Positive Cash Flow vs. Appreciation

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 When investing and deciding what type of investor you are, see our article What Type of Investor am I, one major question you may think about is whether you are concerned with positive cash flow (PCF) or appreciation.

 When my husband and I began investing, we decided that we were a hybrid type of investor.  When choosing a property we take into consideration both PCF and appreciation.  With that, we tend to sway to the side of PCF more heavily than appreciation.  What do I mean by this?

 When we look for a property our number one concern is whether it yields PCF.  If it doesn’t, the property doesn’t make it on our list.  Why?  Although appreciation is great and we invest in areas where most likely there will be some appreciation in the long term, we refuse to invest in something where we have to pay out of our own pocket on a monthly basis in hopes that in ten, fifteen, or more years we will be able to sell it as a profit.

 So when you begin to invest, you must think about whether you want a property that has PCF or if you are financially able to buy a property where you have to pay some money out of pocket of just break even each month.  Sometimes, as an investor that focuses on appreciation, you may choose to invest in a specific growing area where the monthly numbers may lead you to having to put out money each month.  However, if the area is growing and you made a sound investment, you will make that money back and most likely much more when you decide to sell down the road.  It’s a short term sacrifice for a long term gain.

 I can’t say that one way is better than the other, it totally depends on your goals as an investor which again, is why it is so important to know your goals before buying your first property.

 

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