Equity or Cash Flow? Which is More Important When Valuing Real Estate

To equity or to cash flow, that is the question?

When buying a single house, the obvious answer is equity... well, mostly. A good rental investment still needs to cash flow (other than in specific circumstances when it is 1) a small part of your portfolio and 2) there is a very good reason to think it will appreciate soon). When it comes to buying portfolios, gross yield (annual gross rent divided by price) is talked about a lot. While both are important, generally built-in equity is more important for entrepreneurial investors (like 99% of you guys) and gross yield is more important for institutional investors (like hedge funds, REITs, and insurance companies). Get that equity people!

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