Aside from having a small business and a part time job on the side, it’s also important for OFWs to have passive income to have more money, and what better way to do that is to get yourself into real estate investing through property appreciation and cash flow investment strategies. Real estate is one of the ways most investors talk and walk about money because of the investment properties that they can put their money into (and it also serves as a strong point in their investment portfolios).
Think you’re ready to invest in real estate but don’t know if you’re going for cash flow or property appreciation? Worry no more — We’re going to give you a crash course about the difference between these two strategies to make your decision according to your risk appetite and to attain that financial freedom in style!
Cash Flow vs Appreciation: The Ups and Downs
Investing for Cash Flow
Cash flow investments are usually for those who invest in rental properties especially when you’re a senior citizen whose making the most out of your retirement fund. Many investors prioritize rental properties in the real estate market because the money that they’re getting comes from the rent that is paid.
Here are some advantages if you go for a cash flow investment:
- Passive Income
In every real estate investment, there’s every opportunity for more passive income, especially when you have a positive cash flow for you to earn more. Opting for the cash flow strategy with one rental property might not be enough, so two or three of those are enough to cover expenses when it’s done right.
- Stability in Economic Fluctuations
In case there’s going to be an economic downturn, your cash flow investments wouldn’t be affected and it will give you additional financial security for your expenses and emergency fund. After all, a small investment is better than an empty one.
- Easier to Get Loan
Banks have portfolios from your savings and checking accounts to your investments and assets, and when your bank sees that you have a cash flow going on as your passive income, you would get loans approved easily especially when you have a strong property with a good cash flow.
The Downside of Cash Flow Strategy
Of course every investment comes with downfalls, but having a cash flow investment is a low risk, so there aren’t much downfalls that you would worry about. But still, here are some for you to keep an eye on:
- Inaccurate calculation of Returns
Just like getting your salary wrong on a pay day (whether it’s less or too much), it’s frustrating that you’d be getting less or too much than what you’re normally getting in a cash flow strategy. The only way to solve this is to simply run the numbers carefully to prevent a negative cash flow from happening.
- Depends on current market performance and quality of tenants
Real estate investors understand that the real estate industry can be volatile especially in investments, and cash flow investors inspect the real estate market and the quality of tenants these rental properties have. It’s important for you to study the market and the quality of its tenants in order for you to evaluate cash flow positive properties to invest in.
- Can Be Difficult to Find
Trust us when we say that it’s the most frustrating thing on the planet when you can’t find a cash flow positive property because you don’t hear much of it these days with the current investment trends that the pandemic brought out.
Well, we have good news for you: Vista Land has various cash flow properties that will not only make your pocket fixed, but will also give you a major positive cash flow that will make your money worthwhile in the long run!
Investing for Property Appreciation
The Real Estate Appreciation or Property Appreciation is another strategy where the property’s value goes up over time, and most real estate investors go for this because there are properties where it needs to have major repairs (and a makeover) to achieve long term goals such as buying an investment property and flipping it to its market value.
If you’re an aspiring real estate investor and would like to go for this strategy, then here are some things that you can get out of property appreciation:
- Quick Profits
Hear us out before you go Bob the Builder: Yes, you can get your financial independence and financial freedom quicker by putting up with major renovations such as replacing pipes, buying furniture and house decorations, painting or sticking up a bunch of wallpapers on the walls, fixing the floors and everything that needs to be fixed, and establishing finishing touches to your home makeover for you to flip it and sell it will guarantee you quick cash for your cash flows to be liquidated quicker and the easiest win – win situation anyone could do to reel in real estate investors!
(Psst! Watch Falling Inn Love to see what we mean)!
- Tax Benefits
If you’re planning to buy a property for appreciation and to sell it to reel in your investment portfolio, then you’d have the chance to redeem tax benefits to take a break from paying taxes in the meantime (and to pay taxes off their usual prices)! Sweet deal, right?
- Multigenerational Wealth
If you’re passing one property (or more) to your future generation, then they’re the lucky ones because they not only get real wealth, but they’ll also make the most out of the wealth you’ve given to them in the long run! Having multigenerational wealth on your portfolio can be a great asset to not only yourself, but to also for the people enjoying the property!
The Downside of Appreciation Strategy
Real estate investments are volatile, but it’s risky when you’re all for real estate appreciation as this type of investment is high risk and you need to weigh in your options when something happens in the long run.
- Property Depreciation
We agree with you when we say it’s frustrating that the property is depreciating due to natural and man – made causes, often resulting to selling it less than the market value despite its historical performance. We emphasize that you should have your house renovated to make its conditions better and to sell it easier, especially when you have luxurious amenities! The only major thing you need to consider? Property management.
- Property Value Depends on the Market
We know property prices don’t come cheap, but when economical downfalls rise, they have a tendency to not do well, especially when their prices are way too high. Just like when you’re producing cash flow, you need to evaluate the market value of a property (and its value) whether it can be invested or not.
- Missing Out on Cash Flow
It’s easy to be complacent to not consider the idea in investing in the Cash Flow Strategy simply because you’re earning more with Appreciation Strategy, and that’s okay. But when the housing market has problems, it’s better for you to consider in investing cash flow properties as your emergency fund so that you don’t run out of money and these can also be good for your asset and investment portfolio.
How You Make Money Matters
Your financial goals should matter in achieving financial independence and financial freedom, and there are different aspects to consider whether you go with a cash flow investment or property appreciation investment. What matters is how you make money based on your initial investment, monthly income, and rental income with comparable properties and housing prices that you put yourself into. You should know what you’re signing up for when you’re a real estate investor if you want to build wealth and risking it all for money and portfolio; all you need is a good eye, a good set of negotiating skills, a sweet deal that you can get the most out of for short or long term, and that sweet profit coming at you.
So get your cash flowing property or a property with good price appreciation rates, and you’re on your way to your financial freedom that you’ve been dreaming of.