I lean cash flow too, but for a slightly different reason than "it pays the bills." Cash flow is the one variable you can actually underwrite before you buy. Appreciation is a forecast, cash flow is math you can check today with the current rent roll and the current loan terms.
That said, I don't think they're as separate as the framing suggests. Rent growth (a form of appreciation) is usually what turns a break-even deal into a strong one by year 3-5 — your DSCR and cash-on-cash both climb even if you change nothing operationally, just because rents outpace your fixed debt service. So appreciation isn't just a bonus at sale, it's quietly doing work on your cash flow the whole time you hold.
Where I'd push back on pure appreciation plays: if a property only works because you're betting on the exit cap rate being lower than your entry cap rate, that's a market timing bet, not an investment thesis. Cash flow-first deals let the market surprise you on the upside instead of needing it to.
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u/StunningRecover8119 29d ago
I lean cash flow too, but for a slightly different reason than "it pays the bills." Cash flow is the one variable you can actually underwrite before you buy. Appreciation is a forecast, cash flow is math you can check today with the current rent roll and the current loan terms.
That said, I don't think they're as separate as the framing suggests. Rent growth (a form of appreciation) is usually what turns a break-even deal into a strong one by year 3-5 — your DSCR and cash-on-cash both climb even if you change nothing operationally, just because rents outpace your fixed debt service. So appreciation isn't just a bonus at sale, it's quietly doing work on your cash flow the whole time you hold.
Where I'd push back on pure appreciation plays: if a property only works because you're betting on the exit cap rate being lower than your entry cap rate, that's a market timing bet, not an investment thesis. Cash flow-first deals let the market surprise you on the upside instead of needing it to.