Pure cash flow investing vs cash flow/appreciation

[Sean Dezoysa]

Hi everyone,

I am mostly focused on acquiring MFH properties in a high cash flow area like Birmingham, AL. I will be non-local no matter what because I spend half the year outside the US. Low cost, low appreciation markets seem to greatly simplify the equation of getting to a retirement amount of $4,000 - $5,000 per month.

A lot of people here like to not go to the cheapest markets but instead those showing solid fundamentals for appreciation. I know those payoffs can be quite large too. My concern is that it also seems to make the retirement equation harder because that same appreciation benefit will now make followup acquisitions harder. To maximize the gain you might have to focus on a rougher area of town or switch markets.

Is this logic missing something? Or is it fair to say that a high cash flow, low appreciation market is a safer and perhaps more direct, less error prone path to a retirement level of income?

[Joe Villeneuve]

Your logic is sound.  Appreciation alone is riding a very slow boat to retirement.  Cash flow alone is also slow.  The combination of the two, can turn the singular/linear returns into a compounded return...and thus, move much faster.  How fast?

Take any number and see how many steps it takes before you reach 100 times that number by taking the previous number and double it for each step. (i.e....10, 20, 40, 80, etc...)

Then, see how many steps it takes when you start with that same number, and just add that number to each step to get the next step.  (i.e...10, 20, 30, etc...)