Prioritizing Appreciation vs Cash Flow (10/04/2022)

[Lucas Hunt]

I'm in Dallas investing in my first single family property. Bigger Pockets has groomed me to aim for a 10%-12% COC ROI, 8% at the lowest. Today I submitted an offer that was 95% of the list price and got beat out by another investor that paid 100% of the list price. If I would have paid 100% of list price, my COC ROI would have been ~2.5%. My realtor told me some investors have temporarily reprioritized COC ROI to the back-burner (due to the higher interest rates), and have shifted more of their focus to appreciation. Since interest rates have not caught up to rental property pricing, would it make sense to weigh appreciation higher than COC ROI when assessing deals nowadays? Can always refinance the loan later and was curious if anyone has pondered the same thing.

[Kenneth Garrett]

Quote from @Lucas Hunt:

Quote from @Justin Manley:

IMHO, It's best to stop buying until the fools have run out of money and prices have come back to reality.

There is no indication that appreciation will happen for the next 10 years. Appreciation is gravy. Come back to this post in 5 years. I bet the %95

will be looking pretty terrible.

I am ready to expand but have decided to place everything on hold, look for good other investments and keep liquid and wait for them to start dropping

over the next three years. Winter is coming. I plan to do my best vulture imitation as carrion eaters are the only ones who will be getting fatter over the midterm. Just my two cents. Don't try to place a square ped into a round hole.

P.S. -2.5%? I would rather be electrocuted. :)

It was around 2.5% (it was positive). This post will definitely be ear marked to look back on! 

I never count on appreciation as it’s fluctuations are unpredictable.  I make investments based on cash flow.  If I get appreciation that’s a bonus. Historically appreciation occurs over time, but remember you do have markets where appreciation is flat.  If your COC return is to low as you mentioned 2.5%, I would wait for the next opportunity.  Some of the best investments are the ones you don’t make.