Invest in a market that doesn’t appreciate

[Juan Quezada]

I live in sacramento ca and am a first time investor. I’m looking in an out of state market where I see good potential cash flow but very low appreciation value.

Is it worth investing in a location where cash flow is good but appreciation is very low.

[Jay Hinrichs]

Originally posted by @Darius Ogloza:

Many markets with low appreciation have rising property taxes due to a decreasing population that is increasingly becoming poorer.  They are also often located in areas that experience weather extremes that cause high maintenance costs and utility bills.  Rising insurance costs may also be an issue is some neighborhoods.  

In short, the cash flow you project on Day 1 is not necessarily the cash flow you will receive on Day 365 or on Day 1,825 (5 years out).   You need a bit of a crystal ball to determine if you will make any money in the end or whether you will end up supporting a liability out of your W-2 job's paycheck.

Not to mention without any appreciation your in most cases going to lose principal on the exit.. you wont have enough equity to justify a 1031 .. you would have to pay recapture and sales costs so both those numbers if they did not eat into your principal will surely wipe out whatever positive cash flow you may have enjoyed the first 5 to 8 years minimum..  who ever coined the term appreciation is icing on the cake needs to re think that one.. the money is made in appreciation in real estate either just market appreciation or value add.. thats my thought on it..   Now you can value add if your getting a SMOKIN deal buying a property that wont appreciate but you have TRUE built in equity not just zillow or fake equity.