Appreciation or Cash Flow - That is the Question

[Joe Moore]

Yes L.A. and the OC are great places to live but not the greatest place for the average real estate investor. I did say average because those with cash are still buying. Some are even tearing down the old replacing them with brand new dwellings. Our market here is in a rising price spiral for now. Eventually it will crash again. The thing about this, is that in each cycle the prices go even higher. If you want appreciation LA/OC is the place. The problem lies can you buy when it is a buyer's market and hold on until it is a seller's market. If you can, you will be well rewarded. Many investors here are price out of the market and that is why we have to go the out of state route to invest. So what is best for you? Do you buy and hold for appreciation or buy and hold for cash flow? I myself prefer the appreciation for long term but everyday living requires cash flow for me. I think I covered the problem why investors have to go outside their local area to invest. So what do you do? Stay local and do nothing or head for the nearest exit and start making some headway in an out of state investment? You make the call.

[Nathan Emmert]

The reality is you have to invest for both.

If your area isn't appreciating long term, it's dying... if the area is dying, your property is dying, your cash flow is dying.

So invest in a place where the numbers work not only this year, but the forecast is the numbers will work long term.  I fully intend to own these homes in 50 years and eventually passing them along to the kids.

The problem I have with appreciation is... what do you do with it?  Hey, I just got $100k in extra equity?!  Great... you can't cash it out and still cash flow... you could sell the property... but now what are you going to do with the $100k... go buy new properties?  In your market, all the other properties have probably had similar increases so it doesn't really add anything.  Sure, you could try to time the market... buy low in CA... sell high in CA... then go invest in cash flow in Indianapolis... but that's just gambling and market timing IMO.