Good and helpful points by all.
One way that I describe it to my friends who are interested in REI is that there are 5 ways to make money in real estate, and usually you are going to make a trade-off. If you want to maximize cash flow, you will probably lose out on equity appreciation. If you want to maximize equity appreciation, you will probably not cash flow well or at all (SoCal!).
5 Ways to make money in REI (from a blog post on BP, I think)
1. Equity capture at time of purchase (buy a $100k house for $70k)
2. Cash Flow (pay $1200 in monthly expenses= PITI + all expenses including CapEx, vacancy, and maintenance, BUT make $1400 in rent = net $200 monthly cash flow)
3. Equity appreciation (buy a $100k house and 2 years later, it is worth $135k)
4. Tax benefits (depreciation, Real Estate Professional loophole, interest deductions)
5. Principal pay down by renters (your renters are paying off your $75k loan to $0 over time)
#1 - #3 usually involve trade-offs.
If you buy an out-of-state, cash-flowing, turnkey rental, you can realize great cash flow but you are likely overpaying a little (no equity capture) and will likely not see great appreciation. If cash flow is important to you, then this is a great investment.
Most people consider SoCal and NorCal an equity appreciation play. Cash flow may not be realized, but many count on their property going up, possibly doubling or more in value. This has been realized in the past, even in recent years, but most see right now (mid-2016) as not a good time for that kind of play as prices don't have much more room to go up. Critics of this argue that you can't predict the future, but there is no denying that people have made a ton of money over the years in CA and similar markets through appreciation (esp post housing crash).
Flipping is obviously not about cash flow or anything else, but equity capture at time of purchase.
BRRR combines equity capture, cash flow, and possible appreciation, so it has gotten a lot of interest, esp in the BP world. It's like flipping a house and selling it to yourself (financed through a bank who pays you for the house), then renting out the house w/ positive cash flow. Sounds great, but not as easy to execute (although not impossible as many are doing it).
If you find a house that you can (1) buy for 70 cents on the dollar, (2) cash flows $1000 per month with great tenants, and (3) is in a great appreciation area in an A or B neighborhood, then you've found the holy grail of real estate! Let me get a piece of that deal!