What's Wrong with 20-30% 1st yr. ROI with Negative Cash Flow?

[BRIAN KATZ]

Hello Y'all, 

I'm hoping someone can help me understand why the experts repeatedly say cash flow is more important than metrics like Total Return and ROI? And why I should pass on SFHs with strong Total Return and ROI just because the COC, for instance, could be low or even slightly negative?

The reason I ask is that when I factor in interest and depreciation deductions the picture is often very favorable, and that's before any potential appreciation. I typically fall into either the 33% or 35% tax brackets so those deductions are meaningful. 

Of course, I want positive cash flow and have been searching for that situation but with rent prices being based upon median prices, comps and educated guesses/assumptions, there seems to be little guarantee that my rent-to-price ratio will be at least 1% or that my Cash-on-Cash Return will be positive, let alone within the preferable 15-25% range. 

I'm most interested in building a source of cash flow and income that 20 years from now can supplement my retirement savings. As a start, at least, I'm planning to buy a single family home or maybe a duplex. I'm not looking to build a real estate empire my first time out. Yes, I expect to manage it like a business and absolutely expect it to be profitable but I don't intend to flip properties, I'm focused on B level properties, and if the metrics make sense, I might even hire a property management company to keep things as simple as possible.

With all of that in mind, I've built a pretty comprehensive model and find that Total Return and ROI seem to be much more predictable than Cash Flow so someone please help shed some light on what it is that I'm missing here.

Thanks a bunch!