Appreciation or Cash Flow Focus When Starting Out

[Nick Henry]

Hi there - I am starting out in real estate investing and am trying to build a portfolio of rentals that can produce enough cash flow for me to eventually leave my job and make real estate my main job. I have been going back and forth between an appreciation focused investment versus a cash flow focused investment. I'm unsure which focus would help me scale my portfolio and achieve my goals more efficiently. 

In the long run, I want to have properties that are producing strong cash flow (eventually would love to own small apartment buildings and syndicate larger deals), but it seems that focusing on cash flow and reinvesting those cash flows will be a slower process than focusing on properties prime for appreciation or with opportunities for forced appreciation. It seems I could scale my portfolio faster with an appreciation focus.

Does anyone have any thoughts or recommendations on this? I live in SoCal so if I wanted strong cash flow I would likely have to look out of state. I am definitely open to out of state investing though if that helps me reach my goal more efficiently, but would love to stay on the west coast. Thanks in advance for any input!

[Alan Asriants]

Focus on buying properties in good locations that will attract high value tenants. Real estate is a long term game and a lot of podcasts, reels, etc will show you examples of 25 year olds retiring from their 400 unit section 8 portfolio in Cleveland. Try not to fall into the trap of believing those gurus or comapring yourself to people you hear on podcasts. Building a rental portfolio that replaces your income takes years and a lot of effort, this is especially true in our high price high interest rate market.

You need to have at least a 10 year vision when buying real estate. This is when you will see growth in rent rates and appreciation. You will also start paying down more of your principal and in those 10 years rates could fall giving you an opportunity to refinance. 

As time goes on it makes sense for more people to try to get rid of their leverage than add properties to their portfolio. Its a lot easier to have a paid off portfolio of 2-3 properties earning you 10k/m in cash flow than 15 properties giving you the same return but are leveraged. 

Just start and make sure you buy the RIGHT property. I'd rather lose 100 bucks a month in a class A area than make 200 in a class D.