Is Cash Flow really King?

[Christopher Leong E]

I'm looking to buy my first investment property. 

I found some rentals in Alberta and Sask., but the appreciation in these markets are close to zero.

Provided they are cash flowing, are places like this still favourable? I am assuming 0% appreciation. I understand there is forced appreciation as the my mortgage is being paid down, but is that good enough?

Should I avoid places where appreciation is flat or close to zero? or if the cash flow is positive, that should be good enough?

My goal is to expand my portfolio and increase our wealth as a family. I want to get an investment property because I like the idea of leverage and I guess in 25 years i'll have a small cash cow or I can sell the entire property for a lump sum and use that to help fund my retirement/other plans. 

[Kevin Sobilo]

@Christopher Leong E, you are thinking the right things in general.

There are 3 ways you make money with a rental. Appreciation, mortgage pay-down, and positive cash-flow.

Appreciation is in my opinion the least important for a few reasons. First off, until you take an action like sell or refi its just an estimate of value. Second, its not liquid, you need to sell or refi to access that value and use it. Third, it can disappear faster than it appeared (values go down as well). Lastly, you can't control it (except by physically improving a property which is different than market appreciation).

Mortgage paydown, is predictable, BUT you have all the same issues as appreciation because the value is locked up in your equity until you sell or refi. So, the only real advantage is that you know you are gaining equity as its paid down, but you cannot control by how much because of the market appreciation (or depreciation).

Cash-Flow is king! First off, you can control it by buying the right property and managing it well. Second, one you have the money its yours! Its not an estimate its REAL and you get it all the time. You don't have to wait years to access it and pray property values don't go down. No matter what happens with market values the cash keeps flowing if you buy right an manage well.

So, having control of cash-flow and having access to it immediately makes it superior.