What's wrong with just cash flow?

[Matt Gilroy]

BP, 

Minimal or no appreciation, lower overall values, hit or miss area but constant cash flow.  Is there a problem with this? My strategy is to replace my income with rental properties.

Slice and dice it!

Matt

[Matt Gilroy]

@Shiloh Lundahl So many great points have been made, I'm glad to be able to revert back to this thread and take nuggets out.  There are good arguments on both sides.  I think for where I'm looking into (Fayetteville, NC area) I can buy and force some appreciation along with cash flow. One thing I don't want to do is buy with hopes of appreciation and not be able to get cash back out.  

Where are some areas with great rents that also has average appreciation?  I've looked around at many markets but haven't found many that have great purchase prices, great rents and 6%+ appreciation.  Am I overlooking something? 

[Douglas Pollock]

@Matt Gilroy If that’s what you want, go do it. Just be aware of the risks and costs associated with that plan. Appreciation only matters at the time of sale, refinance, and tax day. Depreciation matters on those days two. If you’re able to factor in vacancy, CapEx, Taxes, Insuramce, repairs, etc then you should be able to base your decision on the numbers. Being that you’re asking on BP, you may not be experienced enough to know all of the risks and adequately mitigate them in the event of a downturn. Being that a mortgage usually spans 15-30 years, you have to look at your property over time and not just today. If the local business closes its doors, is there another one standing ready to employ your tenant? If a hurricane, flood, tornado, mud slide, fire, windstorm, or some other event happens, do you have the means to recover? If it happens twice a year, two years in a row, then what?

[Roger Hefner]

@Matt Gilroy not a darb thing wrong with cash flow. I have mix notes and rentals. Started 8 mo ths ago have 7 paid off properties going to stop at 15. No debt . I travel around and do what I like. Some of you all work too hard . This business. Enjoy it and have patience. Do what makes you happy. My happiness is CASH FLOW!!

[Cody L.]

This subject always cracks me up.   It's not either or.   One of my best friends had his Houston stuff literally double (or more) in 4-5 years.   And by the time he sold he was making $250k *A  MONTH* in cash flow.   He built this portfolio in about 10 years starting with a 12 unit that he scrounged up to buy.

You don't have to buy 0 cap cash flow negative properties in San Fran *OR* war zone dumps in BFE Ohio.  There are plenty of places where you can get strong cash flow and appreciation.  I like areas that are close to city cores, where you're in the path of progress.  For me that means somewhat rough areas of Houston that are CLOSE to super high end areas.  Those tend to turn into nice areas at almost predictable rates. 

[Shawn Coverdell]

CASH FLOW will set you free! When you start I believe that is the target for sure. But then what? That's where I am at now. Cash flow is running like the Columbia River. I have based my whole model on obtaining more of it. But at this point, I don't see the need for more, unless of course I buy more boxes with windows and doors. 

Wife and I am wondering where to go from here. Double up on more cash flow?!?  Should I buy a Porsche and write off the 500 dollar oil changes?  It's kind of funny, but seriously, we are wondering where to take this obsession with buying houses. 

One idea is to buy properties that cash flow very little. say 200 bucks or less. I noticed lots of people on here find that normal cash flow anyways for there area. for us it sucks. but I would not mind at all if we bought a beach home along the Oregon coast. with a tenant that bathed regularly and lets the dog outside to do it's business when needed. That would be kind of cool. 

Maybe there is not answer to this question but would love to hear more suggestions or obtions. One is always to call it quits. Roll out a Dave Ramsey snow ball and pay them off. (seems like little gain for the money) but that is one option we are considering. 

maybe start buying homes for family members? 

Homes in the Hood

[Cody L.]

Originally posted by @Shawn Coverdell:

CASH FLOW will set you free! When you start I believe that is the target for sure. But then what? That's where I am at now. Cash flow is running like the Columbia River. I have based my whole model on obtaining more of it. But at this point, I don't see the need for more, unless of course I buy more boxes with windows and doors. 

Wife and I am wondering where to go from here. Double up on more cash flow?!?  Should I buy a Porsche and write off the 500 dollar oil changes?  It's kind of funny, but seriously, we are wondering where to take this obsession with buying houses. 

One idea is to buy properties that cash flow very little. say 200 bucks or less. I noticed lots of people on here find that normal cash flow anyways for there area. for us it sucks. but I would not mind at all if we bought a beach home along the Oregon coast. with a tenant that bathed regularly and lets the dog outside to do it's business when needed. That would be kind of cool. 

Maybe there is not answer to this question but would love to hear more suggestions or obtions. One is always to call it quits. Roll out a Dave Ramsey snow ball and pay them off. (seems like little gain for the money) but that is one option we are considering. 

maybe start buying homes for family members? 

Homes in the Hood

I'll tell you what I did when I hit that 'good problem to have' of 'too much' cash flow. I started buying "cool" properties. Where the numbers suck but it's more of a vanity play. Cooler buildings in cooler ares where the trophy nature of the property means cash flow is secondary. I've started to buy some lower cap NNN deals, office buildings, etc.

So the nasty cash flow class C took me to the dance, now I'm using the proceeds to go after her hot friend.