Updated about 5 years ago on . Most recent reply
Cash Flow vs. Equity
Hello BiggerPockets family!
My partner and I are beginning our real estate investing journey! We've been listening to endless podcasts, reading a lot of the BP books, and perusing the BP forums and blogs as much as we can to make the best decisions and educate ourselves the best we can. First and foremost, I want to thank each and every one of you for welcoming us into this community; it is truly amazing to see everybody supporting and lifting each other up we feel so lucky to be apart of it.
My question today is about cash flow vs building up equity to open more doors. We plan on using the Buy and Hold strategy for multi family properties and are looking to invest OOS (we live in San Diego and not sure we can afford to break into this market quite yet as beginners). Big picture - we want to build our portfolio sooner rather than later and I am just wondering what would help us achieve that goal of adding more doors quicker, focusing on cash flow or focusing on building our equity? We are lucky enough that we are not in need of big cash flow, although it would obviously be nice. We have identified several markets we believe look very promising based on the 6 areas we learned about from a BP blog post (job creation, population growth, buildings coming to market, government planning, affordability, and absorption/vacancy rates) and are looking to purchase our first property within 90 days. Or maybe we are being to nitpicky and getting into our first property is more important than looking at these aspects and learning by doing haha.
Thank you so much in advance for taking the time to help us out and we look forward to being apart of this great community!
Most Popular Reply
Similar to buying stocks, when you go to a financial advisor and you are starting out and have time, they put your money into growth stocks...when you are older and need cashflow for your bills...its maybe stocks that pay dividends. So if you want to become wealthy you will do so through appreciation.
As far as number of doors, I think that number is meaningless. Someone can have 30 doors in the Midwest that would be equivalent to having a 4plex in San Francisco, Los Angeles or San Diego. Also, more doors equal to more expenses, such as having 10 single family homes with 10 roofs vs 10 units under 1 or 2 roofs.
Appreciation is not speculation in my opinion especially in a market where you can show decades of appreciation due to macro-economics, supply/demand and inflation.
If you ask any long term buy and hold investor in San Diego, they don't feel like they are speculating on appreciation in the long term, especially those that have owned here for decades will have proof of their investments not being speculation....those that say cashflow is not speculation and haven't received rent in months.....is assuming a tenant is going to pay rent speculation? I'll let you answer that for yourself.
Long story long, San Diego is a great market for long term appreciation and building wealth and it is actually one of the better cashflow markets in the long term as well, just not as much initially.
Welcome to the community :)
- Twana Rasoul
