Should I Focus on Cash Flow or Appreciation

[Tyler White]

Hi Everyone,

My name is Tyler and I am new to the BiggerPockets forum.

I graduated from college last summer and shortly after my wife and I bought a house with a mother in law apartment, and have been renting out the space ever since. We’ve saved up enough for a potential down payment for a 2nd house, but not sure if we should use that money to get 20% down on our current house. If we rented both the mother in law apartment and the space we are living in now, we would only be a positive cash flow of $200 per month, which would increase to $360 per month if we rid ourselves of mortgage insurance by getting to 20%. Neither factors in property management.

My question is, should we take advantage of buying another duplex now or should we wait until our current house brings in more cash flow by getting the equity to 20% first? I would appreciate any advice for a new investor like myself!

For context, we live in Provo, Utah, an area that is exploding in demand. Our house has appreciated 32,000 in a years time (a 12% appreciation).

Thanks in advance!

[Joe Villeneuve]

No.  Your current duplex isn't making you any money, and based on the numbers you gave here, probably losing money.  If the current duplex has appreciated $32k, then you should sell it and replace it.  Before you make any move though, you need to account for what you have to work with cash wise not counting anything from the current duplex.

In the end (beginning actually), your current equity is more valuable as liquid cash and moving forward than sitting dormant in the floorboards of the duplex...doing nothing.