Do you count appreciation as income even if unrealized, since it

[Jack B.]

...is after all taxable, lest you do a 10-31 exchange, etc.

I know it's not cash flow, but at the end of the day, even though you don't realize it until you sell, can one not consider it unrealized income at least until they sell?

At the end of the day, the gains weren't all made when I sell, they are allocated to each year they property appreciated.

[David Faulkner]

Appreciation comes in 2 forms and these 2 forms usually come hand in hand together: price increases and rent increases. Rent increases do not typically result in correspondingly large increases to expenses, so they more or less go straight to the bottom line as increased cash flow, which is tax efficient but not tax free.

Price increases are realized when you sell, which is a taxable event unless the taxes are deferred via 1031 exchange or partially/wholly exempt from it having been your primary residence for at least 2 of the last 5 years.   You can also tap equity from price appreciation via cash-out refinance tax free prior to sale. This will increase your leverage, and that has risks associated, so should be done with care. 

Many ways to skin the cat ... many ways to make money on both appreciation and cash flow on high quality RE in high quality locations (which is the kind that tends to appreciate) ... and we didn't even get into whether said appreciation was market appreciation, forced appreciation, or some combination thereof ...