Total Return

[Matthew Yrungaray]

Does it make sense to invest for total return? A property that I am considering is very tight on cash flow, capital appreciation is slow in the area but the property is in great shape, is never vacant and I can owner finance. The property is in a very desirable area. The return on this property would come from principal paydown, appreciation and very little income. I will put very little if any money into the deal. Thanks for any input

Matt from the Salt City

[Jeff S.]

No, especially if your strategy is to hold long term. You note that appreciation is slow and cash flow is tight. This leaves equity growth and tax benefits. You’ll quickly tire of a property with no income.

In my view, cash flow is king. Worst case is you have money coming in and can pay your bills. Equity, appreciation, and tax benefits are great but don’t pay the bills or provide monthly income.

Different story if your exit strategy is shorter term, such as to fix & flip, rebuild, or somehow reposition the property. You’re not clear on this. Have you done a thorough cash flow analysis?

“Never vacant” properties do go vacant and everything “in great shape” still requires maintenance.

Don’t become a motivated buyer, Matthew.