Need advice on cash flow vs appreciation SFH investing

[Raj Palem]

HI, I have 8 investment properties which are mixed with cash flow and appreciation markets. I just sold one of the home in appreciating market with 1031 exchange. debate whether i go with 3 or more SFH homes worth of around 200K or buy new construction home in appreciating market.

I am not in need of any cash flow in near future. Appreciate for your inputs

[Evan Polaski]

@Raj Palem, I am always skeptical of appreciation on new construction.  Granted I am in one of those "cash flow" midwest cities (cincinnati), but in my market, new construction has historically seen the least amount of appreciation, and in some cases, even before any talks of current recessions (think 2018 era) there have been properties that were bought as new construction coming back on market for less than was originally paid.

As for cash flow vs appreciation, anyone that says don't bank on appreciation shouldn't be in real estate.  Cash on cash yields in todays markets, for a decent property are mid-single digits, even in "high cash flow midwest markets".  I can get that in money market accounts or dividends from stocks with NO work.  The payday in real estate, as you have seen, is appreciation.  There is no other reason to be in real estate, from an investment standpoint (tax benefits only help so much).  It is just humorous to me the responses here of "appreciation doesn't matter".  

With that said: appreciation is risk.  You SHOULD get a higher return out of appreciation versus cash flow.  It is not guaranteed.  

Ultimately, there is no right answer.  This is case by case.  Lower cost houses typically come with lower quality tenants, more frequent turn over, higher wear and tear, etc.  Higher cost houses typically come with lower cashflow.

Higher end, appreciating areas tend to come with faster rent growth and higher appreciation.  Incomes tend to be stronger, meaning rent hikes are easier for tenants to accept.  And if we go into a real recession, higher income areas tend to be more resilient to job loss.