First time Investor - high COL area, worth it?

[Abhishek Ramanan]

Hello, first time posting after months of podcasts and reading thru forums. Myself and another friend of mine are really looking into investing in a high COL area (Ashburn VA). Lots of appreciation potential, new development & properties, new metro connecting from Washington DC. We are both going to be out of state investors, but grew up in Northern Virginia so we know the area very well.

A new property (3BR, 3.5BA, 4 floor) we are analyzing passes all the check marks for investing viability, except for financial from the way I look at it. Using the rental property calculator, Cash on Cash ROI is -7% for the first year, and doesn't become positive till year 11, after we've had to invest an additional 46.2k to balance each month. However, due to the appreciation play, we can see this increasing 3.5-4% over that time, including maybe 5-7% each of the first 3 years. This makes our overall profit look pretty decent, with a 12% return.

Question I have is, at what point do you value appreciation over cash flow? My friend is pretty interested in the property, especially due to its growth potential, but I'm wary of the amount of additional cash required. Appreciation is also a projection that could be off, whereas a mortgage payment, taxes, HOA, & vacancy rates are easier to predict.