I get asked this question all the time “what is a better investment for my rental property monthly cash flow or appreciation?” The best answer I can honestly give is both, but sometimes thats not always an option so here is a little insight from my experience on both sides
Cash Flow in my option is always great! If you can find a way to do this with enough properties you can steadily increase your income and even replace it, in a lot of cases people end up giving up a job they may have been not to fond of and living off the monthly income. These types of properties are generally lower cost homes to purchase and can be more challenging to maintain. For example if you were to purchase a cash flow home it is most likely going to be in a lower income area, not necessarily a bad area but the higher the cash flow usually the worse the area will be. I tend to stick in the middle decent range. This will obviously cost some time in managing or paying for management as well as maintenance from having a tenant live there. These home however do tend to appreciate as well just not always as quickly but at the end of the month you should see a 8-10% return on your money.
Appreciation is also another great avenue to consider when buying a rental property. You won’t necessarily see any money right away and would have to wait until you sold the property but if you buy in the right area the price can drastically increase within a reasonable amount of time. One thing to remember when renting seeing what you paid for the home your monthly rent may not cover the mortgage or you might be just breaking even. Once you sell you should recover all the money you put in and more. The key to doing it this way is to buy in the right area at the right price.
Written by Scott Esmail