Question: Cash Flow or Appreciation?

[Michael Thurston]

Greetings,

I am analyzing a deal and the cash flow numbers look good.  My monthly expenses would be around $1,850/mo for two units that would return approximately $3,000/mo total.  However, it is in a vacation market that seems to fluctuate more than the suburban market where I usually try to invest.  So, it would likely take longer to resell whenever that time comes and the appreciation is less certain.  I would plan to keep it as a long-term buy and hold.  

My question is how much consideration do you give resale on your investments if the monthly cash-flow is strong vs potential appreciation and liquidity?  My current properties have appreciated well and could be resold quickly but do not cash flow at the same level.

Would appreciate hearing your thoughts!

Michael

[Jeff Schechter]

It's pretty hard to have both.  We always go for max cash flow, as that is something we can realize right now.  Appreciation is only meaningful later, is not predictable, and ONLY is recoverable upon sale or refinance.  Further, it's spending power is eroded by inflation.