Obviously this is a perfect example and numbers may be inflated, I'm just trying to make sure I grasp the concepts.

Hello All,i am a young aspiring new to this site and the world of REI in general. i have always looked to real estate as an abstract means to an end using buy and holds to finance a modest early retirement.i had believed to do well i needed to live below my means and work a w-2 long enough to buy a property outright. realizing the futility of wages - inflation i saw i would never get there in time to realize compounding interest. 

In the second scenario properties in your area appreciate at 3% per year or the general inflation rate. 

At first I was all for spending all my earnings on stocks but my focus is on cash flow & passive income and every kind of stock strategy I looked at just didn't seem worth it to me since inflation and other factors just make buying stock less appealing.

You buy a $100k house that has cap rate of 10%, so $10k cash flow.Since you adjust 3% per year for inflation, after 15 years your income is doubled to $20k, yet the asset price is still only $100K, so now you have a cap rate of 20%.

Now those utility companies want to keep up with inflation again.Check if owner has lower property insurance.

I agree with Manly...properties in Hawaii have a good solid appreciation, not hyper inflated as some markets are.  

I think that's conservative......If you are a note or REO buyer - what level of price inflation are you seeing in your market?

As time wears on inflation will erode the value of these fixed dollar amounts and it will be harder and harder to raise the money needed to finance early-stage ventures or real estate projects absent some adjustment.  

Also, to answer where I think we are in the cycle: I know this doesn't answer your question, but I feel like the market is artificially inflated due to the interest rates being so low.