Investor for cash flow or appreciation

[Wilson Cheung]

It seems like many podcast hosts (including Josh and Brandon on the BP podcast) promote investing for cash flow instead of investing for appreciation.  I understand the economics and the strategies for positive cash flow.  However, speculating on appreciation could yield much bigger returns and in a shorter time frame.

For the San Francisco Bay Area (including the Silicon Valley), prices are continually going up even though many cash flow investors think that it can't go any higher.  I think that as long as the job market continues to grow, there will be continued demand, and thus the values will continue to rise.  Let's face it, Google, Facebook, Apple, and the like are not going to regress anytime soon.

I would like to hear what other investors are thinking... Cash Flow?  Or Appreciation?

[Arlen Chou]

@Wilson Cheung I am a buy and hold investor in the SF Bay area.  In less then 5 years I have been able to put together a portfolio of nearly 20 doors and the fact that this topic comes up so often is just mind boggling to me.  As an investor the discussion should not be about cash flow OR appreciation.  I personally believe investors should look for properties that provide BOTH.  The basic equation that I follow is: cash flow + appreciation = financial freedom.  To all of the people who believe that there are "no cash flowing deals" in the Bay Area, based on my short personal experience, I say they are wrong.  I can say that, because all of my units cash flow AND I have had incredible appreciation during my holding period.

Is there going to be a correction in the near future?  Probably...  But if I have done my research properly, my units should continue to cash flow and also retain a NET appreciation value during a market down cycle.

Don't settle for 1/2 of the financial freedom calculation, look for both. It takes hard work, planning and diligence, but the deals can be found.   The real question is how do you get both in any market.  A strategy must be devised for each particular market and even down to the individual property. 

Good hunting to you!

-Arlen