rainbows are drowning in red now.
- Member since 2024 · 20 posts · 5 votes6mo
Quote from @James Hamling:
Quote from @Mohamed F.:
Quote from @James Hamling:
I find this question (cash-flow vs appreciation) so nauseating at this point. It's been asked and corrected extensively.
Cash-Flow is NOT a component itself, it's a RESULT.
Look, if I corrected this ask to reframe it as:
(A) Golden Egg, or
(B) Goose who lay's Golden Egg's
Which would you choose? Hopefully the answer is obvious.
If you buy, let's say a $500k property. Put $100k down. And you have a starting monthly net of let's say $1k, NO, that is NOT profit. That is capitol recovery.
You need to recover $100k to get back to $0.
And if your using correct math, it's more then $100k because your doing an inflation adjustment.
AFTER capitol recovery, now your at profit.
Now here is what happens when try to buy a paycheck via sacrificing appreciation. 98% of time, your buying future losses.
Why? How?
Well, because there is this thing called common sense. There is a reason seller was selling a paycheck. At discounted rate.
See you ignored the accrued capex. So now 2 yrs into it, flat rents, increasing expenses, that capex starts landing because it was already long deferred and now you can't avoid it any longer.
So this whole wonderful tailspin begins of dumping more and more invested capitol into the place to cover this capex. So your invested capital went from $100k too $90k too $125k too $150k.
But remember, you sacrificed appreciation, which there is always 100% of the time a reason for flat, low, no or negative appreciation. So now your reaping those why's. Tenancy quality has declined, rents flat, insurance up, taxes up. That "cash-flow" has eroded.
Now you find yourself "stuck" into a property that you keep scratching your head wondering what's going on, how is a "cash-flowing" property so expensive and loosing you money????
You look at selling and have a minor stroke when find it would sell for what bought it at, even though you dumped all that $ into roofs, heating systems, carpets etc etc.. Turns out nobody will pay a premium for expected items to be in expected condition. No, no bonus for a non-leaking roof.
That's reality, that's how these things work out repeatedly.
Quality costs, that's just the reality of it. But quality returns.
Now for those who want it all, sure that's possible but it requires investing in an acquisition strategy that realistically results in such, ie value-add's etc..
Because reality is there is a little thing called competition int he market. This is the singular reason that no, no you won't find quality buy's at huge discounts just laying themselves out on silver platters for the taking. Because others are happy to buy them up. That competition brings us to the market value mark. So when the market is happy to pay a 5 cap for quality, it's a fools errand to expect 12 caps to just sprawl themselves out for you. It simply doesn't work that way.
It's just not complicated. Yet, for some reason this lie that Lambos lay waiting at Pinto prices abounds.
Investing is a math game. It requires duration of time to play out.
Flipping and other active high input actions have ability to hack the curve, but they are just that, anything but passive.
What does this all mean in context of the OP's question? I am having difficulty understanding what the takeaway is.Short-short version: The narrative of "Cash-Flow vs Appreciation" is a liar narrative; predominantly constructed to sell some product/service, utilized to dupe naive new/newish/hopeful investors.
The truth: Appreciation CREATES equity. Equity CREATES cash-flow. Lack of appreciation DESTROYS equity because capex is omni-present. Appreciation is a MUST-HAVE, non-optional. Or else all you did was buy yourself a falling-knife.
Equity can be: Purchased, earned, or waited for when appreciation exists.
Since inflation is omni-present, and capex is omni-present, Real Estate DECLINES in value every year on it's own and thus REQUIRES appreciation to at minimum pace net-0, or done wisely, appreciate over time. To understand this you must view your $ in inflation adjusted #'s not just out of context.
A property bought 10yrs ago for $200k, that has had $20k in expenses, and it now market value $260k is net-0 if what you could buy for a dollar 10yrs ago is now $1.20.
And worse yet, those who got into such and now are struggling to sell for just $220k, which is a LOSS. Which happens via chasing the liar narrative of "cash-flow properties" vs the TRUE wealth generator APPRECIATION.
The golden rule has long been location, location, location.
Because it's code for appreciation, appreciation, appreciation.
Cash-flow is a RESULT, not an input. Penalties for getting it wrong are unforgiving. Just go ask those in the Smokies who chased cash-flow. Those who focused on the LT fundamentals are doing just fine as those chasing rainbows are drowning in red now.
Wow, thank you for explaining it that way. I have been way too focused on cash flow for the last few years and just recently realized that appreciation and eventually equity can lead to even greater future cash flows. If you have any other insights, I am all ears.
- 6moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 906 votes
Quote from @Jamison Remmers:
Would you rather buy:
A) A 30 unit in a cash-flow market that produces strong monthly income but slower appreciation
or
B) A similar property in a high-appreciation market with tighter cash flow but bigger upside long term?What's your strategy right now?
@Jamison Remmers
Great question, and honestly, it comes down to your goals, but for me, it’s cash flow all day. Appreciation is nice on paper, but you can’t pay bills or scale with “maybe someday” equity. A high monthly income gives you safety, options, and the ability to reinvest faster. That’s why a lot of investors I know are shifting out of expensive coastal markets and buying in places like the Midwest, where deals still pencil and properties actually pay you from day one. Steady cash flow plus modest appreciation tends to beat hoping the market bails you out later. - 6moBo SmithPro MemberHinton, WV · Member since 2026 · 1k+ posts · 373 votes
It's not either/or for me -- I'm looking for both, but I'll take appreciation over cash flow if I have to pick. A property that cash flows $500/month with no appreciation is just tying up capital in something that's not working hard enough. But a property with $2k/month cash flow in a appreciating market? That's the sweet spot.
The real issue with the "tight cash flow, high appreciation" play is timing and risk. If the market flips before appreciation materializes, you're stuck with a property that doesn't pay you. That's why I like secondary markets over tier-one appreciation plays -- you get better cash flow AND reasonable appreciation, just not crazy 15% year-over-year stuff.
A 30-unit is different though. With multifamily, you're actually capturing the spread differently -- your returns come from stabilizing operations, forcing appreciation through management, and eventually refinancing at better rates. That changes the equation. In that case, I'd lean toward the cash-flowing property and trust the operator to add value over time.
How are you thinking about the refinance and exit timeline on that 30-unit? That's where I'd be doing my analysis instead of just comparing current cash flow.
- 6moBo SmithPro MemberHinton, WV · Member since 2026 · 1k+ posts · 373 votes
I'm gonna be honest -- this is a false choice for most investors. You don't have to pick one or the other. Option A (cash flow + slower appreciation) and Option B (appreciation + tight cash flow) both have downsides at scale. A 30-unit that barely cash flows is a nightmare to manage. A 30-unit in a high-appreciation market that requires you to be cash negative every month is a wealth killer waiting to happen.
The real play is finding the sweet spot: markets with decent appreciation that still produce positive cash flow. Denver, Austin, and similar markets have done this. Cash flow matters because it gives you flexibility. Appreciation matters because it builds actual wealth. But if you're choosing between being negative every month or getting no appreciation, something's wrong with the investment itself.
Where is this 30-unit located? That matters more than the binary choice.
- Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 343 votes6mo
@Jamison Remmers
I will have money to acquire something else in about 18months or so. I have a syndication I am a part of that has the property on the market so that and with savings should be ready to go. With the renovations hopefully being done around August might have an opportunity to refi to buy sooner or buy something bigger.
- Rental Property Investor · Tustin, CA · Member since 2019 · 63 posts · 29 votes6mo
Quote from @Nick Robinson:
@Jamison Remmers
I will have money to acquire something else in about 18months or so. I have a syndication I am a part of that has the property on the market so that and with savings should be ready to go. With the renovations hopefully being done around August might have an opportunity to refi to buy sooner or buy something bigger.
Sounds like a great plan, Nick. Being a part of a syndication is smart. We are more powerful when we work together. 💪 I wish you the best of luck with your plans and the renovation.
- 6moKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
For me it’s cash flow first. Without cash flow you are bleeding money. I believe each investment should support itself. That means cash flow positive. Appreciation is the bonus and reward of your hard work. It’s generally time in the market like most investments is where the reward is.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes6moI agree. A lot of people have lost their future appreciation when they can't make the mortgage payment.
Quote from @Kenneth Garrett:
For me it’s cash flow first. Without cash flow you are bleeding money. I believe each investment should support itself. That means cash flow positive. Appreciation is the bonus and reward of your hard work. It’s generally time in the market like most investments is where the reward is.
- 6moBo SmithPro MemberHinton, WV · Member since 2026 · 1k+ posts · 373 votes
This is the exact tension I think about every deal. The honest answer: cash flow beats appreciation if your goal is income, but appreciation beats cash flow if your goal is net worth. Most investors need both, so the real question is the ratio in your portfolio. In a 30-unit with tight margins in a stable market, you're getting cash flow and slow appreciation. In a high-growth market, you get appreciation but need either deep pockets or lower leverage to survive the carry costs.
I lean toward cash flow first for deals I'll hold 5+ years. Appreciation is a bonus, not the plan. The markets with strong cash flow are the ones where job growth is real and rent demand is consistent -- not sexy, but dependable. If I'm going to bet on appreciation, it's usually through flips (quicker hold, lower risk of being wrong about the market direction) rather than long-term rentals. The worst position is a property in an appreciating market with no cash flow and a long hold horizon. That's speculation with carrying costs.
What's your time horizon -- are you trying to build income streams right now, or are you 10+ years out and can wait for appreciation to do the heavy lifting?
- 6moBo SmithPro MemberHinton, WV · Member since 2026 · 1k+ posts · 373 votes
This is the exact tension I think about every deal. The honest answer: cash flow beats appreciation if your goal is income, but appreciation beats cash flow if your goal is net worth. Most investors need both, so the real question is the ratio in your portfolio. In a 30-unit with tight margins in a stable market, you're getting cash flow and slow appreciation. In a high-growth market, you get appreciation but need either deep pockets or lower leverage to survive the carry costs.
I lean toward cash flow first for deals I'll hold 5+ years. Appreciation is a bonus, not the plan. The markets with strong cash flow are the ones where job growth is real and rent demand is consistent -- not sexy, but dependable. If I'm going to bet on appreciation, it's usually through flips (quicker hold, lower risk of being wrong about the market direction) rather than long-term rentals. The worst position is a property in an appreciating market with no cash flow and a long hold horizon. That's speculation with carrying costs.
What's your time horizon -- are you trying to build income streams right now, or are you 10+ years out and can wait for appreciation to do the heavy lifting?
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