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Cashflow versus Appreciation

Should investors focus on cashflow or appreciation in today's challenging market?


Video transcript below:


Reporter: Cash is king, so is property appreciation. Sometimes you just can’t have both, what should buyers prioritise, especially during this time of rising prices and interest rates? Good cash flow now or hold for appreciation. It’s a catch 22 situation and everyone has their opinion on it. What are buyers doing and who is right?

Julie Kinnear, The Julie Knnier Team, Royal Lepage, Real Estate Services
Julie Kinnear: I am a big fan of focusing on cash flow versus appreciation when you are talking about investment properties. And is it replacing appreciation, I would say yes at this point, mainly because the market has been escalating. For many years, the prices of properties in Toronto have been going up and up and up, so counting on appreciation as your investment vehicle for a way to make money from your investment property is high risk I would say. I think you are in better shape if you focus on the cash flow. Cash flow also at this point because interest rates are really low, it’s a really important thing to focus on because you have to remember that interest rates could go up over time and when they go up over time, your cash flow may keep you know, if you are not keeping a close eye on it, when you are actually buying the property, then you could be in big trouble at some point.


Reporter: Should buyers do what the experts say or follow their own goals?

Adam Brind, Owner, Core Assets Inc., Real Esate Brokerage
Adam Brind: You know I think again it just comes back to individual goals and [you may also keep] capital on hand. So if you can deploy some of the capital you have on hand and you can increase those cash flows by renovating, add in features that weren’t there previously. I certainly think that there is a play, but I think with any investment you definitely have to look at your strategy, how you are going to get there, what are the goals of the property. But I think what most investors forget, what most have to remember is that, there is a time value on money, so as your investment increases, depreciation increases, you know your financing tends to go down and that gap widens as time goes on. So absolutely if the strategy is right I would say 100% consider that investment, if the cash flows aren’t there on day one because eventually it will be.

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