Cash Flow Vs. Appreciation

[Miguelli Fernandez]

Hi BP. Out of state beginner investor initially looking at single family/duplex in Cleveland area to rent to section 8.

The more research I’ve done and the deeper into the process I get I’ve noticed that I’m starting to lean towards appreciation instead of cash flow due.

Is this a natural line of thinking? My wife and I are high income w2 and thought it would be a good idea to expand our portfolio with real estate to help with taxes. However, we also don’t want to invest too much initially due to the learning curve of real estate so we figure starting out with a smaller budget and learn the ins and outs especially developing a team we trust before buying at higher price points.

So here’s the question, for someone not depending on the cash flow as income, is it better to find properties that will cash flow at lower purchase price and find ways to spend the income to avoid taxes or to give up some cash flow and possibly even be at a loss for a few years to buy at a more expensive price in a better neighborhood, be able to take the tax savings each year, but also have a better rate of appreciation? 

[Bill B.]

At today’s high interest rates most bank cd’s have a higher “cash on cash”/ “cash flow” return than rental properties. (Are you finding rentals that cash flow more than than a 5.5% return on your down payment after ALL expenses? That would be very rare.)

you have to “count on appreciation” to justify real estate investing today. 
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IMHO the cash flow gives you financial freedom/independence (at least it used to with lower interest rates.), the appreciation makes you wealthy/rich.