Appreciation or Income

[Patrick H.]

Assume that you had the option to by a $100k property that:
A) Brought in $10k in NOI annually
or
B) Appreciated $10k annually

Which would you prefer? Why?

[Michael B.]

Originally posted by Patrick H.:

Interesting thoughts so far... I personally think income is better than appreciation. Was expecting some more thoughts and insights around investing for appreciation.

I guess my thoughts on this is slightly different than what's been expressed here. But not a lot.

Taking this to the stock market: Investing in cash flow is a lot like investing in safe stocks -- utilities and the like. They give decent, dependable returns. But you're not likely to get really great returns on them. Investing for appreciation is more like the growth stocks -- uncertain, but could be a good deal better in the long run.

I think your question ignores this. Positing a 10K safe return vs a 10k riskier return is an easy choice. Always take the safety if the return is likely to be the same. But houses that are likely to appreciate have the potential to bring greater yields than income property.

Appreciation has a lower likelihood of happening than cash flow, but can be much larger than the cash flow. And just like stocks, both income and growth assets have a place in a portfolio.