Chicago, IL · Member since 2017 · 39 posts · 33 votes
I currently purchased all of my portfolio geared towards cash flow. I keep reading that its better to buy for appreciation then it is for cash flow only. The area that I am renting in are c-d neighborhoods and I can pickup a unit and have it ready to rent for about $35000. Most of the rentals I target are 3 bedrooms and I can usually get $1150-$1200 month rent with the tenants paying utilities. If I wanted to buy in a a-b neighborhood it would cost me around $125,000-$140,000 per unit but the rent would be higher at around $1300-$1400 per month. Is someone able to explain to me how buying something almost 4x the cost and almost similar rents is better. I would like to start to invest in better areas but the numbers aren't making sense to me.
Lots of one-size-fits-all commentary on BP. Buy some of both and, even better, force appreciation, cash out, and then cash flow afterwards. Strategies can vary based on market opportunity, investor goals and simply investor preferences (regardless of returns)...lots of successful approaches. Find what works for you and your market.
Investing verses speculating. Those that rely primarily on appreciation already have more money that then need which is how they can make zero monthly income off of a investment. Most relying primarily on appreciation actually operate with negative cash flow as again they already have more money than needed and are simply playing at investing.
The question for investors is how many zero or negative cash flow properties can you afford to own as opposed to owning positive cash flow. Assuming you derive your monthly income from investing cash flow is necessary where as appreciation is simply a bonus for having invested in a smart income producing property.
The strangest thing about most appreciation investors is that they usually never realise their gains since they are reluctant to ever sell and can not pull out cash due to the further negative impact on cash flow.
What they fail to understand is that equity, due to it's opportunity value, actually reduces cash flow more than having 100% financing.
For appreciation investors it is more of a game since they have already made their money. If they hadn't they would go bankrupt without cash flow.