Appreciation question to experienced investors

[Andreas W.]

In this forum the question to invest for cash flow or appreciation or a combination thereof is discussed regularly with a healthy dose of exchanges of opinions and personal experiences. I understand that the differences are often regional and that the cash flow definition is pretty straight forward. In general, mid-western markets are called cash flow investment markets with flat appreciation while the west coast offers great appreciation. When experienced investors talk about flat or no appreciation, does that mean appreciation in lock step with the inflation rate or outright zero appreciation in absolute terms? What costs 80 k today will cost 80 k in 20 years. It makes a difference for the ROI.

[Andrew Johnson]

Andreas W. When I look at a "cash-flow market" there are (in my opinion) two parts. There's the part where you can get a $100K property that will provide cash-flow and also slowly appreciate. They pretty much stay in step with inflation. When San Francisco goes up 100%, they go up 20%. They also don't crash as hard because it's harder for those markets to get as heated as NYC, SF, LA, etc.

In that same market you can usually find $30K properties. They were also $30K over the past 10-20 years. So the reality is that those properties decline in value relative to be inflation. They are declining in value at a more rapid rate that other real estate assets.