Cash Flow vs Appreciation

Investing capital in the assets is all about getting as many profits as possible, and real estate isn't an exception. Moreover, real estate is currently the number one way; wealthy people generate their income. However, even though most investors can agree that well managed real estate has a vast potential of producing wealth, many still can't figure out which is the best way of doing so.

That's right, besides the various markets and investment types that real estate contains, it also offers two different ways of earning income: cash flow and Appreciation. And before we begin discussing both, keep in mind that there is no best or worse way of getting money, it all depends on your goals and which style fits your needs the most.

Investing for Cash-flow:

Cash-flow is what most investors are looking for when investing in real estate. It is a profit that landlords or passive investors generate from leasing rental properties to tenants, after covering all the property expenses, such as taxes, mortgage, repairs, etc.

If your income exceeds your expenses, you are running your investment right and are earning good money every month to cover all your business or personal expenditures and desires.

Another great thing about cash-flow is that it can freely be generated through passive investing. Let's say that you are looking for high monthly income, but your current job or business doesn't allow you to spare and extra time for managing a real estate, well that's not a rare situation here!

Most of the investors purchase properties trough apartment syndication, where multiple investors pool their money to own a property that they wouldn't be able to manage alone. In apartment syndication, the property and its daily management are taken care of by the general partners of the deal, as well as diving profits for their passive investors.

With passive investing in apartment syndication, you will be able to earn 70-80% of the cash-flow, while general partners only take 20-30%.

Investing for Appreciation:

Appreciation is entirely different from Cash-flow, here instead of earning monthly income, your ROI (Return On Investment) accumulates over time. The value of your investment can grow due to several reasons: increased demand on the asset, etc.

However, it also means that your asset is at risk of losing its value completely, leaving you in the loss. That is why investing for Appreciation is considered a riskier way of investing.

Additionally, investing for Appreciation means that you won't be earning monthly income, and all your expenses will have to be covered with money out of your pocket. In most cases, that's not what investors are looking for in real estate.