Which is Better for you Cash Flow or Appreciation?
Between cash flow or appreciation, which one is more important?
Should you be focused on having cash flow from your deals?
Or do you want appreciation over the period of time?
I think these are really great questions.
Some deals give you more cash flow and some give you more appreciation the best of both worlds is when you get both!
1. Cash Flow vs Appreciation
What is cash flow?
When you retire, is it possible to live off your cash flow.
That sounds amazing, right?
If cash is coming in, covering your expenses, you should be happy. Right?
The other side of that is appreciation growing long term wealth.
If you get a big lump sum when you Exit a deal, is that okay?
If you would like monthly or quarterly income, then cash flow might be a good way to go.
High cash flow deals give you and edge short term by:
Paying out quickly. A larger part of the return.
Within a couple years, it’s possible to have about half the investment back.
People love cash flow deals because the cash comes back so soon.
When an investment comes back that quickly, you should reinvest it in other assets.
After you cover living expenses.
It’s almost like an annuity.
But what happens if you have a deal that’s going to appreciate steadily over time?
An example of this might be a property that doesn’t necessarily cash flow as much.
If somebody buys a particular piece of property believing it will appreciate, they’ve still seen a huge paper gain even if they haven’t realized.
Or if they sold it, they’ve actually had a realized gain in that particular property.
We’re actively working on uncovering new investment opportunities but don’t have any quite ready yet.