Investor looking for Appreciation

[Harrison Jones]

Recently, I have had more investor from more establish markets reach out to me about investing in my home market of Raleigh-Durham NC. It has lead me to build a team that is capable handle kind of investing strategy. While I mostly do flips and find cashflow for my investors this has been a new journey for me. I wanted to ask what is the biggest difference when focusing on appreciation rather than things like cash flow?

[Benjamin Carver]

It's great to hear that you're building a team in the area. I truly believe RDU is set for massive appreciation, though I do not pretend to have a glass ball. Transitioning from cash flow to appreciation as your primary investment strategy is indeed a significant shift, and it comes with its own set of considerations:

1. Investment Horizon: One of the most significant differences is the investment horizon. Cash flow properties are often geared toward providing immediate returns through rental income. In contrast, appreciation-focused investments may require a longer-term commitment. It's important to recognize that you might not see substantial returns for several years.
2. Market Selection: Don't assume every part of the Triangle automatically means great appreciation. Dig in deep to what areas are set for expansion and what areas are tapped out.
3. Financing Considerations: Appreciation-focused investors may be more inclined to use leverage to maximize their gains over time. Meanwhile flips may require more cash and you may be inclined to pay off the property faster to get higher cashflow.
4. Exit Strategy: With cash flow properties, the exit strategy is often to maintain the rental income over the long term. In appreciation-focused investments, the exit strategy may include selling the property after it has gained significant value. Be prepared for capital gains taxes and have a plan in place for when and how to exit the investment.
5. Risk Tolerance: Appreciation-focused strategies can be riskier compared to cash flow investments. Assess your risk tolerance and ensure that your investors are aligned with the longer-term and potentially more uncertain nature of appreciation-based investing.
6. Market Volatility: CF means you don't care about the home value (near as much). While appreciation banks off either a) the market upswinging (more risk) and or b) forced appreciation which you already do with your flips. Consider a flip-appreciation play to hedge your bets.
7. Liquidity: Appreciation investments are less liquid compared to cash flow properties. It might take time to find a buyer willing to pay the price you desire when you decide to sell.

If you want to talk more about this. Feel free to PM. Best to you sir.