Cash flow or appreciation

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Cash flow or appreciation

Brandon Fuhrman
Louisville, KY · Member since 2020 · 80 posts · 31 votes

I am a new investor and looking to get into my first rental property. I have a few different opportunities but my question is: for your first rental property, would you want something that cash flows good with bad appreciation, or one that cash flows okay but in a higher appreciation area?

My goal is long term buy and hold, but with little to no cash reserves, the idea of using the equity in my first rental property to use for another property is enticing. But don’t want to bank on appreciation if something is cash flowing very well.

Of course, in an ideal world you’ll want both cash flow and appreciation but which would be better for your first or first couple of rentals? Thank you very much!

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Edward B.
Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
5y

@Brandon Fuhrman, Cash is King. Most people who go bankrupt do not do so because they owe more than they are worth. It is because they owe more than they can pay. They can't make their monthly nut. Unless you have a job that allows you to afford being cash flow negative, in the beginning I would focus on cash flow until you build up enough that you can make more speculative bets. Because appreciation plays are all speculative and should be left to experienced players who can afford to be wrong.

Yes, you will make way more money on appreciation in the long run, but it works both ways. It will wipe you out way faster and before you even get started if you bet wrong. 

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  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Sean Gribbons I’ll rather play Texas hold ‘em lol

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Joe Costello Thank you for your comment, Joe. Yes it seems there is a lot more to real estate than just cash flow, it has to be look at as a whole and not just one aspect. Best of luck to you!

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Michael Jones thanks, Mike! I would love to talk properties, most of my inner circle aren’t interested in RE so I would love to chat. I’ll send you a connection request .

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Mike Mocek thanks for taking the time to share, mike. I lived close to CLE for about 24 years and is my home town. I appreciate your thoughts and feedback!

    1Reply
  • Luis Perlish
    Developer · Miami · Member since 2020 · 32 posts · 9 votes
    5y
    Originally posted by @Brandon Fuhrman:

    @Luis Perlish congratulations on your 4th property! So you are 2 months in and already have 4 properties? Thats awesome!!

    What is the company you mentioned that does brrrr? I am very interested in the brrrr method and wonder if similar companies would be in my area.

    Brandon, I owned 3 apts (paid off) in Miami are close to where I live. Becuase the purchase of my fisrt apt was at the wrong time (2007), and it was such BAD DEAL I never counted this as ROI until I paid it off.

    I actually owned 3 apts and 2 multifamily (total of 18 units) but for some weird reason I never count the first apt I ever bough. 

    The 2 multifamily properties I bought were managed by Orange Property managment, if you are able to find out which parenting company ownes Orange that is the company that does brrrr very sucessfully in Omaha.

    0Reply
  • Randy Barnard
    Member since 2018 · 13 posts · 3 votes
    5y

    Starting out cash flow is king!

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y

    Here in Columbus OH I focus on cash flow first with a value add option. If there is about $100k avalible in forced equity, then were talking!

    3Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Randy Barnard amen to that lol

    2Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Luis Perlish gotcha! I would love to transition to multi family and apt builders. This is possible through the brrrr method?

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Steven Foster Wilson:

    Here in Columbus OH I focus on cash flow first with a value add option. If there is about $100k avalible in forced equity, then were talking!

    Wow, you are swinging for the fences. A lot of my first deals in Columbus, Ohio were not that good 

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    2Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Remington Lyman:
    Originally posted by @Steven Foster Wilson:

    Here in Columbus OH I focus on cash flow first with a value add option. If there is about $100k avalible in forced equity, then were talking!

    Wow, you are swinging for the fences. A lot of my first deals in Columbus, Ohio were not that good 

     Some start small. I say go big or go home 😉

    0Reply
  • Luke Rorech
    Real Estate Agent · Greater Tampa Bay · Member since 2017 · 392 posts · 290 votes
    5y

    @Brandon Fuhrman I'm currently reading How to Create Lifetime Cash Flow Through Multifamily Properties by Rod Khleif. He goes into detail about the importance of cash flow and why it's so important. You can always force appreciation through value adds aka brrr. 

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Luke Rorech thanks, I’ll check out that book. Currently reading brrrr by David Greene and so far has been excellent.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Brandon Fuhrman:

    I am a new investor and looking to get into my first rental property. I have a few different opportunities but my question is: for your first rental property, would you want something that cash flows good with bad appreciation, or one that cash flows okay but in a higher appreciation area?

    My goal is long term buy and hold, but with little to no cash reserves, the idea of using the equity in my first rental property to use for another property is enticing. But don’t want to bank on appreciation if something is cash flowing very well.

    Of course, in an ideal world you’ll want both cash flow and appreciation but which would be better for your first or first couple of rentals? Thank you very much!

    You should decide your own person goal for yourself.  No one else’s goals apply to you.  Decide for yourself what you’d like to achieve.

    For me personally, I focus on cash flow, which I can forecast @ 90% accurate prior to closing a transaction.  But I also want strong appreciation... but that’s the icing on the cake.  I get returns both ways... 

    But again, don’t live someone else’s life. Figure out your own goal, then setup a strategy to achieve that!

    1Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Brandon Fuhrman:

    I am a new investor and looking to get into my first rental property. I have a few different opportunities but my question is: for your first rental property, would you want something that cash flows good with bad appreciation, or one that cash flows okay but in a higher appreciation area?

    My goal is long term buy and hold, but with little to no cash reserves, the idea of using the equity in my first rental property to use for another property is enticing. But don’t want to bank on appreciation if something is cash flowing very well.

    Of course, in an ideal world you’ll want both cash flow and appreciation but which would be better for your first or first couple of rentals? Thank you very much!


    Based on your goal, you want to focus on cash flow in a market thats growing with strong population + job growth forecasts.  You can find this info free @ US Census and Bureau of Labor Statistics.

    0Reply
  • Alexander Trotter
    Aurora, IL · Member since 2020 · 22 posts · 9 votes
    5y

    @Christopher Smith

    Thanks for sharing this. This is the perfect example of what I'm going for!

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Brandon Fuhrman:

    @Luke Rorech thanks, I’ll check out that book. Currently reading brrrr by David Greene and so far has been excellent.

    This is an excellent book and helped me do 2 BRRRR's

    1Reply
  • Thomas Greer
    Real Estate Consultant · Member since 2020 · 80 posts · 102 votes
    5y

    Great replies.  Just to add to the discussion - I always see cash as cash.  Proforma/future cashflows always have a bit of risk involved.  So, I would look at the deal and think about the certainty of the cash and its source.  In some instances appreciation seems much more "solid" than rental growth and/or vice versa.

    Have fun and all the best!

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Jon S. Thanks for your thoughts and for sharing, Jon!

    1Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Thomas Greer thanks for sharing!

    0Reply
  • Jason Norton
    Specialist · Huntsville, AL · Member since 2020 · 96 posts · 35 votes
    5y

    @Brandon Fuhrman

    I will do a deal if the client wants but at the end of the day I really do not instruct my clients to do a deal unless they have cash flow from the monthly rents and also equity at the time of closing in the property.

    I will do what my clients need to have done but at the end of the day I also advise my clients on whether it is a positive or a negative deal. I don’t like putting my clients in a negative deal but if that’s what they really want I mean I can do the paperwork and still close in three weeks.

    0Reply
  • Brandon Fuhrman
    OP
    Louisville, KY · Member since 2020 · 80 posts · 31 votes
    5y

    @Jason Norton wish you could be working with me, Jason!

    0Reply
  • Jason Norton
    Specialist · Huntsville, AL · Member since 2020 · 96 posts · 35 votes
    5y

    @Brandon Fuhrman

    I can. Go look at my profile.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Brandon Fuhrman:

    @Jon S. Thanks for your thoughts and for sharing, Jon!

     Look for a market with an attractive price-to-rent ratio that is also experiencing strong population and job growth.  If you have questions about that market let me know.  I already investor there.

    0Reply
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