APPRECIATION VS. CASH-FLOW

Both are really important and are what makes a real estate investment unique, for its dual forms of producing riches. An investment is just putting your money to work for you. The main objective is, what is the goal you’re trying to achieve with your investment. If you’re buying a real estate property, you have different ways to make profits, and you very well use all of them. 

Cash-flow brings the profits in small increments, but earlier and more frequently. Appreciation comes with a larger pay-out that you can cash or reinvest again when you sell or refinance your property. One benefit of appreciation over cash-flow is that you can use the power of compound interest and the power of leverage at the same time, but you must wait for your rewards at a later time.

When the interest is added to the amount borrowed then the interest rate applies to a new larger principal. Compound interest can work to your advantage and your investment works overtime for a profit, or against it if you’re paying-off debt. Capital appreciation and cash-flow are very well related to each other, and the roles each one plays in a real estate investment. Cash-flow and appreciation doesn’t exist alone, both share a relationship. So, I don’t see the need to separate them and select which one is better. 

Cash-flow gives you freedom, appreciation gives you wealth. Cash-flow could be very attractive to new investors because it is a new income source, yet no one reaches an incredible level of wealth on cash-flow alone. Now that we are talking about the best return in a real estate investment, the principal focus is the LOCATION of the property, this will determine the success of the investment. Also important is the condition that the property is. 

Sometimes you can buy a cheaper property in bad condition in a good location and if you have the ability to fix it yourself could be an additional profit, because once fixed the value increases according to the neighborhood located. But you have to be sure you’re not buying yourself a job, now you’re an investor not a carpenter or a plumber, and investors use their money to work for them.