Breakeven cashflow inv property, how should I think about return?

[Dennis N.]

Guys, I need some help in thinking through this scenario:

A property that has breakeven cash flow with appreciation in line with average inflation and minimal expense over 30 years. Lets say it cost 500k and I put down 100k of downpayment. Then wouldn't it still be a good deal since you are having the tenant pay for your mortgage and help you build up 400k wealth over 30years? Or am I not thinking this correctly? Or should I take the opportunity cost of not able to invest that 100k over 30 years?

Thanks! appreciate any insight here.

[Joe Villeneuve]

No.  No CF means no profit.  Built up equity is not something you can predict or count on delivering 30 years from now.  Think about 30 years ago.  Could what we are experiencing today have been predicted accurately 30 years ago?
CF is now, it is predictable (excluding the unpredictable surprise repairs) for the next 5 years at least
Besides, if you are looking at the buildup of your equity coming from appreciation, you will be losing even more money of that 30 year period.  Equity is what that property cost you.  In other words, the PV is really what the equity is worth.  When you bought that property from your example, your equity (your 20% DP once closing took place) bought you property worth 5 times what you paid for it.  When your property appreciates, the equity also increases at the same rate...1 to 1.  So, when that PV appreciated to $600k in PV (5%/year over 5 year period = $607k), and increase of $100k, your equity would also go up the same $100k to $200k...and that equity would now be worth only 3 times its face value.  That equity is now buying you a property only three times what it is paying for.
If you sold the property and got all that equity out, and reinvested it at the original 20% DP, that released equity would now be buying you $1M in PV.  That's a long way from $600k...and that is twice the $500k in PV you would have after 30 years in your example.
What if that property was sold and reinvested again when that $200k in equity reached $400k (5%/year over 4 years = $1.22M in PV...and $400k plus in equity)? Sell and reinvest at 20% DP and the new PV is $2M.

Option 1:  Sit and wait, and let it build on its own
Time period = 30 years
PV = $500k
Equity = $500k

Option 2: Let it ride and let it build as it moves
Time period = 10 years
PV = $2.1M
Equity = $500k
The value of "moving" equity is greater than the same face value of "lazy" equity over 1/3 the time period. 

Questions:
1 - What could the equity and PV be if you continued to repeat the same steps until that same 30th year Option 1 was aiming for?
...and,
2 - What could the CF of Option 2 be compared to Option 1 at that 30 year mark?