Who Cares about Appreciation and Equity in a Depressed Market?

[Hilary Hageman]

Hey all,

My husband and I bought our first rental (a 2B/1B SFH) this year and are hunting for our next deal. Our current rental is located in a depressed area with low-no appreciation, very low home prices, but average rents (for the area.) We're currently getting $400 cash flow/month on this property (a 24% ROI.) We have great tenants and we're pretty happy about how things are going so far!

My question is, why should I care about appreciation and/or equity buildup in my market when the cash flow to be had is so great?  Other areas nearby with better appreciation barely break even in terms of monthly cash flow.  This has us pondering financing options in the future with the outlook of maximizing cash flow even if equity buildup suffers (always lowest-down financing.)  

Also, in our area (largely rural) no one seems to want to rent in multi-families (so we've been told by local investors.)  Everyone wants to feel like they own their home.  Has anyone else experienced this?

My markets are South Bend Indiana, Niles Michigan, and Berrien County Michigan.

[John Chapman]

I'm sorry @Hilary Hageman, but you have simply not been doing this long enough to experience the true joy of significant cap ex (which is unavoidable for any property), stagnant rent growth, increasing expenses, and the general illiquidity that comes from owning the type of property you are describing.  Moreover,  you have not honestly looked at what your numbers could be if you were investing in a healthy market.   (Looking only at cash flow is not a good method for investing.)  Not saying you cannot make money doing what you're doing (though I've run the numbers many times and struggle to understand how people make any money on SFRs in a flat or declining market over the long term), but I would be hesitant to conclude. given your newness,that you have come across the best strategy for wealth building.