Advice on a potential deal Appreciation Vs. Cash Flow

[John Hyun]

I am a newer investor and I need advice for a potential deal.  I currently own a 4 unit building and just had an offer accepted for a duplex in the Long Beach area, but now I am having second thoughts after crunching the numbers.  My strategy was to refinance cash out on my current property and put a down payment into a conventional loan for the duplex. My hope was to have more cash flow in total after the 2nd property, but after evaluating the comps in the area I realized I would be cash flowing about the same.  So essentially I would be cash flowing the same, but will have 2 properties.  It seems to me my strategy would be appreciation rather than cash flow for this deal.  Considering the Southern California market would you go for this deal?  Appreciate your time and input

[Andrew Johnson]

John Hyun Well, I’m not 100% sure of I understand but your *actual* dollars would be the same each month in your pocket? Even after cap-ex holdbacks and all of that other fun stuff? So if all of that stays the same you’ll still (I think) have 6 tenants paying down mortgage principal (however small to start) instead of 4. So even if it’s not “appreciation” you’re still getting diversification (which doesn’t hurt) and more mortgage principal pay-down. Assuming you can financially support hiccups along the way I think it’s a solid strategy. After all, money is cheap and you’ll be on 30-year fixed rate mortgages.