Cash Flow vs ROI

[Account Closed]

I posted yesterday that I had been trying out the calculators on some listings in the Houston area (Cypress, TX). I liked to ask a hypothetical question and get feed back. 

My question is if a high cash flow is ever better than a low ROI?

In my hypothetical scenario an investor buys a home for $140K cash with an ARV of $150K or possible more. Rents the home for $1600 and cash flows $770 after expenses. According to the calculator the ROI would only be 6.48%. The cash flow is almost at the 50% rule (48%). So would any of you consider this property? If not, what am I missing in my scenario?

[Bryan O.]

It isn't a vs scenario. Cash flow is important because it is your hedge against a downturn, and it is your known profit. You can reach out and touch your cash flow every day. I usually caress it and speak loving words to it. This is usually expressed as a number ($200/month), or might be expressed as "cash on cash" return as a percentage of what cash you used and what cash comes back after all expenses and reserves are figured.

Your ROI is the overall return you are getting. Putting down a bunch of money will lower the debt servicing payments, which should raise your cash flow. Overall though, you've just dropped a lot of money on that deal, so your ROI will be lower because of it. This is expressed as a percentage.