Location or Cash flow

[Joshua Hill]

I am in the process of negotiating for a purchase. It is a duplex in a overall good location, but the street is very rough. Therefore I feel like there is more risk. Some of the homes are brand new and some need to be bulldozed. The cash flow is good, which is why I want to pick it up. I wanted to ask the forum which they would put as a top priority in long term holding of properties. Cash flow or Location?

[Jon Holdman]

Not sure what you mean by that question. Sort of like asking which is better: four or blue?

If by location you actually mean potential for appreciation, then I'll take cash flow. I think its going to take a long time to work off the huge run up in prices we've had over the last six or so years, and that prospects for appreciation are limited. Some locations, where other specific factors drive prices, may continue to see appreciation. I think in general, real appreciation (nominal appreciation less inflation) will be near zero if not negative. So, better get the bird in the hand -- cash flow. Appreciation is gravy.

Jon