Cash Flow vs Equity

[Adam Connolly]

Hello All- I am new to REI and trying to find my strategy before I dive in. As I scout properties in my local market I find myself wondering whether I should be looking for properties that offer the best equity or ones that offer the best cash flow. That being said a few variables I know to be true.... - I primarily plan to buy and hold properties. - I have a partnership established that allows me access to legitimate licensed contractors at a discounted rate compared to the average homeowner. - My goal is to build long term wealth but positive cash flow is a must how ever small it may be. I pose this question because as I analyze my local market I am finding that one property rarely falls under both categories.....a property that offers great cash flow may only offer minimal initial equity and one with great equity may offer an initial cash flow loss. I'm having great success in my career which has finally afforded me the chance to fulfill my lifelong entrepreneurial spirit. I'm so happy to have found Bigger Pockets and any feedback would be greatly appreciated! As a newbie I don't have much to offer to the community yet but I love sharing thoughts with likewise individuals and I hope to be a valued contributor in the near future! Good luck to everyone!

[Al Williamson]

Hey @Adam Connolly welcome to BP and congratulations on your business success!

We need all the winners we can get around here.

I'm a bit confused about your question. The way you're using the word "equity" is tripping me up.

But before I comment, I need to point you to @David Greene's BP Blog Post that had a brilliant discussion on cash flow vs. equity.

OK, to directly answer your question, besides just saying to focus on assets that have both a strong potential to appropriate AND cash flow... if I had to choose, I would aim for equity growth.

Cash flow is critical, but you can do many thing to improve cash flow ... especially if you're willing to look beyond tenant rents. I push myself to look beyond rents and have found its possible to double and triple your net income. 

So, you can do things to improve your cash flow, and that can increase your appraised values, and that will grow your equity. It's inter-connected.

Best to you - and welcome!